<PAGE>
As filed with the Securities and Exchange Commission
on September 18, 1996
Securities Act File No. 333-07905
Investment Company Act File No. 811-07701
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. __ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 1 [X]
(Check appropriate box or boxes)
GE LifeStyle Funds
...................................................................
(Exact Name of Registrant as Specified in Charter)
3003 Summer Street
Stamford, Connecticut 06905
....................................... ........................
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (203) 326-4040
Matthew J. Simpson, Esq.
Vice President, Associate General Counsel & Assistant Secretary
GE Investment Management Incorporated
3003 Summer Street
Stamford, Connecticut 06905
.........................................
(Name and Address of Agent for Service)
Copies to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4669
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Securities Offering Price per Aggregate Offering Amount of Registration
Being Offered Amount Being Registered Unit Price Fee
------------------- ----------------------- ------------------ ------------------ ----------------------
<S> <C> <C> <C> <C>
Shares of common
stock, $.001 par
value per share Indefinite Indefinite Indefinite $500
</TABLE>
- -----------------------
* An indefinite number of shares of common stock of the Registrant is being
registered by this Registration Statement pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
GE LIFESTYLE FUNDS
FORM N-1A
CROSS REFERENCE SHEET
Part A
Item No. Prospectus Heading
- -------- ------------------
1.Cover Page......................... Cover Page
2.Synopsis........................... Expense Information
3.Condensed Financial
Information...................... Expense Information
4.General Description of
Registrant....................... Cover Page; Investment
Objectives and Management
Policies; Additional Matters
5.Management of the Fund............. Expense Information;
Investment Objectives and
Management Policies;
Management of the Trust
6.Capital Stock and Other
Securities....................... Dividends;
Distributions and
Taxes; Additional
Matters
7.Purchase of Securities
Being Offered.................... Purchase of Shares;
Net Asset Value;
Distributor
8.Redemption or Repurchase........... Redemption of Shares
9.Legal Proceedings.................. Not applicable
10.Cover Page......................... Cover Page
11.Table of Contents.................. Table of Contents
<PAGE>
Part B Heading in Statement of
Item No. Additional Information
- -------- -----------------------
12.General Information and History.... The Funds' Performance
13.Investment Objectives and
Policies......................... Investment Objectives
and Management Policies
14.Management of the Fund............. Management of the Trust
15.Control Persons and Principal
Holders of Securities........... Management of the Trust
See Prospectus--
Additional Matters
16.Investment Advisory and
Other Services................... Management of the Trust
17.Brokerage Allocation
and Other Practices.............. Investment Objectives
and Management Policies --
Investment Restrictions;
Management of the Trust
18.Capital Stock and Other
Securities....................... Redemption of Shares
19.Purchase, Redemption and Pricing
of Securities Being Offered...... Purchase of Shares;
Redemption of Shares;
Net Asset Value
20.Tax Status....................... Dividends, Distributions
and Taxes
21.Underwriters..................... Distributor
22.Calculation of Performance
Data............................. The Funds' Performance
23.Financial Statements............... Independent Accountants;
Financial Statements
Part C
Information required to be included in Part C is set forth
after the appropriate item, so numbered, in Part C to this Registration
Statement.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>1
SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 1996
GE LIFESTYLE FUNDS
GE LifeStyle Funds ("LifeStyle Funds" or the "Trust") is an open-end management
investment company that offers a selection of asset allocation investment funds
(each a "Fund" and collectively the "Funds"). Each Fund seeks to achieve its
objective by investing in certain portfolios of GE Funds ("Underlying GE
Funds"). The Trust is currently comprised of six series, three of which are
offered by a separate prospectus. This Prospectus describes the following three
Funds currently offered by the Trust:
- GE Conservative Strategy Fund's investment objective is
income and long-term growth of capital which the Fund seeks to achieve currently
through investment in an approximate 50/50 mix of equity-oriented funds and
fixed income-oriented funds.
- GE Moderate Strategy Fund's investment objective is long-term
growth of capital with a moderate level of current income which the Fund seeks
to achieve currently through investment in an approximate 65/35 mix of
equity-oriented funds and fixed income-oriented funds, with the bias toward
equity-oriented funds for enhanced growth potential.
- GE Aggressive Strategy Fund's investment objective is capital
appreciation which the Fund seeks to achieve currently through investment in an
approximate 85/15 allocation of equity-oriented funds to fixed income-oriented
funds.
Shares of the Funds are not deposits with or obligations of any financial
institution, are not guaranteed or endorsed by any financial institution or its
affiliates, and are not insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other government agency.
This Prospectus briefly sets forth certain information about the Funds and the
Trust that prospective investors will find helpful in making an investment
decision. Investors are encouraged to read this Prospectus carefully and retain
it for future reference.
Additional information about the Funds and the Trust, contained in a Statement
of Additional Information dated the same date as this Prospectus, has been filed
with the Securities and Exchange Commission (the "SEC") and is available upon
<PAGE>2
request and without charge by calling the Trust at the telephone number listed
below or by contacting the Trust at the address listed below. The Statement of
Additional Information is incorporated in its entirety by reference into this
Prospectus.
GE INVESTMENT MANAGEMENT INCORPORATED
Investment Adviser and Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus
October __, 1996
<PAGE>3
TABLE OF CONTENTS
EXPENSE INFORMATION...........................................4
LIFESTYLE FUNDS...............................................8
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES.................9
RISK FACTORS AND SPECIAL CONSIDERATIONS OF THE FUNDS.........11
PORTFOLIO TURNOVER...........................................14
DESCRIPTION OF THE UNDERLYING GE FUNDS.......................14
MANAGEMENT OF THE TRUST......................................29
PURCHASE OF SHARES...........................................35
RETIREMENT PLANS.............................................42
REDEMPTION OF SHARES.........................................43
EXCHANGE PRIVILEGE...........................................46
NET ASSET VALUE..............................................47
DIVIDENDS, DISTRIBUTIONS AND TAXES...........................48
CUSTODIAN AND TRANSFER AGENT.................................51
DISTRIBUTOR..................................................51
THE FUNDS' PERFORMANCE.......................................51
ADDITIONAL MATTERS...........................................53
APPENDIX - FURTHER INFORMATION: ADDITIONAL INVESTMENTS AND CERTAIN INVESTMENT
TECHNIQUES AND STRATEGIES USED BY THE UNDERLYING GE
FUNDS.......................................................A-1
3003 Summer Street
Stamford, Connecticut 06905
(203)326-4040
<PAGE>4
EXPENSE INFORMATION
The purpose of the following table is to assist an investor in understanding
the expenses that an investor in the Funds offered by this Prospectus will
bear directly in connection with an investment in each Fund's shares ("Direct
Expenses"). In addition to these Direct Expenses, Fund shares will indirectly
bear their pro rata share of the expenses of the Underlying GE Funds
("Indirect Expenses").
Fee Table
<TABLE>
<CAPTION>
GE Conservative Strategy GE Moderate Strategy GE Aggressive Strategy
Fund Fund Fund
------------------------ -------------------- ----------------------
Shareholder Transaction Expenses
<S> <C> <C> <C>
Maximum Sales Load Imposed on
Purchases of Shares (as a
percentage of offering price): 4.75% 4.75% 4.75%
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage
of offering price): None None None
Maximum Contingent Deferred
Sales Load (as a percentage
of redemption proceeds)*: 1.00% 1.00% 1.00%
Redemption Fees (as a percentage
of amount redeemed): None None None
Maximum Exchange Fee: None None None
</TABLE>
<PAGE>5
<TABLE>
<CAPTION>
Annual Fund Operating Expenses as a
percentage of average net assets
(Direct Expenses)
<S> <C> <C> <C>
Advisory and Administration fees: .20% .20% .20%
12b-1 fees: None None None
Other expenses: None None None
Total Operating Expenses: .20% .20%` .20%
</TABLE>
- --------------------------
* The Trust will impose a redemption fee in the form of a contingent deferred
sales charge, equal to 1% of the net asset value of shares being redeemed, if
redeemed within one year of purchase and if the shares were subject to no
front-end sales load upon purchase by virtue of being part of the purchase of $1
million or more.
Expense Ranges (Including Indirect Expenses)
Based on the expense ratios of the Underlying GE Funds plus those of each Fund,
the range of average weighted combined operating expenses for shares of the
Funds offered by this Prospectus are expected to be as follows:
Range of
Combined Expenses**
-------------------
GE Conservative Strategy Fund 1.10% of 1.57%
GE Moderate Strategy Fund 1.15% to 1.62%
GE Aggressive Strategy Fund 1.24% to 1.62%
- --------------------
** A range is provided since the average assets of each Fund invested in
each of the Underlying GE Funds may fluctuate.
The nature of the services provided to, and the advisory and administration fees
paid by, each Fund are described under "Management of the Trust." Under the
agreements governing the asset allocation and administration services to be
furnished to the Funds by GEIM, GEIM bears all expenses of each Fund including,
<PAGE>6
but not limited to, custodial fees, legal and accounting fees, printing costs
and registration fees, the costs of regulatory compliance, the costs
associated with maintaining the Trust's legal existence and the costs involved
in communicating with shareholders of the Funds, but excluding brokerage fees
and commissions, interest, advisory and administration fees, fees and expenses
of the Trust's Board of Trustees who are not affiliated with GEIM or its
affiliates (including counsel fees), taxes payable by the Trust, transfer
agency costs and any extraordinary expenses.
The Funds offered by this Prospectus will invest only in Class A shares of the
Underlying GE Funds, which are currently offered to LifeStyle Funds with no
initial sales charge or redemption fee but are subject to shareholder servicing
and distribution fees ("12b-1 fees") under an amended and restated shareholder
servicing and distribution plan adopted by GE Funds at the annual rate of .50%
of the value of the average daily net assets attributable to the Class. The
LifeStyle Funds will indirectly bear their pro rata share of fees and expenses,
including investment management fees, incurred by the Underlying GE Funds that
are applicable to Class A shareholders. The investment returns of each Fund,
therefore, will be net of the expenses of the Underlying GE Funds in which it is
invested. The following chart shows the expense ratios applicable to Class A
shares of each Underlying GE Fund held by a Fund, based upon estimated operating
expenses for its current fiscal year.
Indirect Expenses
Underlying GE Fund Expense Ratio*
- ------------------ --------------
GE U.S. Equity Fund 1.00%
GE International Equity Fund 1.60%
GE Fixed Income Fund 1.10%
GE Short-Term Government Fund .95%
GE Money Market Fund .45%
- ----------------------
*The expense ratios of the Class A shares of the Underlying GE Funds may
reflect fee waivers and expense reimbursements. Absent these fee waivers on
the Class A shares of the Underlying GE Funds, these expense ratios would be
as follows: GE U.S. Equity Fund - 1.25%, GE International Equity Fund - 1.95%,
GE Fixed Income Fund - 1.17%, GE Short-Term Government Fund - 3.00% and GE
Money Market Fund - .70%.
<PAGE>7
Example
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over a one-year and three-year
period with respect to a hypothetical investment in each Fund. These amounts
are based upon (1) direct payment by the Fund of operating expenses at the
levels set out above; (2) indirect payment by the Fund of its pro rata share
of the Class A share expenses of the Underlying GE Funds (also set out above)
in which a Fund is expected to invest at the commencement of investment
operations; and (3) the specific assumptions stated below.
A shareholder would pay the following
expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2)
redemption at the end of
the time periods shown:
-----------------------------------------
1 Year 3 Years
-----------------------------------------
GE Conservative Strategy Fund: $____ $____
GE Moderate Strategy Fund: $____ $____
GE Aggressive Strategy Fund: $____ $____
The above example is intended to assist an investor in understanding various
costs and expenses that an investor in a Fund will bear directly or indirectly.
Although the table assumes a 5% annual return, a Fund's actual performance will
vary and may result in an actual return that is greater or less than 5%. The
example 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.
<PAGE>8
LIFESTYLE FUNDS
Advantages of Investing in the Trust
The proliferation of mutual funds over the last several years has left many
investors in search of a simple means to manage their long-term investments.
With new investment categories emerging each year and with each mutual fund
reacting differently to political, economic and business events, many investors
are forced to make complex investment decisions in the face of limited
experience, time and personal resources. The Funds are designed to meet the
needs of investors who prefer to have their asset allocation decisions made by
professional money managers, are looking for an appropriate core investment
portfolio and appreciate the advantages of broad diversification.
Although an investor could achieve portfolio diversification by investing
directly in a variety of GE Funds, participating in the LifeStyle Funds offers
two significant advantages: (1) simplified investment decision making; and (2)
periodic portfolio rebalancing to ensure Fund allocations remain consistent with
original risk/return objectives.
Asset Allocation Process
The Funds are managed so that each Fund can serve as a complete investment
program or as a core part of a larger portfolio. Each of the Funds invests in a
select group of Underlying GE Funds suited to the Fund's particular investment
objective. After receipt of recommendations from the Trust's investment adviser,
GE Investment Management Incorporated ("GEIM"), and any investment consultant
retained by the Trust's Board of Trustees (the "Investment Consultant"), the
Trustees will determine the ranges in which Fund assets will be allocated
between equity- and fixed income-oriented funds ("Asset Allocation Ranges").
GEIM, in conjunction with the Investment Consultant, if any, determines which of
the Underlying GE Funds properly should be included within the equity and fixed
income categories composing the Asset Allocation Ranges. Thereafter, the Board
of Trustees, again based upon recommendations from GEIM and the Investment
Consultant, if any, determines the extent to which each Fund may invest in the
Underlying GE Funds (the "Investment Limits"). GEIM will allocate and reallocate
according to fundamental and quantitative analysis each Fund's assets to the
Underlying GE Funds within the Investment Limits set by the Board of Trustees
from time to time. The Asset Allocation Ranges and the Investment Limits are
described below under "Investment Objectives and Management Policies".
<PAGE>9
Before changing either the Asset Allocation Ranges or the Investment Limits, the
Board of Trustees will consult with GEIM and the Investment Consultant and
disclose any such change to shareholders of the affected Funds. Because the
assets will be adjusted only periodically and generally only within
predetermined parameters that will attempt to ensure broad diversification,
there should not be any sudden large-scale changes in the allocation of a Fund's
investments among Underlying GE Funds. LifeStyle Funds are not designed as a
market timing vehicle, but rather as a strategic or conservative approach to
helping investors meet long-term goals.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The Trust is an open-end management investment company that currently offers six
non-diversified asset allocation investment portfolios, three of which are
offered by this Prospectus. Each Fund seeks to achieve its investment objective
by investing strategically within specified ranges among Underlying GE Funds.
Initially, each Fund will invest in the Underlying GE Funds listed below, except
that the GE Aggressive Strategy Fund will not invest in the GE Short-Term
Government Fund. The Funds will not invest in securities other than shares of
the Underlying GE Funds (or other affiliated funds that may be approved by the
Board of Trustees from time to time) and money market instruments of the types
described under "Money Market Instruments" in the Appendix to this Prospectus.
GEIM, in conjunction with the Investment Consultant, if any, will evaluate the
Underlying GE Funds for the purpose of determining whether they should
appropriately be classified as either equity-oriented or fixed income-oriented
for purposes of allocating each Fund's assets within the Asset Allocation Ranges
set by the Trust's Board of Trustees. GEIM will allocate investments for each
Fund among the Underlying GE Funds based on its outlook for the economy,
financial markets and the relative performance of the Underlying GE Funds. The
allocation among the Underlying GE Funds will be made within the Investment
Limits established by the Board of Trustees of the Trust which designate minimum
and maximum limits for investment in each of the Underlying GE Funds.
The investment objective of GE Conservative Strategy Fund (the "Conservative
Fund") is income and long-term growth of capital. The investment objective of GE
Moderate Strategy Fund (the "Moderate Fund") is long-term growth of capital with
<PAGE>10
a moderate level of current income. The investment objective of GE Aggressive
Strategy Fund (the "Aggressive Fund") is capital appreciation. Each Fund's
investment objective is fundamental and may be changed only with the approval of
a majority of the Fund's outstanding shares. There can be no assurance that any
Fund's investment objective will be achieved.
In investing in Underlying GE Funds, the Funds seek to maintain different
allocations between equity-oriented funds and fixed income-oriented funds
depending on a Fund's investment objective. Allocating investments between
equity-oriented and fixed income-oriented funds permits each Fund to attempt to
optimize performance consistent with its investment objective. The tables below
illustrate the initial Asset Allocation Ranges and targets for each Fund:
Asset Allocation Ranges (Percent of Each Fund's Net Assets)
Type of Fund Target Range
- -------------------------------------- ------------------- -----------------
Conservative Fund
Equity-Oriented 50% 45-55%
Fixed Income-Oriented 50% 45-55%
Moderate Fund
Equity-Oriented 65% 60-70%
Fixed Income-Oriented 35% 30-40%
Aggressive Fund
Equity-Oriented 85% 80-90%
Fixed Income-Oriented 15% 10-20%
====================================== =================== =================
The Funds expect to invest their assets in the Underlying GE Funds
listed below within the Investment Limits indicated.
Investment Limits (Percent of Each Fund's Net Assets)
Conservative Moderate Aggressive
Underlying GE Fund Fund Fund Fund
- ----------------------------------------------------------------------------
GE U.S. Equity Fund 30-40% 35-45% 45-55%
GE International Equity Fund 10-20% 20-30% 30-40%
GE Fixed Income Fund 40-50% 25-35% 10-20%
GE Short-Term Government Fund 0-10% 0-10%
GE Money Market Fund 0-2% 0-2% 0-2%
============================================================================
The Underlying GE Funds have been selected to represent a reasonable spectrum of
investment options for the Funds. The Asset Allocation Ranges and the Investment
Limits are based on the degree to which the Underlying GE Funds selected are
expected in combination to be appropriate for a Fund's particular investment
objective. If, as a result of appreciation or depreciation, the percentage of a
<PAGE>11
Fund's assets invested in an Underlying GE Fund exceeds or is less than the
applicable Investment Limits set forth above, GEIM will consider, in its
discretion, whether to reallocate the assets of the Fund to comply with the
foregoing Investment Limits. The particular Underlying GE Funds in which each
Fund may invest, the Asset Allocation Ranges and targets and the Investment
Limits applicable to each Underlying GE Fund may be changed from time to time by
the Trust's Board of Trustees without the approval of the Fund's shareholders.
The Trust will provide prior notice to shareholders before implementing changes
in the mix of Underlying GE Funds or the Asset Allocation Ranges, but not prior
to changes in the Investment Limits.
Each Fund can invest a certain portion of its cash reserves in GE Money Market
Fund or directly in money market instruments. A reserve position provides
flexibility, for example, in meeting redemptions, expenses and the timing of new
investments, and serves as a short-term defense during periods of unusual
volatility.
For information about the investment objectives of each of the Underlying GE
Funds and the investment techniques and the risks involved in the Underlying GE
Funds, please refer to "Description of the Underlying GE Funds", the Appendix to
this Prospectus, the Statement of Additional Information and the prospectus and
statement of additional information for GE Funds which is available from the
Trust upon request.
RISK FACTORS AND SPECIAL CONSIDERATIONS OF THE FUNDS
Non-Diversified Investment Company. Each Fund is a "non-diversified" investment
portfolio for purposes of the Investment Company Act of 1940, as amended (the
"1940 Act"), because it invests in the securities of a limited number of mutual
funds. However, the Underlying GE Funds themselves are diversified investment
portfolios. The Trust intends to comply with the diversification requirements of
Subchapter M of the Code.
Investing in Underlying GE Funds. The investments of each Fund are concentrated
in the Underlying GE Funds, so each Fund's investment performance is directly
related to the investment performance of the Underlying GE Funds held by it. The
ability of each Fund to meet its investment objective is directly related to the
ability of the Underlying GE Funds to meet their objectives as well as the
allocation among those Underlying GE Funds by GEIM. There can be no assurance
that the investment objective of any Fund or any Underlying GE Fund will be
achieved.
<PAGE>12
Investing through the Funds in the Underlying GE Funds involves certain
additional expenses and tax results that would not be present in a direct
investment in the Underlying GE Funds. See "Management of the Trust - Expenses
of the Funds".
Under certain circumstances, an Underlying GE Fund may determine to make payment
of a redemption request by a Fund wholly or partly by a distribution in kind of
securities from its portfolio, instead of cash, in accordance with the rules of
the SEC. In such cases, the Funds may hold securities distributed by an
Underlying GE Fund until GEIM determines that it is appropriate to dispose of
such securities.
Affiliated Persons. GEIM, the investment adviser and administrator of the Funds,
and the officers and trustees of the Trust presently serve as investment adviser
and administrator, officers and trustees, respectively, of the Underlying GE
Funds. Therefore, conflicts may arise as these persons fulfill their fiduciary
responsibilities to the Funds and the Underlying GE Funds. See "Management of
the Trust" for a more detailed explanation of the potential conflicts of
interest that may arise because of the "fund of funds" structure of the Trust.
In addition, GEIM's principal officers, directors and portfolio managers serve
in similar capacities with respect to General Electric Investment Corporation
("GEIC"), which like GEIM is a wholly-owned subsidiary of General Electric
Company ("GE"). GEIM and GEIC collectively provide investment management
services to various institutional accounts with total assets, as of June 30,
1996, in excess of $55 billion.
Investment Practices of Underlying GE Funds. Certain Underlying GE Funds may
invest a portion of their assets in low-rated securities (as defined below);
foreign securities; enter into forward currency transactions; lend their
portfolio securities; enter into stock index, interest rate and currency futures
contracts, and options on such contracts; engage in options transactions; make
short sales; purchase zero coupon obligations; purchase non-publicly traded and
illiquid securities; enter into mortgage roll transactions; purchase securities
on a when-issued or delayed delivery basis; enter into repurchase agreements;
borrow money; and engage in various other investment practices. See "Investment
Objectives and Management Policies of the Underlying GE Funds".
<PAGE>13
Market and Economic Factors. The Funds share prices and yields will fluctuate in
response to various market and economic factors related to both the stock and
bond markets. All Funds may invest in mutual funds that in turn invest in
international securities and thus are subject to additional risks of these
investments, including changes in foreign currency exchange rates and political
risk.
Additional Expense Information Concerning the Funds
Investors in the Funds should recognize that they may invest directly in the GE
Funds and that, by investing in Underlying GE Funds indirectly through the
Funds, they will bear not only their proportionate share of the expenses of the
Funds (including operating costs and investment advisory and administrative fees
to the extent GEIM has not elected to waive such fees), but will also indirectly
bear similar expenses of the Underlying GE Funds. In addition, as a shareholder
of an Underlying GE Fund's Class A shares, a Fund will bear a proportionate
share of expenses related to the distribution and shareholder servicing of the
Underlying GE Fund's shares.
Investment Restrictions of the Funds
The Trust has adopted certain fundamental investment restrictions with respect
to each Fund that may not be changed without approval of a majority of the
Fund's outstanding voting securities (as defined in the 1940 Act). Included
among those fundamental restrictions are those listed below.
1. No Fund may borrow money or issue senior securities, except that each
Fund may borrow from banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests and cash payments
of dividends and distributions that might otherwise require the untimely
disposition of securities, in an amount not to exceed 33-1/3% of the
value of the Fund's total assets (including the amount borrowed) valued
at market less liabilities (not including the amount borrowed) at the
time the borrowing is made. Whenever borrowings of 5% or more of a Fund's
total assets are outstanding, the Fund will not make any additional
investments.
2. No Fund may lend its assets or money to other persons, except through (a)
purchasing debt obligations, (b) lending portfolio securities in an
amount not to exceed 30% of the Fund's assets taken at market value and
(c) entering into repurchase agreements.
<PAGE>14
Certain other investment restrictions adopted by the Trust with respect to the
Funds are described in the Statement of Additional Information. Investment
restrictions of the Underlying GE Funds in which the Funds invest may be more or
less restrictive than those adopted by the Trust.
PORTFOLIO TURNOVER
Each Fund's turnover rate (i.e., the rate at which the Fund buys and sells
shares of the Underlying GE Funds) is not expected to exceed 25% annually. A
Fund may purchase or sell securities to: (a) accommodate purchases and sales of
its shares; (b) change the percentages of its assets invested in each of the
Underlying GE Funds in response to market conditions; and (c) maintain or modify
the allocation of its assets between equity-oriented funds and fixed
income-oriented funds and among the Underlying GE Funds within the Asset
Allocation Ranges and Investment Limits described above or as altered by the
Trust's Board of Trustees from time to time.
GEIM cannot predict precisely the turnover rate for any Underlying GE Fund, but
expects that the annual turnover rate will not exceed 50% for each of GE U.S.
Equity Fund and GE International Equity Fund or 300% for each of GE Fixed Income
Fund and GE Short-Term Government Fund. The portfolio turnover rate for GE Money
Market Fund is expected to be zero for regulatory purposes. There can be no
assurance that the turnover rates of these Underlying GE Funds will not exceed
these limits. Higher turnover rates (more than 100%) may result in higher
transaction expenses being incurred by certain Underlying GE Funds and
shareholders in the Funds that invest in those Underlying GE Funds will
indirectly bear their proportionate share of such expenses. For the fiscal
year ended September 30, 1995, the actual portfolio turnover rates of the
Underlying GE Funds were: GE U.S. Equity Fund - 43%, GE International Equity
Fund - 27%, GE Fixed Income Fund - 315% and GE Short-Term Government Fund -
415%.
DESCRIPTION OF THE UNDERLYING GE FUNDS
Investment Objectives and Management Policies
Set forth below is a description of the investment objective and policies of
each Underlying GE Fund. The investment objective of a Fund may not be changed
without the approval of the holders of a majority of the Underlying GE Fund's
outstanding voting securities as defined in the 1940 Act. Such a majority is
defined in the 1940 Act as the lesser of (1) 67% or more of the shares present
<PAGE>15
at a Fund meeting, if the holders of more than 50% of the outstanding shares of
the Underlying GE Fund are present or represented by proxy or (2) more than 50%
of the outstanding shares of the Underlying GE Fund. No assurance can be given
that an Underlying GE Fund will be able to achieve its investment objective. No
offer is made in this Prospectus of any of the Underlying GE Funds. Because each
Fund invests in Underlying GE Funds, shareholders of each Fund will be affected
by these investment policies in direct proportion to the amount of assets each
Fund allocates to the Underlying GE Funds pursuing such policies.
GE U.S. Equity Fund
The investment objective of GE U.S. Equity Fund (the "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 U.S. Equity Fund, under normal conditions, invests at least 65%
of its assets in equity securities, consisting of common stocks and preferred
stocks, and securities convertible into common stocks, consisting of convertible
bonds, convertible debentures, convertible notes, convertible preferred stocks
and warrants or rights issued by U.S. companies. Up to 15% of the U.S. Equity
Fund's assets may be invested in foreign securities. The U.S. Equity Fund also
may invest in securities of foreign issuers in the form of depositary receipts.
The U.S. Equity Fund may, under normal market conditions, invest up to 35% of
its assets in notes, bonds and debentures issued by corporate or governmental
entities when GEIM determines that investing in these kinds of debt securities
is consistent with the Fund's investment objective of long-term growth of
capital. The U.S. Equity Fund's investments in debt securities are limited to
those that are rated investment grade, except that up to 5% of the Fund's assets
may be invested in securities rated lower than investment grade.
In managing the assets of the U.S. Equity Fund, GEIM uses a combination of
"value-oriented" and "growth-oriented" investing. Value-oriented investing
involves seeking securities that may have low price-to-earnings ratios, or high
yields, or that sell for less than intrinsic value as determined by GEIM, or
that appear attractive on a dividend discount model. These securities generally
are sold from the U.S. Equity Fund's portfolio when their prices approach
targeted levels. Growth-oriented investing generally involves buying securities
with above average earnings growth rates at reasonable prices. The U.S. Equity
Fund holds these securities until GEIM determines that their growth prospects
diminish or that they have become overvalued when compared with alternative
investments.
<PAGE>16
In investing on behalf of the U.S. Equity Fund, GEIM seeks to produce a
portfolio that GEIM believes will have similar characteristics to the Standard &
Poor's 500 Composite Stock Price Index (the "S&P Index"), by virtue of blending
investments in both "value" and "growth" securities. Since the U.S. Equity
Fund's strategy seeks to combine the basic elements of companies comprising the
S&P Index, but is designed to select investments deemed to be the most
attractive within each category, GEIM believes that the strategy should be
capable of outperforming the U.S. equity market as reflected by the S&P Index on
a total return basis.
GE International Equity Fund
The investment objective of GE International Equity Fund (the "International
Fund") is long-term growth of capital, which the Fund seeks to achieve by
investing primarily in foreign equity securities. The International Fund may
invest in securities of companies and governments located in developed and
developing countries outside the United States. The International Fund may also
invest in securities of foreign issuers in the form of depositary receipts.
Investing in securities issued by foreign companies and governments involves
considerations and potential risks not typically associated with investing in
securities issued by the U.S. Government and U.S. corporations. The
International 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 having their principal business activities in
no fewer than three different countries. The percentage of the International
Fund's assets invested in particular countries or regions of the world will vary
depending on political and economic conditions. An issuer's domicile or
nationality will be determined by reference to (a) the country in which the
issuer derives at least 50% of its revenues or profits from goods produced or
sold, investments made or services performed, or (b) the country in which the
issuer has at least 50% of its assets situated.
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 common stock purchase warrants or
<PAGE>17
rights, issued by companies believed by GEIM to have a potential for superior
growth in sales and earnings. The International Fund will emphasize established
companies, although it may invest in companies of varying sizes as measured by
assets, sales or capitalization.
The International Fund may, under normal market conditions, invest up to 35% of
its assets in notes, bonds and debentures issued by corporate or governmental
entities when GEIM determines that investing in those kinds of debt securities
is consistent with the Fund's investment objective of long-term capital
appreciation. The International Fund's investments in debt securities are
limited to those that are rated investment grade; up to 5% of the Fund's assets
may be invested in securities rated lower than investment grade.
In selecting investments on behalf of the International Fund, GEIM seeks
companies that are expected to grow faster than relevant markets and whose
securities are available at a price that does not fully reflect the potential
growth of those companies. GEIM typically focuses on companies that possess one
or more of a variety of characteristics, including strong earnings growth
relative to price-to-earnings and price-to-cash earnings ratios, low
price-to-book value, strong cash flow, presence in an industry experiencing
strong growth and high quality management.
GE Fixed Income Fund
The investment objective of GE Fixed Income Fund (the "Income Fund") is to seek
maximum income consistent with prudent investment management and the
preservation of capital. Capital appreciation with respect to the Income Fund's
portfolio securities may occur but is not an objective of the Fund. In seeking
to achieve its investment objective, the Income Fund invests in the following
types of fixed income instruments: securities issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities ("Government
Securities"); obligations of foreign governments or their agencies or
instrumentalities; bonds, debentures, notes and preferred stocks issued by U.S.
and foreign companies; mortgage related securities, adjustable rate mortgage
related securities ("ARMs"), collateralized mortgage related securities ("CMOs")
and government stripped mortgage related securities; asset-backed and
receivable-backed securities; zero coupon obligations; floating and variable
rate instruments and money market instruments. The Income Fund may also invest
in indexed securities, the value of which is linked to currencies, interest
rates, commodities, indexes or other financial indicators.
<PAGE>18
The Income Fund is subject to no limitation with respect to the maturities of
the instruments in which it may invest; the weighted average maturity of the
Fund's portfolio securities is anticipated to be approximately five to 10 years.
The Income Fund's investments in bonds are limited to those that are rated
within the six highest categories by S&P, Moody's or another NRSRO, or if
unrated, are deemed by GEIM to be of comparable quality.
The Income Fund will not purchase any obligation rated BBB by S&P or Baa by
Moody's if, as a result of the purchase, more than 25% of the Fund's total
assets would be invested in obligations rated in those categories or in unrated
obligations that are deemed by GEIM to be of comparable quality. In addition, no
obligation will be purchased by the Income Fund if, as a result of the purchase,
more than 10% of the Fund's total assets would be invested in obligations rated
BB or B by S&P or Ba or B by Moody's or in unrated obligations that GEIM deems
to be of comparable quality.
GE Short-Term Government Fund
The investment objective of GE Short-Term Government Fund (the "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 Government Fund will invest at least 65% of its total assets in
Government Securities including repurchase agreements secured by Government
Securities.
The Government Fund may invest the remainder of its assets in bonds, convertible
bonds, debentures, notes and non-convertible preferred stocks issued by U.S. and
foreign companies; obligations of foreign governments or their agencies or
instrumentalities; mortgage related securities, ARMs, CMOs and government
stripped mortgage related securities and asset-backed and receivable-backed
securities; zero coupon obligations (including zero coupon municipal
obligations); floating and variable rate instruments; and money market
instruments. The Government Fund may also invest in indexed securities, the
value of which is linked to currencies, interest rates, commodities, indexes or
other financial indicators. Mortgage related securities, ARMs, CMOs, government
stripped mortgage related securities and asset-backed and receivable-backed
securities are subject to several risks, including the prepayment of principal.
The debt securities in which the Fund invests will only be purchased if, in the
<PAGE>19
case of long-term securities, they are rated investment grade by S&P or Moody's
(or the equivalent from another NRSRO) and short-term securities will only be
purchased if they are rated A-1 by S&P or Prime-1 by Moody's (or the equivalent
from another NRSRO) or, for both short- and long-term securities, if unrated,
deemed to be of equivalent quality by GEIM.
The dollar-weighted average maturity of the Government Fund's portfolio
securities is anticipated to be not more than three years. Within this
limitation the Government Fund may purchase individual securities with effective
maturities greater than three years as long as its average maturity remains
within this limit.
GE Money Market Fund
The investment objective of GE Money Market Fund (the "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 Money Market
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.
The Money Market Fund limits its portfolio investments to securities that GE
Funds' Board of Trustees determines present minimal credit risk and that are
"Eligible Securities" at the time of acquisition by the Money Market Fund.
"Eligible Securities" as used in this Prospectus means securities rated by the
"Requisite 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 Money Market Fund acquires the
security. Currently, six organizations are NRSROs: S&P, Moody's, Fitch Investors
Service, Inc., Duff and Phelps, Inc., IBCA Limited and its affiliate, IBCA,
Inc., and Thomson BankWatch Inc. By limiting its investments to Eligible
Securities, the Money Market Fund may not achieve as high a level of current
income as a fund investing in lower-rated securities.
<PAGE>20
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 SEC under the 1940 Act. In addition,
the Money Market Fund may not invest more than 5% of its total assets in
Eligible Securities that have not received the highest rating from the Requisite
NRSROs and comparable unrated securities ("Second Tier Securities"), and may not
invest more than 1% of its total assets in the Second Tier Securities of any one
issuer. The Money Market 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. If
the Money Market Fund acquires securities that are unrated or that have been
rated by a single NRSRO, the acquisition must be approved or ratified by GE
Funds' Board of Trustees. Determinations of comparable quality is made by GEIM
in accordance with procedures established by the Board of Trustees. The Money
Market 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. The
Money Market Fund will maintain a dollar-weighted average portfolio maturity of
90 days or less. The assets of the Money Market Fund are valued on the basis of
amortized cost.
Cash Management Policies
In addition to investing as described above, during normal market conditions,
each of the Underlying GE Funds (other than GE Money Market Fund which invests
primarily in money market instruments as described above) may invest a portion
of its total assets in cash and/or money market instruments of the types
described in the Appendix to this Prospectus for cash management purposes,
pending investment in accordance with the Underlying GE Fund's investment
objective and policies and to meet operating expenses. Under normal market
conditions, each of the Income Fund and the Government Fund may hold a
substantial portion of its assets in money market instruments, including in the
case of the Government Fund short-term instruments with remaining maturities of
<PAGE>21
one year or less, if such investment is deemed by GEIM to be consistent with the
Underlying GE Fund's investment objective. During periods in which GEIM believes
that economic or other market conditions warrant, the Underlying GE Funds may
for temporary defensive purposes hold cash and/or invest in the same types of
money market instruments (in the case of the Income Fund and the Government
Fund, short-term money market instruments) without limitation. To the extent
that it holds cash or invests in money market instruments, an Underlying GE Fund
may not achieve its stated investment objective.
Additional Investments of the Underlying GE Funds
The Underlying GE Funds, in addition to investing as described above, which are
the core investments of and strategies employed by the Underlying GE Funds, may
hold one or more of the following types of instruments: repurchase agreements,
reverse repurchase agreements, non-publicly traded securities, illiquid
securities, securities that are not registered under the Securities Act of 1933,
as amended (the "1933 Act"), but that can be sold to "qualified institutional
buyers" in accordance with Rule 144A under the 1933 Act (each, a "Rule 144A
Security" and collectively, "Rule 144A Securities"), securities of supranational
agencies and securities of other investment funds. In addition, the Underlying
GE Funds may engage in the following types of investment techniques and
strategies: purchasing put and call options on securities, writing put and call
options on securities, purchasing put and call options on securities indexes,
entering 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 or in the over-the-counter market, engaging in forward currency
transactions, purchasing and writing put and call options on foreign currencies,
entering into securities transactions on a when-issued or delayed-delivery
basis, lending portfolio securities, entering into mortgage dollar rolls and
selling securities short against the box.
These other instruments, investment techniques and strategies have risks and
special considerations associated with them that are described below under "Risk
Factors and Special Considerations of the Underlying GE Funds." For additional
information regarding the permitted investments, techniques and strategies of
the Underlying GE Funds, see "Further Information: Additional Investments and
Certain Investment Techniques and Strategies Used by the Underlying GE Funds" in
the Appendix to this Prospectus, the Trust's Statement of Additional Information
and the prospectus for GE Funds.
<PAGE>22
Risk Factors and Special Considerations of the Underlying GE Funds
General. From time to time, the Underlying GE Funds may experience relatively
large purchases or redemptions due to asset allocation decisions made by GEIM
for its clients, including the Trust. These transactions may have a material
effect on the Underlying GE Funds, since Underlying GE Funds that experience
redemptions as a result of reallocations may have to sell portfolio securities
and because Underlying GE Funds that receive additional cash will have to invest
it. While it is impossible to predict the overall impact of these transactions
over time, there could be adverse effects on portfolio management to the extent
that Underlying GE Funds may be required to sell securities at times when they
would not otherwise do so, or receive cash that cannot be invested in an
expeditious manner. There may be tax consequences associated with purchases and
sales of securities, and such sales may also increase transaction costs. GEIM is
committed to minimizing the impact of these transactions on the Underlying GE
Funds to the extent it is consistent with pursuing the investment objectives of
its asset allocation clients, and will monitor the impact of asset allocation
decisions on the Underlying GE Funds. GEIM will nevertheless face conflicts in
fulfilling its responsibilities because of the possible differences between
interests of its asset allocation clients and the interests of the Underlying GE
Funds.
Debt Instruments. A debt instrument held by an Underlying GE 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 an Underlying GE Fund's portfolio can be expected
to vary inversely to changes in prevailing interest rates. In periods of
declining interest rates, the yield of an Underlying GE 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 Underlying
GE Fund's yield will tend to be somewhat lower. In addition, when interest rates
are falling, money received by such an Underlying GE 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.
<PAGE>23
Certain Investment Grade Obligations. A security is considered investment grade
if it is rated at the time of purchase within the four highest grades assigned
by Standard & Poor's Corporation ("S&P") or by Moody's Investors Service, Inc.
("Moody's") or has received an equivalent rating from another nationally
recognized statistical rating organization ("NRSRO") or, if unrated, is deemed
by GEIM to be of comparable quality. 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. A description of S&P and Moody's
ratings relevant to Underlying GE Funds' investments is included as an Appendix
to the Trust's Statement of Additional Information.
Low-rated Securities. Certain Underlying GE 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.
Although the market values of low-rated securities tend to react less to
fluctuations in interest rate levels than the market values of higher-rated
securities, 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
<PAGE>24
is significantly greater because low-rated securities generally are unsecured
and frequently are subordinated to the prior payment of senior indebtedness. An
Underlying GE 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 GEIM's ability to obtain accurate market quotations for
purposes of valuing the securities held by an Underlying GE Fund and calculating
the Fund's net asset value.
Non-publicly Traded and Illiquid Securities. 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 an Underlying GE 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. An Underlying GE 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 GEIM
deems representative of their value, the value of the Fund's net assets could be
adversely affected.
Repurchase and Reverse Repurchase Agreements. A Fund or an Underlying GE 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 Underlying GE 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 the Money Market 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 the securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, the Money Market 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.
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
<PAGE>25
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 an Underlying GE Fund in warrants valued at the lower of
cost or market, may not exceed 5% of the value of the Underlying GE Fund's net
assets. Included within that amount, but not to exceed 2% of the value of the
Underlying GE Fund's net assets, may be warrants that are not listed on the New
York Stock Exchange, Inc. ("NYSE") or the American Stock Exchange. Warrants
acquired by an Underlying GE Fund in units or attached to securities may be
deemed to be without value.
Investment in Foreign Securities. Investing in securities issued by foreign
companies and governments involves considerations and potential risks not
typically associated with investing in obligations issued by the U.S. Government
and U.S. corporations. Less information may be available about foreign companies
than about U.S. companies, and foreign companies generally are not subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory practices and requirements comparable to those applicable to U.S.
companies. The values of foreign investments are affected by changes in currency
rates or exchange control regulations, restrictions or prohibitions on the
repatriation of foreign currencies, application of foreign tax laws, including
withholding taxes, changes in governmental administration or economic or
monetary policy (in the United States or abroad) or changed circumstances in
dealings between nations. Costs are also incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions are
generally higher than those charged in the United States and foreign securities
markets may be less liquid, more volatile and less subject to governmental
supervision than in the United States. Investments in foreign countries could be
affected by other factors not present in the United States, including
expropriation, confiscatory taxation, lack of uniform accounting and auditing
standards, limitations on the use or removal of funds or other assets (including
the withholding of dividends), and potential difficulties in enforcing
contractual obligations, and could be subject to extended clearance and
settlement periods.
<PAGE>26
Currency Exchange Rates. An Underlying GE Fund's share value may change
significantly when the currencies, other than the U.S. dollar, in which the
Fund's portfolio investments are denominated strengthen or weaken against the
U.S. dollar. Currency exchange rates generally are determined by the forces of
supply and demand in the foreign exchange markets and the relative merits of
investments in different countries as seen from an international perspective.
Currency exchange rates can also be affected unpredictably by intervention by
U.S. or foreign governments or central banks or by currency controls or
political developments in the United States or abroad.
Investing in Developing Countries. Investing in securities issued by companies
located in developing countries involves not only the risks described above with
respect to investing in foreign securities, but also other risks, including
exposure to economic structures that are generally less diverse and mature than,
and to political systems that can be expected to have less stability than, those
of developed countries. Other characteristics of developing countries that may
affect investment in their markets include certain national policies that may
restrict investment by foreigners in issuers or industries deemed sensitive to
relevant national interests and the absence of developed legal structures
governing private and foreign investments and private property. The typically
small size of the markets for securities issued by companies located in
developing countries and the possibility of a low or nonexistent volume of
trading in those securities may also result in a lack of liquidity and in price
volatility of those securities.
Covered Option Writing. Upon the exercise of a put option written by an
Underlying GE Fund, the Fund may suffer a loss equal to the difference between
the price at which the Fund is required to purchase the underlying security and
its market value at the time of the option exercise, less the premium received
for writing the option. Upon the exercise of a call option written by an
Underlying GE Fund, the Fund may suffer a loss equal to the excess of the
security's market value at the time of the option's exercise over the Fund's
acquisition cost of the security, less the premium received for writing the
option. In addition, no assurance can be given that an Underlying GE Fund will
be able to effect closing purchase transactions at a desired time. The ability
of an Underlying GE Fund to engage in closing transactions with respect to
options depends on the existence of a liquid secondary market. Although an
Underlying GE Fund will generally purchase or write securities options only if a
liquid secondary market appears to exist for the option purchased or sold, no
such secondary market may exist or the market may cease to exist.
<PAGE>27
An Underlying GE Fund will engage in hedging transactions only when deemed
advisable by GEIM. Successful use by an Underlying GE Fund of options will
depend on GEIM'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 an Underlying GE
Fund's performance.
Securities Index Options. 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 an Underlying GE Fund to engage in closing purchase
transactions with respect to securities index options depends on the existence
of a liquid secondary market. Although an Underlying GE 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 GEIM desires that an Underlying GE Fund engage in such a transaction.
Futures and Options on Futures. 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. Losses incurred in hedging
transactions and the costs of these transactions will affect an Underlying GE
Fund's performance.
Forward Currency Transactions. In entering into forward currency contracts, an
Underlying GE 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 Underlying GE Fund's ability to hedge against the risk
of devaluation of currencies in which the Fund holds a substantial quantity of
securities. The successful use of forward currency contracts as a hedging
<PAGE>28
technique draws upon GEIM's special skills and experience with respect to
those instruments and will usually depend upon GEIM's ability to forecast
interest rate and currency exchange rate movements correctly. Should interest
or exchange rates move in an unexpected manner, an Underlying GE 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.
GEIM's ability to dispose of an Underlying GE Fund's positions in forward
currency contracts depends on the availability of active markets in those
instruments, and GEIM cannot now 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 an Underlying GE Fund
will be able to utilize these contracts effectively for the intended purposes.
Options on Foreign Currencies. 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; an Underlying GE 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 an Underlying GE Fund's position, the Fund could
forfeit the entire amount of the premium plus related transaction costs.
Instruments and Strategies Involving Special Risks. Certain instruments in
which the Underlying GE Funds can invest and certain investment strategies
that the Funds may employ could expose the Funds to various risks and special
considerations. The instruments presenting risks to an Underlying GE Fund that
holds the instruments are: Rule 144A Securities, depositary receipts,
securities of supranational agencies, securities of other investment funds,
floating and variable rate instruments, zero coupon obligations, mortgage
related securities, government stripped mortgage related securities, and
asset-backed and receivable-backed securities. Among the risks that some but
not all of these instruments involve are lack of liquid secondary markets and
the risk of
<PAGE>29
prepayment of principal. The investment strategies involving special risks to
some or all of the Underlying GE Funds are: engaging in when-issued or
delayed-delivery securities transactions, lending portfolio securities and
selling securities short against the box. Among the risks that some but not all
of these strategies involve are increased exposure to fluctuations in market
value of the securities and certain credit risks. See the Appendix to this
Prospectus for a more complete description of these instruments and strategies.
MANAGEMENT OF THE TRUST
Board of Trustees
Overall responsibility for management and supervision of the Funds rests with
the Trust's Board of Trustees. The Trustees determine, after receipt of
recommendations from GEIM and the Investment Consultant, if any, the Asset
Allocation Ranges which designate the minimum and maximum percentages for
investment in equity- and fixed income-oriented funds. Based upon GEIM's
determination of which Underlying GE Funds properly should be included within
these categories, the Board of Trustees sets the Investment Limits which define
the extent to which a Fund can invest in an Underlying GE Fund. In addition, 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.
A majority of the Trust's trustees are non-interested persons as defined in
Section 2(a)(19) of the 1940 Act. However, the trustees and officers of the
Trust also serve in similar positions with the GE Funds. Thus, if the interests
of a Fund and the Underlying GE Funds were ever to become divergent, it is
possible that a conflict of interest could arise and affect how the trustees and
officers of the Trust fulfill their fiduciary duties to that Fund and the
Underlying GE Funds. The trustees of the Trust believe they have structured each
Fund to avoid these concerns. However, conceivably a situation could occur where
proper action for the Trust or a Fund separately could be adverse to the
interests of an Underlying GE Fund, or the reverse could occur. If such a
possibility arises, the trustees and officers of the Trust, GE Funds and GEIM
will carefully analyze the situation and make all steps they believe reasonable
to minimize and, where possible, eliminate the potential conflict.
<PAGE>30
Investment Adviser and Administrator
GEIM, located at 3003 Summer Street, P.O. Box 7900, Stamford, Connecticut 06904,
serves as the investment adviser and administrator of each Fund. GEIM, which was
formed under the laws of Delaware in 1988, is a wholly-owned subsidiary of GE
and is a registered investment adviser under the Investment Advisers Act of
1940, as amended. In addition to its administrative responsibilities, GEIM, in
conjunction with the Investment Consultant, if any, determines which of the
Underlying GE Funds appropriately should be classified as equity-oriented or
fixed-income oriented for purposes of the Asset Allocation Ranges determined by
the Board of Trustees from time to time. GEIM then allocates and reallocates
according to fundamental and quantitative analysis each Fund's assets to the
Underlying GE Funds within the Investment Limits set by the Board of Trustees
from time to time.
In addition to serving as investment adviser to the GE Funds since their
inception in 1993, GEIM has served as the investment adviser of the investment
portfolios of Variable Investment Trust, which are offered only to insurance
company separate accounts that fund certain variable contracts, since their
inception in 1994, and other institutional accounts, including PaineWebber
Global Equity Fund, a series of Mitchell Hutchins/Kidder Peabody Investment
Trust, since its inception in 1991, the Global Growth Portfolio of PaineWebber
Series Trust and Global Small Cap Fund Inc. since March, 1995. GEIM's principal
officers and directors serve in similar capacities with respect to GEIC, which
like GEIM is a wholly-owned subsidiary of GE, and which currently acts as the
investment adviser of Elfun Global Fund, Elfun Trusts, Elfun Income Fund, Elfun
Money Market Fund, Elfun Tax-Exempt Income Fund and Elfun Diversified Fund
(collectively, the "Elfun Funds"). The first Elfun Fund, Elfun Trusts, was
established in 1935. Investment in the Elfun Funds is generally limited to
regular and senior members of the Elfun Society, whose regular members are
selected from active employees of GE and/or its majority-owned subsidiaries, and
whose senior Society members are former members who have retired from those
companies. In addition, under the General Electric Savings and Security Program,
GEIC serves as investment adviser to the GE S&S Program Mutual Fund and GE S&S
Long Term Interest Fund. GEIC also serves as the investment adviser to the
General Electric Pension Trust. Through GEIM and GEIC and their predecessors, GE
<PAGE>31
has over 60 years of investment management experience. GEIM and GEIC
collectively provide investment management services to various institutional
accounts with total assets, as of June 30, 1996, in excess of $55 billion, of
which roughly $10 billion is invested in mutual funds.
As a Fund's investment adviser, GEIM, subject to the supervision and direction
of the Trust's Board of Trustees, will determine how each Fund's assets will be
invested in the Underlying GE Funds and in money market instruments pursuant to
the investment objective and policies of each Fund set forth in this Prospectus
and, in conjunction with the Investment Consultant, if any, make recommendations
to the Board of Trustees concerning changes to (a) the Underlying GE Funds in
which the Funds may invest, (b) the Asset Allocation Ranges and (c) the
Investment Limits. The Trustees of the Trust will periodically monitor the
allocations made and the basis upon which such allocations were made or
maintained and will be responsible for supervising compliance with each Fund's
investment objective and policies. As a Fund's administrator, GEIM furnishes the
Trust with statistical and research data, clerical help and accounting, data
processing, bookkeeping, internal auditing services and certain other services
required by the Trust; prepares reports to the shareholders of the Fund; and
assists in the preparation of tax returns and reports to and filings with the
SEC and state securities law authorities. GEIM also pays the salaries of all
personnel employed by both it and the Trust.
Under the agreements governing the asset allocation and administration services
to be furnished to the Funds, GEIM has agreed to bear all expenses of the
LifeStyle Funds other than brokerage, interest, advisory and administration
fees, fees and expenses of the Trust's Board of Trustees who are not affiliated
with GEIM or its affiliates (including counsel fees), taxes payable by the
Trust, transfer agency costs and any extraordinary expenses. For services
rendered and expenses borne, each Fund pays GEIM fees for advisory and
administration services provided by GEIM to the Fund that are accrued daily and
paid monthly at the annual rate of .20% of the value of the Fund's average daily
net assets. Each Fund, as a shareholder in the Underlying GE Funds, will
indirectly bear its proportionate share of any investment advisory and
administration fees and other expenses paid by the Underlying GE Funds. The
effective advisory and administration fee of each of the Underlying GE Funds in
which the Funds may invest is paid at the following annual rates in each case of
the value of the Underlying GE Fund's average daily net assets: the U.S. Equity
Fund - .40%, the International Fund - .80%, the Income Fund - .35%, the
<PAGE>32
Government Fund - .30% and the Money Market Fund - .25%. The fees paid by the
International Fund are higher than investment management fees paid by most other
mutual funds. When combined with the fees payable by each Underlying GE Fund in
which a Fund invests, the advisory and administration fee for each Fund may be
higher than that paid by most mutual funds.
The agreements governing the asset allocation and administration services
furnished to the Trust by GEIM provide that, if GEIM ceases to act as the
investment adviser to the Trust, at GEIM's request, the Trust's license to use
the initials "GE" will terminate and the Trust will change the name of the Trust
and the Funds to a name not including the initials "GE."
Investment Consultant
The Trust and GEIM have entered into an Investment Consulting Agreement with
DiMeo, Schneider & Associates, L.L.C., an Illinois limited liability company, an
investment advisory firm which will initially act as the Investment Consultant
to the Trust's Board of Trustees. The Investment Consultant will review and
analyze the Underlying GE Funds and asset allocation of the Funds among the
Underlying GE Funds taking into account each Fund's stated investment objective.
The Investment Consultant, in conjunction with GEIM, will make recommendations
to the Board concerning changes to (1) the Underlying GE Funds in which the
Funds may invest, (2) the Asset Allocation Ranges and (3) the Investment Limits.
Out of its advisory and administration fee, GEIM will pay the Investment
Consultant fees for investment consulting services provided by the Investment
Consultant to the Board of Trustees and GEIM. These fees paid to the Investment
Consultant are paid by GEIM directly and no additional cost is borne by the
Funds.
Portfolio Management
Eugene K. Bolton is the Portfolio Manager of the Funds. Mr. Bolton is
responsible for the overall management of the domestic equity investment process
at GEIM and GEIC (GEIM, GEIC and their predecessors are collectively referred to
as "GE Investments"). In that capacity, Mr. Bolton is specifically responsible
for selecting the portfolio managers of the U.S. Equity Fund and the equity
related investments of the portfolio of GE Strategic Investment Fund, another
series of GE Funds which is not currently an Underlying GE Fund. He is also
<PAGE>33
responsible for monitoring the investment strategies of those funds to ensure
that they are consistent with the investment objectives and policies of those
funds. Mr. Bolton has more than 12 years of investment experience and has held
positions with GE Investments since 1984. He is currently a Director and
Executive Vice President of GE Investments.
GEIM investment personnel may engage in securities transactions for their own
accounts pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions.
Shareholder Servicing and Distribution Plans Adopted by the
Underlying GE Funds
GE Funds has adopted Shareholder Servicing and Distribution Plans (the "Plans")
pursuant to Rule 12b-1 under the 1940 Act with respect to each Underlying GE
Fund, other than the Money Market Fund. Under the Plans, GE Funds will pay GEIM,
with respect to the Class A shares of an Underlying GE Fund, an annual service
fee of .25% of the value of the Underlying GE Fund's average daily net assets
attributable to the Class and an annual distribution fee of .25% of the value of
the Underlying GE Fund's average daily net assets attributable to the Class. The
annual service fee is used by GEIM to compensate itself or others, including GE
Investment Services Inc., the distributor of the Underlying GE Funds' shares
("GEIS" or the "Distributor"), for services provided to shareholders of the
Class A shares. The distribution fee is used to compensate GEIM or to allow GEIM
to compensate others, including the Distributor, for its expenses associated
with activities that are primarily intended to result in the sale of Class A
shares of the Underlying GE Funds. Fees to be paid with respect to the
Underlying GE Funds under the Plans will be calculated daily and paid monthly by
the GE Funds. Shareholders of the Funds offered by this Prospectus will
indirectly bear the Fund's pro rata share of these 12b-1 fees paid by Class A
shares of the Underlying GE Funds.
The Trust, GEIM and GEIS have entered into a special servicing agreement (the
"Servicing Agreement") which provides that all or a portion of each Underlying
GE Fund's Rule 12b-1 fees paid pursuant to the Plans that are attributable to
shares held by a Fund may be used to compensate GEIS for providing ongoing
servicing and/or maintenance of the accounts of shareholders of the Fund
("Shareholder Services") and to compensate GEIS for providing services that are
<PAGE>34
primarily attributable to the sale of shares of the Fund ("Selling Services").
Payments made pursuant to the Plans that are attributable to shares of the Funds
are used to compensate GEIS for providing Shareholder Services and Selling
Services to LifeStyle Fund shareholders as if they were direct shareholders in
the Underlying GE Funds. Because GEIS is compensated by the Plans for providing
Shareholder Services and Selling Services to shareholders of the LifeStyle
Funds, it is unnecessary for LifeStyle Funds' Board of Trustees to adopt plans
pursuant to Rule 12b-1 under the 1940 Act and, accordingly, no 12b-1 fees are
paid directly by shareholders of LifeStyle Funds.
Shareholder Services means all forms of shareholder liaison services, including,
among other things, one or more of the following: providing shareholders of a
Fund with (i) information on the Fund's and the Underlying GE Funds'
investments; (ii) general information regarding investing in mutual funds; (iii)
periodic newsletters containing materials relating to the Fund or the Underlying
GE Funds 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 Fund or the Underlying GE Funds specifically; (v)
access to a telephone inquiry center relating to the Fund; and other similar
services not otherwise required to be provided by the Funds' custodian or
transfer agent. Selling Services include, but are not limited to (a) the
printing and distribution to prospective investors in the Fund of prospectuses
and statements of additional information that are used in connection with sales
of shares of the Fund; (b) the preparation, including printing, and distribution
of sales literature and media advertisements relating to the shares of the Fund;
and (c) distributing shares of the Fund. Service Providers who assist GEIM in
rendering Shareholder Services or Selling Services will be compensated by GEIM
as described above.
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. GE Funds' Board of Trustees 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.
<PAGE>35
PURCHASE OF SHARES
General
Fund shares are sold on a continuous basis by the Distributor. A purchase order
will be processed at the net asset value next determined with respect to the
shares of the Fund being purchased after your purchase order (or your wire, if
applicable) has been received and accepted by State Street Bank and Trust
Company ("State Street"), the Trust's custodian and transfer agent. For a
description of the manner of calculating a Fund's net asset value, see "Net
Asset Value."
The minimum initial investment in a Fund is $500 (or $250 in the case of
individual retirement accounts ("IRAs")) and the minimum for subsequent
investments is $100. The minimum for any purchase by payroll deduction
(including initial investment) is $25 per month. Purchase orders for shares of a
Fund will be accepted by the Trust only on a day on which the Fund's net asset
value is calculated. See "Net Asset Value" below. The Trust may in its
discretion reject any order for the purchase of shares of a Fund. For the
convenience of shareholders and in the interest of economy, the Trust will not
issue physical certificates representing shares in any Fund.
Shares of the Funds may be purchased directly from the Distributor or through
authorized broker-dealers, financial institutions or investment advisers which
have entered into sales agreements with the Distributor ("Authorized Firms"), as
follows:
Through Authorized Firms. Initial purchases of shares through Authorized Firms
should be made with the assistance of a sales representative (a "Sales
Representative"). Subsequent investments may be made with a Sales Representative
or mailed directly to the Trust. When making subsequent investments directly to
the Trust, make your check payable to GE LifeStyle Funds and clearly indicate
your account number on the check.
Initial or subsequent purchases of shares through Authorized Firms can also be
made by Federal Funds wire, transferred along with proper instructions directly
to your account. Before an initial wire transfer can be accepted, an account
must be established for you. See your Sales Representative for further
instructions. Your financial institution may charge a fee for wiring to your
account.
<PAGE>36
If you purchase shares through a Sales Representative, your Authorized Firm will
be responsible for transmitting your order promptly to State Street. You begin
to earn income as of the first business day following the day State Street has
received payment for your order. Orders will be accepted only upon receipt by
State Street of all documentation required to be submitted in connection with
such order. If you purchase or redeem your shares through an Authorized Firm,
you may be subject to service fees imposed by that Firm.
Other investors not being assisted by a Sales Representative of an Authorized
Firm may purchase shares in a manner described below:
By Mail. Investors may send a check made payable to GE LifeStyle Funds in
U.S. currency along with account information and instructions to the Trust,
at:
GE LifeStyle Funds
P.O. Box 8309
Boston, MA 02266-8325
For overnight package delivery:
GE LifeStyle Funds
c/o Boston Financial Data Services Inc.
Two Heritage Drive
Quincy, MA 02171
Investors should send all account information and instructions that are
accompanied by a check payable to GE LifeStyle Funds in payment for shares to
the Trust. A purchase of shares of a Fund will be effected in accordance with a
completed order at the Fund's net asset value next determined after receipt. If
the check used for the purchase does not clear, the Trust will cancel the
purchase and the investor may be liable for losses or fees incurred. Checks are
accepted subject to collection at full face value in U.S. funds and must be
drawn on a U.S. bank. Investors may obtain an account application necessary to
open an account by telephoning the Trust at the applicable toll free number
listed on the back cover of the Prospectus or by writing to the Trust, at:
GE LifeStyle Funds
P.O. Box 120065
Stamford, CT 06912-0065
<PAGE>37
For overnight package delivery:
GE LifeStyle Funds
c/o Boston Financial Data Services Inc.
Two Heritage Drive
Quincy, MA 02171
By Wire. Purchase orders for shares of a Fund may be transmitted by wire.
Wire orders will not be accepted until a completed account application in
proper form has been received by the Trust at the address set forth above.
After the Trust receives an application, an investor should then wire Federal
funds (minimum $1,000) to: State Street Bank and Trust Company (ABA
#0110-0002-8; DDA No. 9904-641-9) For: [Name of Fund] Account of: [Investor's
name, address and account number].
If a wire is received by the close of regular trading on the NYSE (currently
4:00 p.m. New York time), the shares will be priced according to the net asset
value of the Fund on that day. If a wire is received after the close of
regular trading on the NYSE, the shares will be priced as of the time the
Fund's net asset value per share is next determined. Payment for orders that
are not accepted will be returned to the prospective investor promptly.
By Direct Deposit Privilege. The Trust offers a Direct Deposit Privilege (the
"Privilege"), which enables investors to purchase shares of a Fund (minimum of
$25) by having Federal salary, Social Security, or certain veterans', military
or other payments from the U.S. Government, or a GE employee's payroll check,
automatically deposited into their Fund account. An investor may elect to
deposit as much as desired. To enroll for the Privilege, an investor must file
with the Trust a completed Direct Deposit Sign Up Form for each type of payment
desired to be included in the Privilege. The appropriate form may be obtained
from the Trust. Death or legal incapacity will terminate the Privilege for an
investor. An investor may elect at any time to terminate participation by
notifying in writing the appropriate Federal agency. Further, the Trust may
terminate participation upon 30 days' notice to the investor.
By Payroll Savings Plan. The Payroll Savings Plan offered by the Trust permits
an investor to purchase shares of a Fund (minimum of $25) automatically on a
regular basis. Depending upon the direct deposit program established with an
investor's employer, part or all of such investor's paycheck may be transferred
to an existing account electronically at each pay period (through the Automated
<PAGE>38
Clearing House). To establish a Payroll Savings Plan account, an authorization
form must be sent to the Trust at:
GE LifeStyle Funds
P.O. Box 120065
Stamford, CT 06912-0065
For overnight package delivery:
GE LifeStyle Funds
c/o Boston Financial Data Services Inc.
Two Heritage Drive
Quincy, MA 02171
The necessary authorization form may be obtained from the Trust. Investors may
change the amount of purchase or cancel the authorization only by written
notification to the Trust. The Trust may modify or terminate the Payroll Savings
Plan at any time or charge a service fee. No such fee currently is contemplated.
By Automatic Investment Plan. Investors may arrange to make purchases of shares
automatically on a monthly basis by electronic funds transfer (minimum $25 per
transaction) from the checking, NOW, bank money market deposit account or credit
union account designated by the investor if their bank or credit union is a
member of an automated clearing house or by preauthorized checks drawn on their
bank or credit union account. Shareholders will receive confirmations for
transactions and a debit entry will appear on the bank or credit union
statement. To make arrangements for automatic monthly investments, call the
Trust at the applicable toll free number listed on the back cover of the
Prospectus for further information. Investors may change the purchase amount or
terminate this privilege at any time. The Trust may modify or terminate this
privilege at any time or charge a service fee; however, no service fee is
currently contemplated.
Sales Charges
Shares of the Funds described in this Prospectus will be offered at their net
asset value next determined, plus a sales charge, if applicable. The sales
charge payable upon the purchase of shares will vary with the amount of purchase
as shown in the following table:
<PAGE>39
<TABLE>
<CAPTION>
Maximum Dealers'
Total Front-End Sales Charge Reallowance
---------------------------- ----------------
As a Percentage
As a Percentage of As a Percentage
Amount of Purchase at of Net Amount of
Offering Price Offering Price Invested Offering Price
--------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Less than $50,000........................... 4.75% 4.99% 4.25%
$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>
- ----------------------
* For purchases in excess of $1 million, the Distributor will pay a
concession of up to .70% to the selling dealer.
No sales charge is imposed on shares purchased through reinvestment of dividends
or capital gains distributions. In addition, Shares are offered without any
sales charge with respect to: (1) purchases of $1 million or more by an
investor, including an investment by an employee retirement plan that seeks the
additional services provided to the Funds offered by this Prospectus
("Retirement Plans"), (2) all purchases by Retirement Plans which have 250 or
more eligible employees, (3) all purchases by Retirement Plans, including Plans
that purchase less than $1 million of shares and have less than 250 eligible
employees, which are made exclusively through the Distributor and not through an
Authorized Firm, (4) all purchases directly by individuals who may invest in the
Funds through defined contribution plans currently invested in the Funds, and
who purchase shares exclusively through the Distributor 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 the Distributor or financial institutions through which shares
of the Funds are being offered or made available for sale, (6) all purchases
through nondiscretionary investment advisory programs made available by
registered investment advisers or banks approved by the Trust's Board of
Trustees and (7) all purchases by certain customers (the "Selected Customers")
of GE who previously purchased shares during a special limited offering of Class
A shares of GE Funds by the Distributor, provided that the Selected 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 individual retirement account for the Selected Customer.
<PAGE>40
Reduced sales charges are available under a combined right of accumulation under
which an investor may combine (1) the value of shares held in the Fund, (2) the
value of shares held in another 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 shares being purchased. For example, if an investor owns shares of the
Conservative Fund and the Moderate Fund that have an aggregate value of $92,000,
and makes an additional investment in shares of the Conservative Fund of
$15,000, the sales charge applicable to the additional investment would be 3.25%
rather than 4.75% normally charged on a $15,000 purchase. In addition,
Retirement Plans may include, as part of the calculation of accumulation
benefits, purchases of interests in other pooled investment vehicles, which are
made available to such investors and specified by the Distributor as eligible
for accumulation benefits in sales agreements with Authorized Firms.
By signing a Letter of Intent form available from the Distributor, an investor
becomes eligible for the reduced sales load applicable to the total number of
shares purchased in a 13-month period (beginning up to 90 days prior to the date
of execution of the Letter of Intent), pursuant to the terms and under the
conditions set forth in the Letter of Intent. To compute the applicable sales
load, the shares an investor beneficially owns (on the date of submission of the
Letter of Intent) in any Fund that may be used toward "right of accumulation"
benefits described above may be used as a credit toward completion of the Letter
of Intent.
State Street will hold in escrow 5% of the amount indicated in the Letter of
Intent for payment of a higher sales load if an investor does not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
an investor fulfills the terms of the Letter of Intent by purchasing the
specified amount. Assuming completion of the total minimum investment specified
under a Letter of Intent, 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 Letter of Intent. Additionally, if the total purchases
within the period exceed the amount specified in the Letter of Intent, 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
<PAGE>41
applicable to a single purchase of the total amount of the total purchases. If
total purchases are less than the amount specified, 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 such remittance is not received within 20 days, State Street, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of shares held in escrow to realize the difference. Signing a
Letter of Intent 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.
The Funds also offer a reinstatement privilege under which a shareholder that
has redeemed shares may reinvest the proceeds from the redemption without
imposition of a sales charge, provided the reinvestment is made within 60 days
of the redemption. The tax status of a gain realized on a redemption will not be
affected by exercise of the reinstatement privilege but a loss will be nullified
if the reinvestment is made within 30 days of redemption. See the Statement of
Additional Information for the tax consequences when, within 90 days of a
purchase of shares, the shares are redeemed and reinvested in a Fund.
Subsequent Purchase of Shares
Investors may purchase additional shares of a Fund at any time by mail or by
telephone in the manner outlined above. All payments should clearly indicate the
investor's account number.
RETIREMENT PLANS
Shares of each of the Funds are available for purchase by IRAs, including GE
IRAs, retirement plans for self-employed individuals, 401(k) Plans, eligible
deferred compensation plans meeting the requirements of Section 457(b) of the
Code, tax-exempt organizations enumerated in Section 501(c)(3) of the Code and
retirement plans qualified under Section 403(b)(7) of the Code (collectively
"Qualified Plans"). Details about the procedure to be followed by Qualified
Plans in investing in the Funds are available through the Distributor. Investors
interested in establishing a GE IRA should contact the Distributor at the
applicable toll free number listed on the back cover of the Prospectus to obtain
the necessary documentation.
<PAGE>42
REDEMPTION OF SHARES
Redemptions in General
Shares of a 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.
Redemption proceeds will be subject to no charge. 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.
Shares of a Fund may be redeemed in the following ways:
Redemptions through an Authorized Firm
An investor whose shares are purchased with the assistance of a Sales
Representative may redeem all or part of his or her shares in accordance with
instructions pertaining to such accounts. If such investor is also the
shareholder of record of those accounts on the books of State Street, he or she
may redeem shares pursuant to the methods described below. Such an investor
using the redemption by mail or wire methods, must arrange with the Authorized
Firm for delivery of the required forms to State Street. It is the
responsibility of the Authorized Firm to transmit the redemption order (and
credit its customers' account with the redemption proceeds, if applicable) on a
timely basis.
Redemption by Mail
Shares of a Fund may be redeemed by mail by making a written request for
redemption that (1) states the number of shares or the specific dollar amount to
be redeemed, (2) identifies the Fund or Funds from which the number or dollar
amount is to be redeemed, (3) identifies the shareholder's account number and
(4) is signed by each registered owner of the shares exactly as the shares are
registered and sending the request to the Trust, at:
<PAGE>43
GE LifeStyle Funds
P.O. Box 8309
Boston, MA 02266-8325
For overnight package delivery:
GE LifeStyle Funds
c/o Boston Financial Data Services Inc.
Two Heritage Drive
Quincy, MA 02171
Signature guarantees are required for all redemptions over $25,000. 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. 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 typically required to assure the safety
of a particular account. The Trust may waive the signature guarantee on a
redemption of $25,000 or less if it is able to verify the signatures of all
registered owners from its accounts.
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). 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. 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. Wire transfers will be made
<PAGE>44
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. Although the Trust imposes no fees on wire transfers,
fees normally will be imposed by the bank and will be the responsibility of the
shareholder. Redemptions of shares of a Fund by a Qualified Plan may not be
effected by telephone.
Telephonic redemption requests should be made by calling the applicable toll
free number listed on the back cover page of the Prospectus. Confirmation of
telephonic redemptions will be sent within seven days of the date of redemption
but will normally be sent in less time. 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 LifeStyle Funds
P.O. Box 8309
Boston, MA 02266-8325
For overnight package delivery:
GE LifeStyle Funds
c/o Boston Financial Data Services Inc.
Two Heritage Drive
Quincy, MA 02171
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.
<PAGE>45
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 $5,000 minimum account in a 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 that is reduced by redemptions, and not by
reason of market fluctuations or by payroll deductions, 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. Proceeds of such a redemption will be mailed to the
shareholder.
Distributions in Kind
If the Trust's Board of Trustees 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 Fund'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.
EXCHANGE PRIVILEGE
Under an exchange privilege offered by the Trust, shares of a Fund offered by
this Prospectus may be exchanged for shares of any other Fund offered by this
Prospectus at their respective net asset values. In addition, shares of a Fund
offered by this Prospectus may be exchanged for Class A Shares of GE Funds or
shares of GE Money Market Fund at their net asset values. The privilege is
<PAGE>46
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.
Shareholders who exchange their shares for GE Money Market Fund shares will be
subject to the CDSC applicable to such shares at the time the shareholder
redeems such Money Market Fund shares. Upon an exchange of shares for Class A
shares of a GE Fund, the new Class A shares will be deemed to have been
purchased on the same date as the shares of the LifeStyle Fund which have been
exchanged for CDSC calculation purposes.
Class A shares of the GE Funds are available without a sales charge through
exchanges between Class A shares and shares of Funds which were sold by
Authorized Firms and were subject to a sales charge. GEIM or its affiliates may
compensate selling dealers for their efforts in effecting these exchanges at no
additional cost to investors.
Shareholders exercising the exchange privilege should review the prospectus
disclosure for the Fund they are considering investing in carefully prior to
making an exchange. The Trust reserves the right to reject any exchange request.
NET ASSET VALUE
Each Fund's net asset value per share is calculated on each day, Monday through
Friday, except on days on which the NYSE is closed. The NYSE is currently
scheduled to be closed on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on the
preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively. Each Fund's net asset value per share is
determined as of the close of regular trading on the NYSE (currently 4:00 p.m.,
New York time). Net asset value per share of a Fund is computed by dividing the
value of the Fund's net assets attributable to that Fund by the total number of
<PAGE>47
shares outstanding. The assets of each Fund consist primarily of the Underlying
GE Funds, which are valued at their respective net asset values at the time of
computation. In general, the Underlying GE Funds value their portfolio
securities at market value or, in the absence of market value, at fair value as
determined by or under the direction of the GE Funds' Board of Trustees.
Any short-term investments of the Funds that mature in 60 days or less, will be
valued on the basis of amortized cost (which involves valuing an investment 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 investment) when the Trust's Board of Trustees
determines that amortized cost is fair value.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions
Net investment income (that is, income other than long- and short-term capital
gains) and net realized long- and short-term capital gains will be determined
separately for each Fund. Dividends of a Fund which are derived from net
investment income and distributions of net realized long- and short-term capital
gains paid by a Fund to a shareholder will be automatically reinvested in
additional shares of the Fund and deposited in the shareholder's account, unless
the shareholder instructs the Trust, in writing, to pay all dividends and
distributions in cash. Shareholders may contact the Trust for details concerning
this election. However, if it is determined that the U.S. Postal Service cannot
properly deliver Fund mailings to a shareholder, the Fund may terminate the
shareholder's election to receive dividends and other distributions in cash.
Thereafter, the shareholder's subsequent dividends and other distributions will
be automatically reinvested in additional shares of the Fund until the
shareholder notifies the Fund in writing of his or her correct address and
requests in writing that the election to receive dividends and other
distributions in cash be reinstated. Dividends attributable to investment income
are declared and paid annually. If a shareholder redeems all of his shares of a
Fund at any time during a month, all dividends to which the shareholder is
entitled will be paid to the shareholder along with the proceeds of his
redemption. Written confirmations relating to the automatic reinvestment of
dividends will be sent to shareholders within five days following the end of
each fiscal year. Distributions of any net realized long-term and short-term
capital gains earned by a Fund will be made annually. These dividends and
<PAGE>48
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. All expenses of the Funds
are accrued daily and deducted from net asset value before declaration of
dividends to shareholders.
Each Fund is subject to a 4% non-deductible excise tax measured with respect to
certain undistributed amounts of net investment income and capital gains. If
necessary to avoid the imposition of this tax, and if in the best interests of
the Fund's shareholders, the Trust will declare and pay dividends of the Fund's
net investment income and distributions of the Fund's net capital gains more
frequently than stated above.
Taxes
Each Fund is treated as a separate entity for Federal income tax purposes. As a
result, the amounts of net investment income and net realized capital gains
subject to tax are determined separately for each Fund (rather than on a
Trust-wide basis).
The Trust intends that each Fund qualify each year as a regulated investment
company under the Code. Dividends paid from a Fund's net investment income and
distributions of a Fund's net realized short-term capital gains will be treated
as ordinary income dividends for Federal income tax purposes, regardless of how
long shareholders have held their shares of the Fund and whether the dividends
or distributions are received in cash or reinvested in additional shares of the
Fund. Distributions of a Fund's net realized long-term capital gains will be
treated as long-term capital gains for Federal income tax purposes, regardless
of how long shareholders have held their shares of the Fund and whether the
distributions are received in cash or are reinvested in additional shares of the
Fund. In addition, as a general rule, a shareholder's gain or loss on a sale or
redemption (including a redemption in kind) 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 and will be a short-term capital gain or loss if the shareholder
has held the shares for one year or less.
Dividends paid by the Funds will qualify for the dividends-received deduction
for corporations to the extent derived from dividends paid by Underlying GE
Funds that qualify for such deduction. Some states, if certain asset and
diversification requirements are satisfied, permit shareholders to treat their
portions of a Fund's dividends that are attributable to interest on U.S.
Treasury securities and certain Government Securities as income that is exempt
from state and local income taxes. Dividends attributable to repurchase
agreement earnings are, as a general rule, subject to state and local taxation.
<PAGE>49
Net investment income or capital gains earned by the Funds 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.
If more than 50% in value of an Underlying GE Fund's assets at the close of any
taxable year consists of stocks or securities of foreign corporations, that
Underlying GE Fund may elect to treat certain foreign taxes paid by it as paid
by its shareholders. The shareholders would then be required to include their
proportionate portion of the electing fund's foreign income and related foreign
taxes in income even if the shareholder does not receive the amount representing
foreign taxes. Shareholders itemizing deductions could then deduct the foreign
taxes or, subject to certain limitations, claim a direct dollar for dollar tax
credit against their U.S. federal income tax liability attributable to foreign
income. In many cases, a foreign tax credit will be more advantageous than a
deduction for foreign taxes. Each Fund may invest in the International Fund,
which expects to be eligible to make the above-described election. While each
Fund will be able to deduct the foreign taxes that it will be treated as
receiving if the election is made, the Fund will not itself be able to elect to
treat its foreign taxes as paid by its shareholders. Accordingly, the
shareholders of the Funds will not have an option of claiming a foreign tax
credit for foreign taxes paid by the Underlying GE Funds, while persons who
invest directly in such Underlying GE Funds may have that option.
Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually. Shareholders will also receive, as
appropriate, various written notices after the close of their Fund's taxable
year regarding the tax status of certain dividends and distributions that were
paid (or that are treated as having been paid) by the Fund to its shareholders
during the preceding taxable year, including the amount of dividends that
represents interest derived from Government Securities. Shareholders should
consult with their own tax advisors with specific reference to their own tax
situations.
<PAGE>50
CUSTODIAN AND TRANSFER AGENT
State Street, located at 225 Franklin Street, Boston, Massachusetts 02101,
serves as the Trust's custodian and transfer agent, and is responsible for
receiving acceptance orders for the purchase of shares and processing redemption
requests.
DISTRIBUTOR
GE Investment Services Inc., located at 3003 Summer Street, P.O. Box 7900,
Stamford, Connecticut, 06904-7900, serves as distributor of the Funds' shares.
The Distributor, a wholly-owned subsidiary of GEIM, also serves as Distributor
for the GE Funds and the Elfun Funds. GEIM or its affiliates, at their own
expense, may allocate portions of their revenues or other resources to assist
the Distributor in distributing shares of the Funds, by providing additional
promotional incentives to dealers. In some instances, these incentives may be
limited to certain dealers who have sold or may sell significant numbers of
shares of the Funds. The Distributor routinely offers dealers in Fund shares the
opportunity to participate in contests for which prizes include tickets to
theater and sporting events, dining, travel to meetings and conferences held in
locations remote from their offices and other items.
THE FUNDS' PERFORMANCE
Certain information about the Funds' performance is set out below.
Yield
The Trust may, from time to time, advertise a 30-day "yield" for each Fund. The
yield of a Fund refers to the income generated by an investment in a Fund over
the 30-day period identified in the advertisement and is computed by dividing
the net investment income per share earned by a Fund during the period by the
net asset value per share for that Fund on the last day of the period. This
income is "annualized" by assuming that the amount of income is generated each
month over a one-year period and is compounded semi-annually. The annualized
income is then shown as a percentage of the Fund's net asset value.
<PAGE>51
Total Return
From time to time, the Trust may advertise an "average annual total return" over
various periods of time for each Fund. This total return figure shows an average
percentage change in value of an investment in the Fund from the beginning date
of the measuring period to the ending date of the period. The figure reflects
changes in the price of a Fund's 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 Fund. Figures will be given for recent one-,
five- and 10-year periods (if applicable), and may be given for other periods as
well (such as from commencement of a Fund's operations, or on a year-by-year
basis). When considering average annual total return figures for periods longer
than one year, investors should note that a Fund's annual total return for any
one year in the period might have been greater or less than the average for the
entire period.
The Trust may use "aggregate total return" figures for various periods,
representing the cumulative change in value of an investment in a Fund, for the
specific period (again reflecting changes in the Fund's share price and assuming
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). Reflecting
compounding over a longer period of time, aggregate total return data generally
will be higher than average annual total return data, which reflects compounding
of return.
The Trust may, in addition to quoting a Fund's average annual and aggregate
total returns, advertise the actual annual and annualized total return
performance data for various periods of time. Actual annual and annualized total
returns 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, which reflects compounding of return.
Yield and total return figures are based on historical earnings and are thus not
intended to indicate future performances. The Statement of Additional
Information describes the method used to determine a Fund's yield and total
return.
<PAGE>52
Comparative Performance Information
In reports or other communications to shareholders of a Fund or in advertising
materials, the Trust may compare the Fund's performance with (1) the performance
of other mutual funds as listed in the rankings prepared by Lipper Analytical
Services, Inc. or similar independent services that monitor the performance of
mutual funds, (2) various unmanaged indexes, including the Russell Index, S&P
Index, and the Dow Jones Industrial Average or (3) other appropriate indexes of
investment securities or with data developed by GEIM derived from those indexes.
The performance information may also include evaluations of a Fund published by
nationally recognized ranking services and by financial publications that are
nationally recognized, such as Barron's, Business Week, Forbes, Fortune,
Institutional Investor, Kiplinger's Personal Finance, Money, Morningstar Mutual
Fund Values, The New York Times, The Wall Street Journal and USA Today. These
ranking services or publications may compare a Fund's performance to, or rank it
within, a universe of mutual funds with investment objectives and policies
similar, but not necessarily identical to, the Fund's. Such comparisons or
rankings are made on the basis of several factors, including objectives and
policies, management style and strategy, and portfolio composition, and may
change over time if any of those factors change.
ADDITIONAL MATTERS
The Trust was formed as a business trust pursuant to a Declaration of Trust, as
amended from time to time (the "Declaration"), under the laws of The
Commonwealth of Massachusetts on June 21, 1996. The Declaration authorizes the
Trust's Board of Trustees to create separate series, and within each series
separate classes, of an unlimited number of shares of beneficial interest, par
value $.001 per share. As of the date of this Prospectus, the Trustees have
established six such series, each offering a single class of shares. The other
three series of the Trust are currently being offered by a separate prospectus.
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.
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 Trust's Board of Trustees.
<PAGE>53
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) a matter affecting the interests of one or more
of the Funds, in which case only shares of the affected Funds would be entitled
to vote or (2) when the 1940 Act or separate agreement applicable to a Fund
requires that shares of the Funds be voted by 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.
Each Fund will vote its Underlying GE Fund shares in proportion to the votes of
all other shareholders in each respective Underlying GE Fund.
The Trust will send to each shareholder of each Fund a semiannual report and an
audited annual report, each of which includes a list of the investment
securities held by each Fund. Only one report each will be mailed to a single
address at which more than one shareholder with the same last name had indicated
mail is to be delivered. Shareholders may request additional copies of any
report by calling the toll free numbers listed on the back cover page of the
Prospectus or by writing to the Trust at the address set forth on the front
cover page of the Prospectus.
GE LIFESTYLE FUNDS
o GE Conservative Strategy Fund
o GE Moderate Strategy Fund
o GE Aggressive Strategy Fund
<PAGE>54
For information contact your investment professional or
call the following toll free number: 1-800-746-4417
- ----------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN THE
STATEMENT OF ADDITIONAL INFORMATION INCORPORATED INTO THIS PROSPECTUS
BY REFERENCE IN CONNECTION WITH THE OFFERING OF SHARES OF LIFESTYLE FUNDS,
AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY LIFESTYLE FUNDS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY
PERSON TO WHOM, AN OFFER MAY NOT LAWFULLY BE MADE.
- ----------------------------------------------------------------------------
<PAGE>A-1
APPENDIX
FURTHER INFORMATION: ADDITIONAL INVESTMENTS AND CERTAIN INVESTMENT TECHNIQUES
AND STRATEGIES USED BY THE UNDERLYING GE FUNDSFURTHER INFORMATION: CERTAIN
INVESTMENT TECHNIQUES AND STRATEGIES USED BY THE UNDERLYING GE FUNDS
The Underlying GE Funds may engage in a number of investment techniques and
strategies, including those described below. No Underlying GE Fund is under any
obligation to use any of the techniques and strategies at any given time or
under any particular economic condition. In addition, no assurance can be given
that the use of any practice will have its intended result or that the use of
any practice is, or will be, available to any Underlying GE Fund.
Money Market Instruments
Each Fund and each Underlying GE Fund, other than the Money Market Fund, may
invest only in the following types of money market instruments: (i) securities
issued or guaranteed by the U.S. Government or one of its agencies or
instrumentalities, (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.
<PAGE>A-2
Each Fund and each Underlying GE Fund, other than the Money Market Fund, may
also invest up to 25% of its assets in GEI Short-Term Investment Fund (the
"Investment Fund"), a fund created specifically to serve as a vehicle for the
collective investment of cash balances of the Funds and the Underlying GE Funds
(other than the Money Market Fund) and other accounts advised by GEIM and 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 the Investment Fund, nor will the Funds or the
Underlying GE Funds incur any sales charge, redemption fee, distribution fee or
service fee in connection with their investments in the Investment Fund.
Repurchase Agreements. Each Underlying GE Fund may engage in repurchase
agreement transactions with respect to instruments in which the Underlying GE
Fund is authorized to invest. The Underlying GE 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, an Underlying GE 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
<PAGE>A-3
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 an Underlying GE Fund are monitored on an ongoing basis by GEIM to
ensure that the value is at least equal at all times to the total amount of the
repurchase obligation, including interest. GEIM also monitors, on an ongoing
basis to evaluate potential risks, the creditworthiness of those banks and
dealers with which an Underlying GE Fund enters into repurchase agreements.
The Money Market Fund may engage in reverse repurchase agreements, subject to
its investment restrictions. A reverse repurchase agreement, which is considered
a borrowing by the Money Market 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. The Money Market 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
or other liquid assets equal in value to the Money Market Fund's obligations
with respect to reverse repurchase agreements are segregated and maintained with
GE Funds' custodian or designated sub-custodian.
Non-publicly Traded and Illiquid Securities. Each Underlying GE 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 GE Funds' Board of Trustees based
upon the trading markets for the securities. In addition, each Underlying GE
Fund, other than the Money Market Fund, may invest up to 15% 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 an Underlying GE 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 an Underlying GE Fund 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 GEIM has determined are not liquid under guidelines
established by the GE Funds' Board of Trustees. In no event, however, will any
Underlying GE Fund's investments in illiquid and non-publicly traded securities,
in the aggregate, exceed 15% of its assets.
<PAGE>A-4
Indexed Securities. The Income Fund and the Government Fund may also invest in
indexed securities, the value of which is linked to currencies, interest rates,
commodities, indexes or other financial indicators ("reference instruments").
The interest rate or (unlike most fixed income securities) the principal amount
payable at maturity of an indexed security may be increased or decreased,
depending on changes in the value of the reference instrument. 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 Income Fund and the Government Fund will bear the market
risk of the reference instrument.
Purchasing Put and Call Options on Securities. Each Underlying GE 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. An
Underlying GE 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, an
Underlying GE 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 an Underlying GE 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.
An Underlying GE 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 an Underlying GE 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
<PAGE>A-5
as of the date the options are sold, shall not exceed 25% of the net assets of
an Underlying GE Fund. In addition, the premiums paid by an Underlying GE Fund
in purchasing options on securities, options on securities indexes, options on
foreign currencies and options on futures contracts will not exceed 20% of the
Fund's net assets.
Covered Option Writing. Each Underlying GE Fund, other than the Money Market
Fund, may write covered put and call options on securities. An Underlying GE
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 Underlying GE Funds with option-writing authority write only covered
options. A put or call option written by an Underlying GE Fund will be deemed
covered in any manner permitted under the 1940 Act or the rules and regulations
thereunder or any other method determined by the SEC to be permissible. See
"Strategies Available to Some But Not All Underlying GE Funds -- Covered Option
Writing" in the Statement of Additional Information for specific situations
where put and call options will be deemed to be covered by an Underlying GE
Fund.
An Underlying GE 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, an Underlying GE
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 an Underlying GE 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. To facilitate closing purchase transactions, the Underlying GE
Funds with option-writing authority will ordinarily write options only if a
secondary market for the options exists on a U.S. or foreign securities exchange
or in the over-the-counter market.
<PAGE>A-6
Option writing for an Underlying GE 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 Code for qualification as a
regulated investment company. In addition to writing covered put and call
options to generate current income, an Underlying GE 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 position's being offset by a loss on the hedge
position. No Underlying GE Fund will enter into a transaction involving options
for speculative purposes.
Securities Index Options. In seeking to hedge all or a portion of its
investments, an Underlying GE Fund, other than the Money Market Fund, may
purchase and write put and call options on securities indexes listed on U.S. or
foreign securities exchanges or traded in the over-the-counter market, which
indexes include securities held in the Underlying GE Fund's portfolio. The
Underlying GE Funds with such option writing authority may write only covered
options. An Underlying GE Fund may also use securities index options as a means
of participating in a securities market without making direct purchases of
securities. No Underlying GE Fund will enter into a transaction involving
securities index options for speculative purposes.
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 indexes do not
involve the delivery of an underlying security; the option in the case of an
option on a securities index represents the holder's right to obtain from the
writer in cash a fixed multiple of the amount by which the exercise price
exceeds (in the case of a call) or is less than (in the case of a put) the
closing value of the underlying securities index on the exercise date.
A securities index option written by an Underlying GE Fund will be deemed
covered in any manner permitted under the 1940 Act or the rules and regulations
thereunder or any other method determined by the SEC to be permissible. See
"Strategies Available to Some But Not All Underlying GE Funds--Covered Option
Writing" in the Statement of Additional Information for specific situations
<PAGE>A-7
where securities index options will be deemed to be covered by an Underlying GE
Fund. If the Underlying GE Fund has written a securities index option, it may
terminate its obligation by effecting a closing purchase transaction, which is
accomplished by purchasing an option of the same series as the option previously
written.
Futures and Options on Futures. Each Underlying GE Fund, other than 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, for duration management, or when the transactions are
economically appropriate to the reduction of risks inherent in the management of
the Fund involved. No Underlying GE Fund will enter into a transaction involving
futures and options on futures for speculative purposes.
An Underlying GE 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 SEC staff 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 (see "Strategies Available to Some But Not All Underlying GE
Funds--Covered Option Writing" in the Statement of Additional Information) and
designed to eliminate any potential leveraging.
An interest rate futures contract provides for the future sale by one party and
the purchase by the other party of a specified amount of a particular financial
instrument (debt security) at a specified price, date, time and place. Financial
futures contracts are contracts that obligate the holder to deliver (in the case
of a futures contract that is sold) or receive (in the case of a futures
contract that is purchased) at a future date a specified quantity of a financial
instrument, specified securities, or the cash value of a securities index. A
municipal bond index futures contract is based on an index of long-term,
tax-exempt municipal bonds and a corporate bond index futures contract is based
<PAGE>A-8
on an index of corporate bonds. Stock index futures contracts are based on
indexes that reflect the market value of common stock of the companies included
in the indexes. 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.
Forward Currency Transactions. Each Underlying GE Fund, other than the Money
Market Fund, may hold currencies to meet settlement requirements for foreign
securities and 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 Underlying GE 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
an Underlying GE 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. An Underlying GE Fund, however, may enter into
forward currency contracts requiring deposits or involving the payment of
commissions. To assure that an Underlying GE Fund's forward currency contracts
are not used to achieve investment leverage, cash or other liquid assets will be
segregated with GE Funds' 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, an Underlying GE 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
<PAGE>A-9
or receiving the difference between the exchange rate fixed in the contract and
the then current exchange rate. GE Funds may also be able to negotiate such an
offset on behalf of an Underlying GE 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 an Underlying GE Fund.
In hedging a specific portfolio position, an Underlying GE 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 GEIM. An Underlying GE
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.
Options on Foreign Currencies. Each Underlying GE Fund, other than 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 Underlying GE Funds with such option
writing authority may write only covered options. No Underlying GE Fund will
enter into a transaction involving options on foreign currencies for speculative
purposes. Options on foreign currencies to be written or purchased by an
Underlying GE Fund are traded on U.S. or foreign exchanges or in the
over-the-counter market. GE Funds will limit the premiums paid on an Underlying
GE Fund's options on foreign currencies to 5% of the value of the Underlying GE
Fund's total assets.
When-Issued and Delayed-Delivery Securities. To secure prices or yields deemed
advantageous at a particular time, an Underlying GE 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 Underlying
GE Fund, however, prior to the actual delivery or payment by the other party to
the transaction. Each Underlying GE 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 an Underlying
GE 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
<PAGE>A-10
each Underlying GE Fund's when-issued or delayed-delivery purchase commitments
will be segregated with the GE Funds' 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 an
Underlying GE 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 an
Underlying GE Fund's net asset value.
Lending Portfolio Securities. Each Underlying GE 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% of an
Underlying GE Fund's assets taken at value. The Underlying GE Fund's loans of
securities will be collateralized by cash, letters of credit or Government
Securities. Cash or instruments collateralizing an Underlying GE Fund's loans of
securities are segregated and maintained at all times with the GE Funds'
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, an
Underlying GE 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.
Rule 144A Securities. Each of the Underlying GE Funds may purchase Rule 144A
Securities. Certain Rule 144A Securities may be considered illiquid and
therefore subject to an Underlying GE Fund's limitation on the purchase of
illiquid securities, unless the GE Funds' Board of Trustees determines on an
ongoing basis that an adequate trading market exists for the Rule 144A
Securities. An Underlying GE 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 GE Funds' Board of Trustees has
established standards and procedures for determining the liquidity of a Rule
144A Security and monitors GEIM'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.
<PAGE>A-11
Depositary Receipts. The U.S. Equity Fund and the International Fund may each
invest in securities of foreign issuers in the form of American Depositary
Receipts ("ADRs"), which are U.S. dollar-denominated receipts typically issued
by domestic banks or trust companies that represent the deposit with those
entities of securities of a foreign issuer, 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. The U.S. Equity Fund and the International Fund may each
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.
Supranational Agencies. The Income Fund and the Money Market Fund may each
invest up to 10% of its assets in securities of supra-national 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.
Securities of supranational agencies are not considered Government Securities
and are not supported, directly or indirectly, by the U.S.
Government.
Investments In Other Investment Funds. The International Fund, the Income Fund
and the Government Fund may each invest in investment funds that invest
principally in securities in which the Fund is authorized to invest. Under the
1940 Act and as a condition to the exemptive relief that was granted to the
Trust by the SEC, a Fund may invest a maximum of 10% of its total assets in the
<PAGE>A-12
securities of other investment companies. In addition, under the 1940 Act and as
a condition to the exemptive relief that was granted to the Trust by the SEC,
not more than 5% of a Fund's total assets may be invested in the securities of
any one investment company, and the Fund may not own more than 3% of the
securities of any investment company. To the extent an Underlying GE Fund
invests in other investment companies, the Fund's shareholders will incur
certain duplicative fees and expenses, including investment advisory fees.
Floating and Variable Rate Instruments. The Income Fund, the Government Fund and
the Money Market Fund may each 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. The amount by which the rates paid
on an income security may increase or decrease may be subject to periodic or
lifetime caps. Floating and variable rate income securities include securities
whose rates vary inversely with changes in market rates of interest. Such
securities may also pay a rate of interest determined by applying a multiple to
the variable rate. The extent of increases and decreases in the value of
securities whose rates vary inversely with changes in market rates of interest
generally will be larger than comparable changes in the value of an equal
principal amount of a fixed rate security having similar credit quality,
redemption provisions and maturity.
Zero Coupon Obligations. The Income Fund and the Government Fund 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 the Income Fund and the Government Fund will receive no payments on its zero
coupon securities prior to their maturity or disposition, it will be required
for federal income tax purposes generally to include in its dividends each year
an amount equal to the annual income that accrues on its zero coupon securities.
<PAGE>A-13
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 the Income Fund and the
Government Fund 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 the Income Fund or the
Government Fund 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 Government Fund may 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.
Mortgage Related Securities. The mortgage related securities in which the Income
Fund and the Government Fund will invest 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. 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
<PAGE>A-14
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 the Income Fund or the Government Fund. 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 the Income Fund and
the Government Fund. Because prepayments of principal generally occur when
interest rates are declining, the Income Fund and the Government Fund will
likely have to reinvest the proceeds of prepayments at lower interest rates than
those at which its assets were previously invested, resulting in a corresponding
decline in the Fund's yield. Thus, mortgage related securities may have less
potential for capital appreciation in periods of falling interest rates than
other fixed income securities of comparable maturity, although those other fixed
income securities may have a comparable risk of decline in market value in
periods of rising interest rates. To the extent that the Income Fund or the
Government Fund purchases mortgage related securities at a premium, unscheduled
prepayments, which are made at par, will result in a loss equal to any
unamortized premium.
ARMs have interest rates that reset at periodic intervals, thereby allowing the
Income Fund and the Government Fund 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, the Income Fund or the Government Fund generally will be
able to reinvest these amounts in securities with a higher current rate of
return. Neither the Income Fund nor the Government Fund, 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.
<PAGE>A-15
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, the Income Fund's and the Government Fund's 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 the Income Fund or
the Government Fund before the interest rates on the underlying mortgages are
adjusted to reflect current market rates.
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 the Income Fund and the Government Fund 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 GEIM, each of the
Income Fund and the Government Fund limit their investments in these securities,
together with other illiquid instruments, to not more than 15% of the value of
its net assets.
Government Stripped Mortgage Related Securities. The Income Fund and the
Government Fund 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. The Income Fund and the
Government Fund 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 GEIM 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 the Income Fund
or the Government Fund.
<PAGE>A-16
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 the Income Fund's
or the Government Fund's not fully recovering its initial investment in an
interest-only government stripped mortgage related security. Under current
market conditions, the Income Fund and the Government Fund expect that
investments in government stripped mortgage related securities will consist
primarily of interest-only securities. The sensitivity of an interest-only
security that represents the interest portion of a particular class, as opposed
to the interest portion of an entire pool, to interest rate fluctuations, may be
increased because of the characteristics of the principal portion to which they
relate. Government stripped mortgage related securities are currently traded in
an over-the-counter market maintained by several large investment banking firms.
No assurance can be given that the Income Fund or the Government Fund will be
able to effect a trade of a government stripped mortgage related security at a
desired time. The Income Fund and the Government Fund 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 GE Funds'
Board of Trustees, the GE Funds treat government stripped mortgage related
securities as illiquid and will limit each of the Income Fund's and the
Government Fund's investments in these securities, together with other illiquid
investments, to not more than 15% of its net assets.
Asset-Backed and Receivable-Backed Securities. The Income Fund and the
Government Fund may invest in asset-backed and receivable-backed securities. To
date, several types of asset-backed and receivable-backed securities have been
<PAGE>A-17
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,
the Income Fund or the Government Fund 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 the Income Fund's and the Government Fund's investment objective and
policies and subject to the review and approval of the GE Funds' Board of
Trustees, the Income Fund and the Government Fund may also invest in other types
of asset-backed and receivable-backed securities.
Mortgage Dollar Rolls. With respect to up to 10% of their total assets each of
the Income Fund and the Government Fund may, enter into mortgage "dollar rolls"
in which the Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterpart to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Underlying GE Fund loses the right to receive principal and interest
paid on the securities sold. However, the Underlying GE 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 Underlying
GE Fund compared with what such performance would have been without the use of
<PAGE>A-18
mortgage dollar rolls. The Underlying GE Fund will hold and maintain in a
segregated account until the settlement date cash or other liquid assets in an
amount equal to the forward purchase price. The benefits derived from the use of
mortgage dollar rolls may depend upon GEIM'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 the Income Fund and the
Government Fund propose 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. The International Fund may sell securities "short
against the box." Whereas a short sale is the sale of a security the
International 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. Short sales against the box are typically used by sophisticated investors
to defer recognition of capital gains or losses.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>1
SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 1996
GE LIFESTYLE FUNDS
GE LifeStyle Funds ("LifeStyle Funds" or the "Trust") is an open-end management
investment company that offers a selection of asset allocation investment funds
(each a "Fund" and collectively the "Funds"). Each Fund seeks to achieve its
objective by investing in certain portfolios of GE Funds ("Underlying GE
Funds"). The Trust is currently comprised of six series, three of which are
offered by a separate prospectus. This Prospectus describes the following three
Funds currently offered by the Trust:
- GE Conservative Allocation Fund's investment objective is
income and long-term growth of capital which the Fund seeks to achieve currently
through investment in an approximate 50/50 mix of equity-oriented funds and
fixed income-oriented funds.
- GE Moderate Allocation Fund's investment objective is
long-term growth of capital with a moderate level of current income which the
Fund seeks to achieve currently through investment in an approximate 65/35 mix
of equity-oriented funds and fixed income-oriented funds, with the bias toward
equity-oriented funds for enhanced growth potential.
- GE Aggressive Allocation Fund's investment objective is
capital appreciation which the Fund seeks to achieve currently through
investment in an approximate 85/15 allocation of equity-oriented funds to fixed
income-oriented funds.
The Funds offered by this Prospectus are currently available only as a funding
vehicle to retirement plans, including plans meeting the requirements of Section
401(k) of the Internal Revenue Code of 1986, as amended (the "Code"), eligible
deferred compensation plans meeting the requirements of Section 457(b) of the
Code, tax-exempt organizations enumerated in Section 501(c)(3) of the Code and
retirement plans qualified under Section 403(b)(7) of the Code.
This Prospectus briefly sets forth certain information about the Funds and the
Trust that prospective investors will find helpful in making an investment
decision. Investors are encouraged to read this Prospectus carefully and retain
it for future reference.
Additional information about the Funds and the Trust, contained in a Statement
of Additional Information dated the same date as
<PAGE>2
this Prospectus, has been filed with the Securities and Exchange Commission
(the "SEC") and is available upon request and without charge by calling the
Trust at the telephone number listed below or by contacting the Trust at the
address listed below. The Statement of Additional Information is incorporated
in its entirety by reference into this Prospectus.
GE INVESTMENT MANAGEMENT INCORPORATED
Investment Adviser and Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus
October __, 1996
<PAGE>3
TABLE OF CONTENTS
EXPENSE INFORMATION..............................................4
LIFESTYLE FUNDS..................................................8
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES....................9
RISK FACTORS AND SPECIAL CONSIDERATIONS OF THE FUNDS............11
PORTFOLIO TURNOVER..............................................14
DESCRIPTION OF THE UNDERLYING GE FUNDS..........................14
MANAGEMENT OF THE TRUST.........................................28
RETIREMENT PLANS................................................32
PURCHASE OF SHARES..............................................33
REDEMPTION OF SHARES............................................33
EXCHANGE PRIVILEGE..............................................34
NET ASSET VALUE.................................................35
DIVIDENDS, DISTRIBUTIONS AND TAXES..............................35
CUSTODIAN AND TRANSFER AGENT....................................37
DISTRIBUTOR.....................................................38
THE FUNDS' PERFORMANCE..........................................38
ADDITIONAL MATTERS..............................................40
APPENDIX FURTHER INFORMATION: ADDITIONAL INVESTMENTS
AND CERTAIN INVESTMENT TECHNIQUES AND
STRATEGIES USED BY THE UNDERLYING GE FUNDS.........A-1
3003 Summer Street
Stamford, Connecticut 06905
(203)326-4040
<PAGE>4
EXPENSE INFORMATION
The purpose of the following table is to assist an investor in understanding
the expenses that an investor in the Funds offered by this Prospectus will
bear directly in connection with an investment in each Fund's shares ("Direct
Expenses"). In addition to these Direct Expenses, Fund shares will indirectly
bear their pro rata share of the expenses of the Underlying GE Funds
("Indirect Expenses").
Fee Table
<TABLE>
<CAPTION>
GE Conservative GE Moderate GE Aggressive
Allocation Fund Allocation Fund Allocation Fund
---------------- --------------- ----------------
Shareholder Transaction Expenses
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
of Shares (as a percentage of offering
price): None None None
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage
of offering price): None None None
Maximum Contingent Deferred Sales
Load (as a percentage of redemption proceeds): None None None
Redemption Fees (as a percentage
of amount redeemed): None None None
Maximum Exchange Fee: None None None
</TABLE>
<PAGE>5
Annual Fund Operating Expenses as a
percentage of average net assets
(Direct Expenses)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Advisory and Administration
fees: .20% .20% .20%
12b-1 fees: None None None
Other Expenses: None None None
Total Operating Expenses: .20% .20% .20%
</TABLE>
Expense Ranges (Including Indirect Expenses)
Based on the expense ratios of the Underlying GE Funds plus those of each
Fund, the range of average weighted combined operating expenses for shares of
the Funds offered by this Prospectus are expected to be as follows:
Range of
Combined Expenses**
-------------------
GE Conservative Allocation Fund .70% to .97%
GE Moderate Allocation Fund .75% to 1.02%
GE Aggressive Allocation Fund .82% to 1.04%
- --------------------------
** A range is provided since the average assets of each Fund
invested in each of the Underlying GE Funds may fluctuate.
The nature of the services provided to, and the advisory and administration
fees paid by, each Fund are described under "Management of the Trust." Under
the agreements governing the asset allocation and administration services to
be furnished to the Funds by GEIM, GEIM bears all expenses of each Fund
including, but not limited to, custodial fees, legal and accounting fees,
printing costs and registration fees, the costs
<PAGE>6
of regulatory compliance, the costs associated with maintaining the Trust's
legal existence and the costs involved in communicating with shareholders of the
Funds, but excluding brokerage fees and commissions, interest, advisory and
administration fees, fees and expenses of the Trust's Board of Trustees who are
not affiliated with GEIM or its affiliates (including counsel fees), taxes
payable by the Trust, transfer agency costs and any extraordinary expenses.
The Funds offered by this Prospectus will invest only in Class D shares of the
Underlying GE Funds, which are currently offered with no initial sales charge,
redemption fee or shareholder servicing and distribution fees ("12b-1 fees").
The LifeStyle Funds will indirectly bear their pro rata share of fees and
expenses, including investment management fees, incurred by the Underlying GE
Funds that are applicable to Class D shareholders. The investment returns of
each Fund, therefore, will be net of the expenses of the Underlying GE Funds in
which it is invested. The following chart shows the expense ratios applicable to
Class D shares of each Underlying GE Fund held by a Fund, based upon estimated
operating expenses for its current fiscal year.
Indirect Expenses
Underlying GE Fund Expense Ratio*
- ------------------ --------------
GE U.S. Equity Fund .50%
GE International Equity Fund 1.10%
GE Fixed Income Fund .60%
GE Short-Term Government Fund .45%
GE Money Market Fund .45%
- ----------------------
*The expense ratios of the Class D shares of the Underlying GE Funds may
reflect fee waivers and expense reimbursements. Absent these fee waivers on
the Class D shares of the Underlying GE Funds, these expense ratios would be
as follows: GE U.S. Equity Fund -- 71%; GE International Equity Fund -- 1.18%;
GE Fixed Income Fund -- 1.50%; GE Short-Term Government Fund -- .98%; and GE
Money Market Fund --.70%.
Example
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over a one-year and three-year period
with respect to a hypothetical investment in each Fund. These amounts are based
upon (1) direct payment by the Fund of operating expenses at the levels set out
above; (2) indirect payment
<PAGE>7
by the Fund of its pro rata share of the Class D share expenses of the
Underlying GE Funds (also set out above) in which a Fund is expected to invest
at the commencement of investment operations; and (3) the specific assumptions
stated below.
A shareholder would pay the
following expenses on a $1,000
investment, assuming (1) a 5%
annual return and (2) redemption
at the end of the time periods shown:
------------------------------------------
1 Year 3 Years
------------------------------------------
GE Conservative
Allocation Fund: $____ $____
GE Moderate
Allocation Fund: $____ $____
GE Aggressive
Allocation Fund: $____ $____
The above example is intended to assist an investor in understanding various
costs and expenses that an investor in a Fund will bear directly or indirectly.
Although the table assumes a 5% annual return, a Fund's actual performance will
vary and may result in an actual return that is greater or less than 5%. The
example 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.
<PAGE>8
LIFESTYLE FUNDS
Advantages of Investing in the Trust
The proliferation of mutual funds over the last several years has left many
investors in search of a simple means to manage their long-term investments.
With new investment categories emerging each year and with each mutual fund
reacting differently to political, economic and business events, many investors
are forced to make complex investment decisions in the face of limited
experience, time and personal resources. The Funds are designed to meet the
needs of investors who prefer to have their asset allocation decisions made by
professional money managers, are looking for an appropriate core investment
portfolio and appreciate the advantages of broad diversification.
Although an investor could achieve portfolio diversification by investing
directly in a variety of GE Funds, participating in the LifeStyle Funds offers
two significant advantages: (1) simplified investment decision making; and (2)
periodic portfolio rebalancing to ensure Fund allocations remain consistent with
original risk/return objectives.
Asset Allocation Process
The Funds are managed so that each Fund can serve as a complete investment
program or as a core part of a larger portfolio. Each of the Funds invests in a
select group of Underlying GE Funds suited to the Fund's particular investment
objective. After receipt of recommendations from the Trust's investment adviser,
GE Investment Management Incorporated ("GEIM"), and any investment consultant
retained by the Trust's Board of Trustees (the "Investment Consultant"), the
Trustees will determine the ranges in which Fund assets will be allocated
between equity- and fixed income-oriented funds ("Asset Allocation Ranges").
GEIM, in conjunction with the Investment Consultant, if any, determines which of
the Underlying GE Funds properly should be included within the equity and fixed
income categories composing the Asset Allocation Ranges. Thereafter, the Board
of Trustees, again based upon recommendations from GEIM and the Investment
Consultant, if any, determines the extent to which each Fund may invest in the
Underlying GE Funds (the "Investment Limits"). GEIM will allocate and reallocate
according to fundamental and quantitative analysis each Fund's assets to the
Underlying GE Funds within the Investment Limits set by the Board of Trustees
from time to time. The Asset Allocation Ranges and the Investment Limits are
described below under "Investment Objectives and Management Policies".
<PAGE>9
Before changing either the Asset Allocation Ranges or the Investment Limits, the
Board of Trustees will consult with GEIM and the Investment Consultant and
disclose any such change to shareholders of the affected Funds. Because the
assets will be adjusted only periodically and generally only within
predetermined parameters that will attempt to ensure broad diversification,
there should not be any sudden large-scale changes in the allocation of a Fund's
investments among Underlying GE Funds. LifeStyle Funds are not designed as a
market timing vehicle, but rather as a strategic or conservative approach to
helping investors meet long-term goals.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The Trust is an open-end management investment company that currently offers six
non-diversified asset allocation investment portfolios, three of which are
offered by this Prospectus. Each Fund seeks to achieve its investment objective
by investing strategically within specified ranges among Underlying GE Funds.
Initially, each Fund will invest in the Underlying GE Funds listed below, except
that the GE Aggressive Allocation Fund will not invest in the GE Short-Term
Government Fund. The Funds will not invest in securities other than shares of
the Underlying GE Funds (or other affiliated funds that may be approved by the
Board of Trustees from time to time) and money market instruments of the types
described under "Money Market Instruments" in the Appendix to this Prospectus.
GEIM, in conjunction with the Investment Consultant, if any, will evaluate the
Underlying GE Funds for the purpose of determining whether they should
appropriately be classified as either equity-oriented or fixed income-oriented
for purposes of allocating each Fund's assets within the Asset Allocation Ranges
set by the Trust's Board of Trustees. GEIM will allocate investments for each
Fund among the Underlying GE Funds based on its outlook for the economy,
financial markets and the relative performance of the Underlying GE Funds. The
allocation among the Underlying GE Funds will be made within the Investment
Limits established by the Board of Trustees of the Trust which designate minimum
and maximum limits for investment in each of the Underlying GE Funds.
The investment objective of GE Conservative Allocation Fund (the "Conservative
Fund") is income and long-term growth of capital. The investment objective of GE
Moderate Allocation Fund (the "Moderate Fund") is long-term growth of capital
with a moderate level of current income. The investment objective of GE
Aggressive Allocation Fund (the "Aggressive Fund") is capital appreciation. Each
Fund's investment objective is fundamental and may be changed only with the
approval of a majority of the
<PAGE>10
Fund's outstanding shares. There can be no assurance that any Fund's investment
objective will be achieved.
In investing in Underlying GE Funds, the Funds seek to maintain different
allocations between equity-oriented funds and fixed income-oriented funds
depending on a Fund's investment objective. Allocating investments between
equity-oriented and fixed income-oriented funds permits each Fund to attempt to
optimize performance consistent with its investment objective. The tables below
illustrate the initial Asset Allocation Ranges and targets for each Fund:
Asset Allocation Ranges (Percent of Each Fund's Net Assets)
Type of Fund Target Range
- -------------------------------------- ------------------- -----------------
Conservative Fund
Equity-Oriented 50% 45-55%
Fixed Income-Oriented 50% 45-55%
Moderate Fund
Equity-Oriented 65% 60-70%
Fixed Income-Oriented 35% 30-40%
Aggressive Fund
Equity-Oriented 85% 80-90%
Fixed Income-Oriented 15% 10-20%
====================================== =================== =================
The Funds expect to invest their assets in the Underlying GE Funds
listed below within the Investment Limits indicated.
Investment Limits (Percent of Each Fund's Net Assets)
Conservative Moderate Aggressive
Underlying GE Fund Fund Fund Fund
- ---------------------------------- -----------------------------------------
GE U.S. Equity Fund 30-40% 35-45% 45-55%
GE International Equity Fund 10-20% 20-30% 30-40%
GE Fixed Income Fund 40-50% 25-35% 10-20%
GE Short-Term Government Fund 0-10% 0-10%
GE Money Market Fund 0-2% 0-2% 0-2%
================================== =========================================
The Underlying GE Funds have been selected to represent a reasonable spectrum
of investment options for the Funds. The Asset Allocation Ranges and the
Investment Limits are based on the degree to which the Underlying GE Funds
selected are expected in combination to be appropriate for a Fund's particular
investment objective. If, as a result of appreciation or depreciation, the
percentage of a Fund's assets invested in an
<PAGE>11
Underlying GE Fund exceeds or is less than the applicable Investment Limits set
forth above, GEIM will consider, in its discretion, whether to reallocate the
assets of the Fund to comply with the foregoing Investment Limits. The
particular Underlying GE Funds in which each Fund may invest, the Asset
Allocation Ranges and targets and the Investment Limits applicable to each
Underlying GE Fund may be changed from time to time by the Trust's Board of
Trustees without the approval of the Fund's shareholders. The Trust will provide
prior notice to shareholders before implementing changes in the mix of
Underlying GE Funds or the Asset Allocation Ranges, but not prior to changes in
the Investment Limits.
Each Fund can invest a certain portion of its cash reserves in GE Money Market
Fund or directly in money market instruments. A reserve position provides
flexibility, for example, in meeting redemptions, expenses and the timing of new
investments, and serves as a short-term defense during periods of unusual
volatility.
For information about the investment objectives of each of the Underlying GE
Funds and the investment techniques and the risks involved in the Underlying GE
Funds, please refer to "Description of the Underlying GE Funds", the Appendix to
this Prospectus, the Statement of Additional Information and the prospectus and
statement of additional information for GE Funds which is available from the
Trust upon request.
RISK FACTORS AND SPECIAL CONSIDERATIONS OF LIFESTYLE FUNDS
Non-Diversified Investment Company. Each Fund is a "non-diversified" investment
portfolio for purposes of the Investment Company Act of 1940, as amended (the
"1940 Act"), because it invests in the securities of a limited number of mutual
funds. However, the Underlying GE Funds themselves are diversified investment
portfolios. The Trust intends to comply with the diversification requirements of
Subchapter M of the Code.
Investing in Underlying GE Funds. The investments of each Fund are concentrated
in the Underlying GE Funds, so each Fund's investment performance is directly
related to the investment performance of the Underlying GE Funds held by it. The
ability of each Fund to meet its investment objective is directly related to the
ability of the Underlying GE Funds to meet their objectives as well as the
allocation among those Underlying GE Funds by GEIM. There can be no assurance
that the investment objective of any Fund or any Underlying GE Fund will be
achieved.
<PAGE>12
Investing through the Funds in the Underlying GE Funds involves certain
additional expenses and tax results that would not be present in a direct
investment in the Underlying GE Funds. See "Management of the Trust - Expenses
of the Funds".
Under certain circumstances, an Underlying GE Fund may determine to make payment
of a redemption request by a Fund wholly or partly by a distribution in kind of
securities from its portfolio, instead of cash, in accordance with the rules of
the SEC. In such cases, the Funds may hold securities distributed by an
Underlying GE Fund until GEIM determines that it is appropriate to dispose of
such securities.
Affiliated Persons. GEIM, the investment adviser and administrator of the Funds,
and the officers and trustees of the Trust presently serve as investment adviser
and administrator, officers and trustees, respectively, of the Underlying GE
Funds. Therefore, conflicts may arise as these persons fulfill their fiduciary
responsibilities to the Funds and the Underlying GE Funds. See "Management of
the Trust" for a more detailed explanation of the potential conflicts of
interest that may arise because of the "fund of funds" structure of the Trust.
In addition, GEIM's principal officers, directors and portfolio managers serve
in similar capacities with respect to General Electric Investment Corporation
("GEIC"), which like GEIM is a wholly-owned subsidiary of General Electric
Company ("GE"). GEIM and GEIC collectively provide investment management
services to various institutional accounts with total assets, as of June 30,
1996, in excess of $55 billion.
Investment Practices of Underlying GE Funds. Certain Underlying GE Funds may
invest a portion of their assets in low-rated securities (as defined below);
foreign securities; enter into forward currency transactions; lend their
portfolio securities; enter into stock index, interest rate and currency futures
contracts, and options on such contracts; engage in options transactions; make
short sales; purchase zero coupon obligations; purchase non-publicly traded and
illiquid securities; enter into mortgage roll transactions; purchase securities
on a when-issued or delayed delivery basis; enter into repurchase agreements;
borrow money; and engage in various other investment practices. See "Investment
Objectives and Management Policies of the Underlying GE Funds".
Market and Economic Factors. The Funds share prices and yields will fluctuate in
response to various market and economic factors related to both the stock and
bond markets. All Funds may invest in mutual funds that in turn invest in
international securities and thus are subject to additional risks of these
investments, including changes in foreign currency exchange rates and political
risk.
<PAGE>13
Additional Expense Information Concerning the Funds
Investors in the Funds should recognize that they may invest directly in the GE
Funds and that, by investing in Underlying GE Funds indirectly through the
Funds, they will bear not only their proportionate share of the expenses of the
Funds (including operating costs and investment advisory and administrative fees
to the extent GEIM has not elected to waive such fees), but will also indirectly
bear similar expenses of the Underlying GE Funds.
Investment Restrictions of the Funds
The Trust has adopted certain fundamental investment restrictions with respect
to each Fund that may not be changed without approval of a majority of the
Fund's outstanding voting securities (as defined in the 1940 Act).
Included among those fundamental restrictions are those listed below.
1. No Fund may borrow money or issue senior securities, except that each
Fund may borrow from banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests and cash payments
of dividends and distributions that might otherwise require the untimely
disposition of securities, in an amount not to exceed 33-1/3% of the
value of the Fund's total assets (including the amount borrowed) valued
at market less liabilities (not including the amount borrowed) at the
time the borrowing is made. Whenever borrowings of 5% or more of a Fund's
total assets are outstanding, the Fund will not make any additional
investments.
2. No Fund may lend its assets or money to other persons, except through (a)
purchasing debt obligations, (b) lending portfolio securities in an
amount not to exceed 30% of the Fund's assets taken at market value and
(c) entering into repurchase agreements.
Certain other investment restrictions adopted by the Trust with respect to the
Funds are described in the Statement of Additional Information. Investment
restrictions of the Underlying GE Funds in which the Funds invest may be more or
less restrictive than those adopted by the Trust.
<PAGE>14
PORTFOLIO TURNOVER
Each Fund's turnover rate (i.e., the rate at which the Fund buys and sells
shares of the Underlying GE Funds) is not expected to exceed 25% annually. A
Fund may purchase or sell securities to: (a) accommodate purchases and sales of
its shares; (b) change the percentages of its assets invested in each of the
Underlying GE Funds in response to market conditions; and (c) maintain or modify
the allocation of its assets between equity-oriented funds and fixed
income-oriented funds and among the Underlying GE Funds within the Asset
Allocation Ranges and Investment Limits described above or as altered by the
Trust's Board of Trustees from time to time.
GEIM cannot predict precisely the turnover rate for any Underlying GE Fund, but
expects that the annual turnover rate will not exceed 50% for each of GE U.S.
Equity Fund and GE International Equity Fund or 300% for each of GE Fixed Income
Fund and GE Short-Term Government Fund. The portfolio turnover rate for GE Money
Market Fund is expected to be zero for regulatory purposes. There can be no
assurance that the turnover rates of these Underlying GE Funds will not exceed
these limits. Higher turnover rates (more than 100%) may result in higher
transaction expenses being incurred by certain Underlying GE Funds and
shareholders that invest in those Underlying GE Funds will indirectly bear
their proportionate share of such expenses. For the fiscal year ended
September 30, 1995, the actual portfolio turnover rates of the Underlying GE
Funds were: GE U.S. Equity Fund - 43%, GE International Equity Fund - 27%, GE
Fixed Income Fund - 315% and GE Short-Term Government Fund - 415%.
DESCRIPTION OF THE UNDERLYING GE FUNDS
Investment Objectives and Management Policies
Set forth below is a description of the investment objective and policies of
each Underlying GE Fund. The investment objective of a Fund may not be changed
without the approval of the holders of a majority of the Underlying GE Fund's
outstanding voting securities as defined in the 1940 Act. Such a majority is
defined in the 1940 Act as the lesser of (1) 67% or more of the shares present
at a Fund meeting, if the holders of more than 50% of the outstanding shares of
the Underlying GE Fund are present or represented by proxy or (2) more than 50%
of the outstanding shares of the Underlying GE Fund. No assurance can be given
that an Underlying GE Fund will be able to achieve its investment objective. No
offer is made in this Prospectus of any of the Underlying GE Funds. Because each
Fund invests in Underlying GE Funds, shareholders of each Fund will be affected
by these
<PAGE>15
investment policies in direct proportion to the amount of assets each Fund
allocates to the Underlying GE Funds pursuing such policies.
GE U.S. Equity Fund
The investment objective of GE U.S. Equity Fund (the "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 U.S. Equity Fund, under normal conditions, invests at least 65%
of its assets in equity securities, consisting of common stocks and preferred
stocks, and securities convertible into common stocks, consisting of convertible
bonds, convertible debentures, convertible notes, convertible preferred stocks
and warrants or rights issued by U.S. companies. Up to 15% of the U.S. Equity
Fund's assets may be invested in foreign securities. The U.S. Equity Fund also
may invest in securities of foreign issuers in the form of depositary receipts.
The U.S. Equity Fund may, under normal market conditions, invest up to 35% of
its assets in notes, bonds and debentures issued by corporate or governmental
entities when GEIM determines that investing in these kinds of debt securities
is consistent with the Fund's investment objective of long-term growth of
capital. The U.S. Equity Fund's investments in debt securities are limited to
those that are rated investment grade, except that up to 5% of the Fund's assets
may be invested in securities rated lower than investment grade.
In managing the assets of the U.S. Equity Fund, GEIM uses a combination of
"value-oriented" and "growth-oriented" investing. Value-oriented investing
involves seeking securities that may have low price-to-earnings ratios, or high
yields, or that sell for less than intrinsic value as determined by GEIM, or
that appear attractive on a dividend discount model. These securities generally
are sold from the U.S. Equity Fund's portfolio when their prices approach
targeted levels. Growth-oriented investing generally involves buying securities
with above average earnings growth rates at reasonable prices. The U.S. Equity
Fund holds these securities until GEIM determines that their growth prospects
diminish or that they have become overvalued when compared with alternative
investments.
In investing on behalf of the U.S. Equity Fund, GEIM seeks to produce a
portfolio that GEIM believes will have similar characteristics to the Standard &
Poor's 500 Composite Stock Price Index (the "S&P Index"), by virtue of blending
investments in both "value" and "growth" securities. Since the U.S. Equity
Fund's strategy seeks to combine the basic elements of companies comprising the
S&P Index, but is designed to select investments
<PAGE>16
deemed to be the most attractive within each category, GEIM believes that the
strategy should be capable of outperforming the U.S. equity market as reflected
by the S&P Index on a total return basis.
GE International Equity Fund
The investment objective of GE International Equity Fund (the "International
Fund") is long-term growth of capital, which the Fund seeks to achieve by
investing primarily in foreign equity securities. The International Fund may
invest in securities of companies and governments located in developed and
developing countries outside the United States. The International Fund may also
invest in securities of foreign issuers in the form of depositary receipts.
Investing in securities issued by foreign companies and governments involves
considerations and potential risks not typically associated with investing in
securities issued by the U.S. Government and U.S. corporations. The
International 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 having their principal business activities in
no fewer than three different countries. The percentage of the International
Fund's assets invested in particular countries or regions of the world will vary
depending on political and economic conditions. An issuer's domicile or
nationality will be determined by reference to (a) the country in which the
issuer derives at least 50% of its revenues or profits from goods produced or
sold, investments made or services performed, or (b) the country in which the
issuer has at least 50% of its assets situated.
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 common stock purchase warrants or
rights, issued by companies believed by GEIM to have a potential for superior
growth in sales and earnings. The International Fund will emphasize established
companies, although it may invest in companies of varying sizes as measured by
assets, sales or capitalization.
The International Fund may, under normal market conditions, invest up to 35% of
its assets in notes, bonds and debentures issued by corporate or governmental
entities when GEIM determines that investing in those kinds of debt securities
is consistent with the Fund's investment objective of long-term capital
appreciation. The International Fund's investments in debt securities are
limited to those that are rated investment grade; up to 5% of the Fund's assets
may be invested in securities rated lower than investment grade.
<PAGE>17
In selecting investments on behalf of the International Fund, GEIM seeks
companies that are expected to grow faster than relevant markets and whose
securities are available at a price that does not fully reflect the potential
growth of those companies. GEIM typically focuses on companies that possess one
or more of a variety of characteristics, including strong earnings growth
relative to price-to-earnings and price-to-cash earnings ratios, low
price-to-book value, strong cash flow, presence in an industry experiencing
strong growth and high quality management.
GE Fixed Income Fund
The investment objective of GE Fixed Income Fund (the "Income Fund") is to seek
maximum income consistent with prudent investment management and the
preservation of capital. Capital appreciation with respect to the Income Fund's
portfolio securities may occur but is not an objective of the Fund. In seeking
to achieve its investment objective, the Income Fund invests in the following
types of fixed income instruments: securities issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities ("Government
Securities"); obligations of foreign governments or their agencies or
instrumentalities; bonds, debentures, notes and preferred stocks issued by U.S.
and foreign companies; mortgage related securities, adjustable rate mortgage
related securities ("ARMs"), collateralized mortgage related securities ("CMOs")
and government stripped mortgage related securities; asset-backed and
receivable-backed securities; zero coupon obligations; floating and variable
rate instruments and money market instruments. The Income Fund may also invest
in indexed securities, the value of which is linked to currencies, interest
rates, commodities, indexes or other financial indicators.
The Income Fund is subject to no limitation with respect to the maturities of
the instruments in which it may invest; the weighted average maturity of the
Fund's portfolio securities is anticipated to be approximately five to 10 years.
The Income Fund's investments in bonds are limited to those that are rated
within the six highest categories by S&P, Moody's or another NRSRO, or if
unrated, are deemed by GEIM to be of comparable quality.
The Income Fund will not purchase any obligation rated BBB by S&P or Baa by
Moody's if, as a result of the purchase, more than 25% of the Fund's total
assets would be invested in obligations rated in those categories or in unrated
obligations that are deemed by GEIM to be of comparable quality. In addition, no
obligation will be purchased by the Income Fund if, as a result of the purchase,
more than 10% of the Fund's total assets would be invested in obligations rated
BB or B by S&P or Ba or B by
<PAGE>18
Moody's or in unrated obligations that GEIM deems to be of comparable quality.
GE Short-Term Government Fund
The investment objective of GE Short-Term Government Fund (the "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 Government Fund will invest at least 65% of its total assets in
Government Securities including repurchase agreements secured by Government
Securities.
The Government Fund may invest the remainder of its assets in bonds, convertible
bonds, debentures, notes and non-convertible preferred stocks issued by U.S. and
foreign companies; obligations of foreign governments or their agencies or
instrumentalities; mortgage related securities, ARMs, CMOs and government
stripped mortgage related securities and asset-backed and receivable-backed
securities; zero coupon obligations (including zero coupon municipal
obligations); floating and variable rate instruments; and money market
instruments. The Government Fund may also invest in indexed securities, the
value of which is linked to currencies, interest rates, commodities, indexes or
other financial indicators. Mortgage related securities, ARMs, CMOs, government
stripped mortgage related securities and asset-backed and receivable-backed
securities are subject to several risks, including the prepayment of principal.
The debt securities in which the Fund invests will only be purchased if, in the
case of long-term securities, they are rated investment grade by S&P or Moody's
(or the equivalent from another NRSRO) and short-term securities will only be
purchased if they are rated A-1 by S&P or Prime-1 by Moody's (or the equivalent
from another NRSRO) or, for both short- and long-term securities, if unrated,
deemed to be of equivalent quality by GEIM.
The dollar-weighted average maturity of the Government Fund's portfolio
securities is anticipated to be not more than three years. Within this
limitation the Government Fund may purchase individual securities with effective
maturities greater than three years as long as its average maturity remains
within this limit.
GE Money Market Fund
The investment objective of GE Money Market Fund (the "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 Money Market
Fund invests in the following U.S. dollar denominated, short-term
<PAGE>19
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.
The Money Market Fund limits its portfolio investments to securities that GE
Funds' Board of Trustees determines present minimal credit risk and that are
"Eligible Securities" at the time of acquisition by the Money Market Fund.
"Eligible Securities" as used in this Prospectus means securities rated by the
"Requisite 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 Money Market Fund acquires the
security. Currently, six organizations are NRSROs: S&P, Moody's, Fitch Investors
Service, Inc., Duff and Phelps, Inc., IBCA Limited and its affiliate, IBCA,
Inc., and Thomson BankWatch Inc. By limiting its investments to Eligible
Securities, the Money Market 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 SEC under the 1940 Act. In addition,
the Money Market Fund may not invest more than 5% of its total assets in
Eligible Securities that have not received the highest rating from the Requisite
NRSROs and comparable unrated securities ("Second Tier Securities"), and may not
invest more than 1% of its total assets in the Second Tier Securities of any one
issuer. The Money Market 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. If
the Money Market Fund acquires securities that are unrated or that have been
rated by a single NRSRO, the acquisition must be approved or ratified by GE
<PAGE>20
Funds' Board of Trustees. Determinations of comparable quality is made by GEIM
in accordance with procedures established by the Board of Trustees. The Money
Market 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. The
Money Market Fund will maintain a dollar-weighted average portfolio maturity of
90 days or less. The assets of the Money Market Fund are valued on the basis of
amortized cost.
Cash Management Policies
In addition to investing as described above, during normal market conditions,
each of the Underlying GE Funds (other than GE Money Market Fund which invests
primarily in money market instruments as described above) may invest a portion
of its total assets in cash and/or money market instruments of the types
described in the Appendix to this Prospectus for cash management purposes,
pending investment in accordance with the Underlying GE Fund's investment
objective and policies and to meet operating expenses. Under normal market
conditions, each of the Income Fund and the Government Fund may hold a
substantial portion of its assets in money market instruments, including in the
case of the Government Fund short-term instruments with remaining maturities of
one year or less, if such investment is deemed by GEIM to be consistent with the
Underlying GE Fund's investment objective. During periods in which GEIM believes
that economic or other market conditions warrant, the Underlying GE Funds may
for temporary defensive purposes hold cash and/or invest in the same types of
money market instruments (in the case of the Income Fund and the Government
Fund, short-term money market instruments) without limitation. To the extent
that it holds cash or invests in money market instruments, an Underlying GE Fund
may not achieve its stated investment objective.
Additional Investments of the Underlying GE Funds
The Underlying GE Funds, in addition to investing as described above, which are
the core investments of and strategies employed by the Underlying GE Funds, may
hold one or more of the following types of instruments: repurchase agreements,
reverse repurchase agreements, non-publicly traded securities, illiquid
securities, securities that are not registered under the Securities Act of 1933,
as amended (the "1933 Act"), but that can be sold to "qualified institutional
buyers" in accordance with Rule 144A under the 1933 Act (each, a "Rule 144A
Security" and collectively, "Rule 144A Securities"), securities of supranational
agencies and securities of other investment funds. In addition, the Underlying
GE Funds may engage in the following
<PAGE>21
types of investment techniques and strategies: purchasing put and call options
on securities, writing put and call options on securities, purchasing put and
call options on securities indexes, entering 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 or in the over-the-counter market,
engaging in forward currency transactions, purchasing and writing put and call
options on foreign currencies, entering into securities transactions on a
when-issued or delayed-delivery basis, lending portfolio securities, entering
into mortgage dollar rolls and selling securities short against the box.
These other instruments, investment techniques and strategies have risks and
special considerations associated with them that are described below under "Risk
Factors and Special Considerations of the Underlying GE Funds." For additional
information regarding the permitted investments, techniques and strategies of
the Underlying GE Funds, see "Further Information: Additional Investments and
Certain Investment Techniques and Strategies Used by the Underlying GE Funds" in
the Appendix to this Prospectus, the Trust's Statement of Additional Information
and the prospectus for GE Funds.
Risk Factors and Special Considerations of the Underlying GE Funds
General. From time to time, the Underlying GE Funds may experience relatively
large purchases or redemptions due to asset allocation decisions made by GEIM
for its clients, including the Trust. These transactions may have a material
effect on the Underlying GE Funds, since Underlying GE Funds that experience
redemptions as a result of reallocations may have to sell portfolio securities
and because Underlying GE Funds that receive additional cash will have to invest
it. While it is impossible to predict the overall impact of these transactions
over time, there could be adverse effects on portfolio management to the extent
that Underlying GE Funds may be required to sell securities at times when they
would not otherwise do so, or receive cash that cannot be invested in an
expeditious manner. There may be tax consequences associated with purchases and
sales of securities, and such sales may also increase transaction costs. GEIM is
committed to minimizing the impact of these transactions on the Underlying GE
Funds to the extent it is consistent with pursuing the investment objectives of
its asset allocation clients, and will monitor the impact of asset allocation
decisions on the Underlying GE Funds. GEIM will nevertheless face conflicts in
fulfilling its responsibilities because of the possible differences between
interests of its
<PAGE>22
asset allocation clients and the interests of the Underlying GE Funds.
Debt Instruments. A debt instrument held by an Underlying GE 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 an Underlying GE Fund's portfolio can be expected
to vary inversely to changes in prevailing interest rates. In periods of
declining interest rates, the yield of an Underlying GE 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 Underlying
GE Fund's yield will tend to be somewhat lower. In addition, when interest rates
are falling, money received by such an Underlying GE 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.
Certain Investment Grade Obligations. A security is considered investment grade
if it is rated at the time of purchase within the four highest grades assigned
by Standard & Poor's Corporation ("S&P") or by Moody's Investors Service, Inc.
("Moody's") or has received an equivalent rating from another nationally
recognized statistical rating organization ("NRSRO") or, if unrated, is deemed
by GEIM to be of comparable quality. 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. A description of S&P and Moody's
ratings relevant to Underlying GE Funds' investments is included as an Appendix
to the Trust's Statement of Additional Information.
Low-rated Securities. Certain Underlying GE 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.
<PAGE>23
Securities in the lowest rating categories may be in default or may present
substantial risks of default.
Although the market values of low-rated securities tend to react less to
fluctuations in interest rate levels than the market values of higher-rated
securities, 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. An
Underlying GE 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 GEIM's ability to obtain accurate market quotations for
purposes of valuing the securities held by an Underlying GE Fund and calculating
the Fund's net asset value.
Non-publicly Traded and Illiquid Securities. 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 an Underlying GE 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. An Underlying GE 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 GEIM
deems representative of their value, the value of the Fund's net assets could be
adversely affected.
Repurchase and Reverse Repurchase Agreements. A Fund or an Underlying GE 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 Underlying GE 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
<PAGE>24
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 the Money Market 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 the securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, the Money Market 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.
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 an Underlying GE Fund in warrants valued at the lower of
cost or market, may not exceed 5% of the value of the Underlying GE Fund's net
assets. Included within that amount, but not to exceed 2% of the value of the
Underlying GE Fund's net assets, may be warrants that are not listed on the New
York Stock Exchange, Inc. ("NYSE") or the American Stock Exchange. Warrants
acquired by an Underlying GE Fund in units or attached to securities may be
deemed to be without value.
Investment in Foreign Securities. Investing in securities issued by foreign
companies and governments 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
<PAGE>25
commissions are generally higher than those charged in the United States and
foreign securities markets may be less liquid, more volatile and less subject to
governmental supervision than in the United States. Investments in foreign
countries could be affected by other factors not present in the United States,
including expropriation, confiscatory taxation, lack of uniform accounting and
auditing standards, limitations on the use or removal of funds or other assets
(including the withholding of dividends), and potential difficulties in
enforcing contractual obligations, and could be subject to extended clearance
and settlement periods.
Currency Exchange Rates. An Underlying GE Fund's share value may change
significantly when the currencies, other than the U.S. dollar, in which the
Fund's portfolio investments are denominated strengthen or weaken against the
U.S. dollar. Currency exchange rates generally are determined by the forces of
supply and demand in the foreign exchange markets and the relative merits of
investments in different countries as seen from an international perspective.
Currency exchange rates can also be affected unpredictably by intervention by
U.S. or foreign governments or central banks or by currency controls or
political developments in the United States or abroad.
Investing in Developing Countries. Investing in securities issued by companies
located in developing countries involves not only the risks described above with
respect to investing in foreign securities, but also other risks, including
exposure to economic structures that are generally less diverse and mature than,
and to political systems that can be expected to have less stability than, those
of developed countries. Other characteristics of developing countries that may
affect investment in their markets include certain national policies that may
restrict investment by foreigners in issuers or industries deemed sensitive to
relevant national interests and the absence of developed legal structures
governing private and foreign investments and private property. The typically
small size of the markets for securities issued by companies located in
developing countries and the possibility of a low or nonexistent volume of
trading in those securities may also result in a lack of liquidity and in price
volatility of those securities.
Covered Option Writing. Upon the exercise of a put option written by an
Underlying GE Fund, the Fund may suffer a loss equal to the difference between
the price at which the Fund is required to purchase the underlying security and
its market value at the time of the option exercise, less the premium received
for writing the option. Upon the exercise of a call option written by an
Underlying GE Fund, the Fund may suffer a loss equal to the excess of the
security's market value at the time of the option's
<PAGE>26
exercise over the Fund's acquisition cost of the security, less the premium
received for writing the option. In addition, no assurance can be given that an
Underlying GE Fund will be able to effect closing purchase transactions at a
desired time. The ability of an Underlying GE Fund to engage in closing
transactions with respect to options depends on the existence of a liquid
secondary market. Although an Underlying GE Fund will generally purchase or
write securities options only if a liquid secondary market appears to exist for
the option purchased or sold, no such secondary market may exist or the market
may cease to exist.
An Underlying GE Fund will engage in hedging transactions only when deemed
advisable by GEIM. Successful use by an Underlying GE Fund of options will
depend on GEIM'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 an Underlying GE
Fund's performance.
Securities Index Options. 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 an Underlying GE Fund to engage in closing purchase
transactions with respect to securities index options depends on the existence
of a liquid secondary market. Although an Underlying GE 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 GEIM desires that an Underlying GE Fund engage in such a transaction.
Futures and Options on Futures. 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. Losses incurred in hedging
transactions and the costs of these transactions will affect an Underlying GE
Fund's performance.
Forward Currency Transactions. In entering into forward currency contracts,
an Underlying GE 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
<PAGE>27
certain currencies. The existence of a limited market may in turn restrict the
Underlying GE Fund's ability to hedge against the risk of devaluation of
currencies in which the Fund holds a substantial quantity of securities. The
successful use of forward currency contracts as a hedging technique draws upon
GEIM's special skills and experience with respect to those instruments and will
usually depend upon GEIM's ability to forecast interest rate and currency
exchange rate movements correctly. Should interest or exchange rates move in an
unexpected manner, an Underlying GE 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.
GEIM's ability to dispose of an Underlying GE Fund's positions in forward
currency contracts depends on the availability of active markets in those
instruments, and GEIM cannot now 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 an Underlying GE Fund will be able to
utilize these contracts effectively for the intended purposes.
Options on Foreign Currencies. 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; an Underlying GE 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 an Underlying GE Fund's position, the Fund could forfeit the entire
amount of the premium plus related transaction costs.
Instruments and Strategies Involving Special Risks. Certain instruments in which
the Underlying GE Funds can invest and certain investment strategies that the
Funds may employ could expose the Funds to various risks and special
considerations. The instruments presenting risks to an Underlying GE Fund that
holds the instruments are: Rule 144A Securities, depositary receipts, securities
of supranational agencies, securities of other investment funds, floating and
variable rate instruments, zero coupon obligations, mortgage related securities,
government
<PAGE>28
stripped mortgage related securities, and asset-backed and receivable-backed
securities. Among the risks that some but not all of these instruments involve
are lack of liquid secondary markets and the risk of prepayment of principal.
The investment strategies involving special risks to some or all of the
Underlying GE Funds are: engaging in when-issued or delayed-delivery
securities transactions, lending portfolio securities and selling securities
short against the box. Among the risks that some but not all of these
strategies involve are increased exposure to fluctuations in market value of
the securities and certain credit risks. See the Appendix to this Prospectus
for a more complete description of these instruments and strategies.
MANAGEMENT OF THE TRUST
Board of Trustees
Overall responsibility for management and supervision of the Funds rests with
the Trust's Board of Trustees. The Trustees determine, after receipt of
recommendations from GEIM and the Investment Consultant, if any, the Asset
Allocation Ranges which designate the minimum and maximum percentages for
investment in equity- and fixed income-oriented funds. Based upon GEIM's
determination of which Underlying GE Funds properly should be included within
these categories, the Board of Trustees sets the Investment Limits which
define the extent to which a Fund can invest in an Underlying GE Fund. In
addition, 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.
A majority of the Trust's trustees are non-interested persons as defined in
Section 2(a)(19) of the 1940 Act. However, the trustees and officers of the
Trust also serve in similar positions with the GE Funds. Thus, if the
interests of a Fund and the Underlying GE Funds were ever to become divergent,
it is possible that a conflict of interest could arise and affect how the
trustees and officers of the Trust fulfill their fiduciary duties to that Fund
and the Underlying GE Funds. The trustees of the Trust believe they have
structured each Fund to avoid these concerns. However, conceivably a situation
could occur where proper action for the Trust or a Fund separately could be
adverse to the interests of an Underlying GE Fund, or the reverse could occur.
If such a possibility arises, the trustees and officers of the Trust, GE Funds
and GEIM will carefully analyze the situation and make all steps they believe
reasonable to minimize and, where possible, eliminate the potential conflict.
<PAGE>29
Investment Adviser and Administrator
GEIM, located at 3003 Summer Street, P.O. Box 7900, Stamford, Connecticut 06904,
serves as the investment adviser and administrator of each Fund. GEIM, which was
formed under the laws of Delaware in 1988, is a wholly-owned subsidiary of GE
and is a registered investment adviser under the Investment Advisers Act of
1940, as amended. In addition to its administrative responsibilities, GEIM, in
conjunction with the Investment Consultant, if any, determines which of the
Underlying GE Funds appropriately should be classified as equity-oriented or
fixed-income oriented for purposes of the Asset Allocation Ranges determined by
the Board of Trustees from time to time. GEIM then allocates and reallocates
according to fundamental and quantitative analysis each Fund's assets to the
Underlying GE Funds within the Investment Limits set by the Board of Trustees
from time to time.
In addition to serving as investment adviser to the GE Funds since their
inception in 1993, GEIM has served as the investment adviser of the investment
portfolios of Variable Investment Trust, which are offered only to insurance
company separate accounts that fund certain variable contracts, since their
inception in 1994, and other institutional accounts, including PaineWebber
Global Equity Fund, a series of Mitchell Hutchins/Kidder Peabody Investment
Trust, since its inception in 1991, the Global Growth Portfolio of PaineWebber
Series Trust and Global Small Cap Fund Inc. since March, 1995. GEIM's principal
officers and directors serve in similar capacities with respect to GEIC, which
like GEIM is a wholly-owned subsidiary of GE, and which currently acts as the
investment adviser of Elfun Global Fund, Elfun Trusts, Elfun Income Fund, Elfun
Money Market Fund, Elfun Tax-Exempt Income Fund and Elfun Diversified Fund
(collectively, the "Elfun Funds"). The first Elfun Fund, Elfun Trusts, was
established in 1935. Investment in the Elfun Funds is generally limited to
regular and senior members of the Elfun Society, whose regular members are
selected from active employees of GE and/or its majority-owned subsidiaries, and
whose senior Society members are former members who have retired from those
companies. In addition, under the General Electric Savings and Security Program,
GEIC serves as investment adviser to the GE S&S Program Mutual Fund and GE S&S
Long Term Interest Fund. GEIC also serves as the investment adviser to the
General Electric Pension Trust. Through GEIM and GEIC and their predecessors, GE
has over 60 years of investment management experience. GEIM and GEIC
collectively provide investment management services to various institutional
accounts with total assets, as of June 30, 1996, in excess of $55 billion, of
which roughly $10 billion is invested in mutual funds.
<PAGE>30
As a Fund's investment adviser, GEIM, subject to the supervision and direction
of the Trust's Board of Trustees, will determine how each Fund's assets will be
invested in the Underlying GE Funds and in money market instruments pursuant to
the investment objective and policies of each Fund set forth in this Prospectus
and, in conjunction with the Investment Consultant, if any, make recommendations
to the Board of Trustees concerning changes to (a) the Underlying GE Funds in
which the Funds may invest, (b) the Asset Allocation Ranges and (c) the
Investment Limits. The Trustees of the Trust will periodically monitor the
allocations made and the basis upon which such allocations were made or
maintained and will be responsible for supervising compliance with each Fund's
investment objective and policies. As a Fund's administrator, GEIM furnishes the
Trust with statistical and research data, clerical help and accounting, data
processing, bookkeeping, internal auditing services and certain other services
required by the Trust; prepares reports to the shareholders of the Fund; and
assists in the preparation of tax returns and reports to and filings with the
SEC and state securities law authorities. GEIM also pays the salaries of all
personnel employed by both it and the Trust.
Under the agreements governing the asset allocation and administration services
to be furnished to the Funds, GEIM has agreed to bear all expenses of the
LifeStyle Funds other than brokerage, interest, advisory and administration
fees, fees and expenses of the Trust's Board of Trustees who are not affiliated
with GEIM or its affiliates (including counsel fees), taxes payable by the
Trust, transfer agency costs and any extraordinary expenses. For services
rendered and expenses borne, each Fund pays GEIM fees for advisory and
administration services provided by GEIM to the Fund that are accrued daily and
paid monthly at the annual rate of .20% of the value of the Fund's average daily
net assets. Each Fund, as a shareholder in the Underlying GE Funds, will
indirectly bear its proportionate share of any investment advisory and
administration fees and other expenses paid by the Underlying GE Funds. The
effective advisory and administration fee of each of the Underlying GE Funds in
which the Funds may invest is paid at the following annual rates in each case of
the value of the Underlying GE Fund's average daily net assets: the U.S. Equity
Fund - .40%, the International Fund - .80%, the Income Fund - .35%, the
Government Fund - .30% and the Money Market Fund - .25%. The fees paid by the
International Fund are higher than investment management fees paid by most other
mutual funds. When combined with the fees payable by each Underlying GE Fund in
which a Fund invests, the advisory and administration fee for each Fund may be
higher than that paid by most mutual funds.
The agreements governing the asset allocation and administration services
furnished to the Trust by GEIM provide that, if GEIM
<PAGE>31
ceases to act as the investment adviser to the Trust, at GEIM's request, the
Trust's license to use the initials "GE" will terminate and the Trust will
change the name of the Trust and the Funds to a name not including the initials
"GE."
Investment Consultant
The Trust and GEIM have entered into an Investment Consulting Agreement with
DiMeo Schneider & Associates, L.L.C., an Illinois limited liability company, an
investment advisory firm which will initially act as the Investment Consultant
to the Trust's Board of Trustees. The Investment Consultant will review and
analyze the Underlying GE Funds and asset allocation of the Funds among the
Underlying GE Funds taking into account each Fund's stated investment objective.
The Investment Consultant, in conjunction with GEIM, will make recommendations
to the Board concerning changes to (1) the Underlying GE Funds in which the
Funds may invest, (2) the Asset Allocation Ranges and (3) the Investment Limits.
Out of its advisory and administration fee, GEIM will pay the Investment
Consultant fees for investment consulting services provided by the Investment
Consultant to the Board of Trustees and GEIM. These fees paid to the Investment
Consultant are paid by GEIM directly and no additional cost is borne by the
Funds.
Portfolio Management
Eugene K. Bolton is the Portfolio Manager of the Funds. Mr. Bolton is
responsible for the overall management of the domestic equity investment process
at GEIM and GEIC (GEIM, GEIC and their predecessors are collectively referred to
as "GE Investments"). In that capacity, Mr. Bolton is specifically responsible
for selecting the portfolio managers of the U.S. Equity Fund and the equity
related investments of the portfolio of GE Strategic Investment Fund, another
series of GE Funds which is not currently an Underlying GE Fund. He is also
responsible for monitoring the investment strategies of those funds to ensure
that they are consistent with the investment objectives and policies of those
funds. Mr. Bolton has more than 12 years of investment experience and has held
positions with GE Investments since 1984. He is currently a Director and
Executive Vice President of GE Investments.
GEIM investment personnel may engage in securities transactions for their own
accounts pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions.
GE Funds will offer Class D shares of the Underlying GE Funds, other than the
Money Market Fund which offers only one class of shares, to the Funds described
in this Prospectus. No sales
<PAGE>32
charge will be imposed on Class D shares purchased by the Funds and Class D
shares will not be subject to service fees or distribution fees. Class D shares
of the Underlying GE Funds are not sold to the general public; but rather
exclusively to: banks, insurance companies and industrial corporations (as
defined in GE Funds' prospectus) each purchasing shares for their own account;
investment management programs of financial institutions that contemplate
purchasing shares of investment companies managed by an adviser unaffiliated
with the financial institution; 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 ("401(k) Plans")), 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;
and investment companies not managed or sponsored by GEIM or any affiliate of
GEIM ("Institutional Investors"). Under no circumstances are regular IRAs,
simplified employee pension IRAs ("SEP-IRAs"), salary reduction SEP-IRAs and
Keogh plans eligible to purchase Class D shares of the Underlying GE Funds
directly.
RETIREMENT PLANS
Shares of each of the Funds are currently available exclusively for purchase by
401(k) Plans, eligible deferred compensation plans meeting the requirements of
Section 457(b) of the Code, tax-exempt organizations enumerated in Section
501(c)(3) of the Code and retirement plans qualified under Section 403(b)(7) of
the Code. Retirement Plan participants may invest in shares of a Fund through
their Plan by directing the Plan fiduciary to purchase shares for their account.
Participants should contact their Plan sponsor for information concerning the
appropriate procedure for investing in the Fund. See "PURCHASE OF SHARES" below.
<PAGE>33
PURCHASE OF SHARES
General
Shares of the Funds are currently offered only to certain employee retirement
plans. See "RETIREMENT PLANS" above. The shares are sold on a continuous basis
and may be purchased without any sales charge at net asset value. Purchase
orders are submitted to the Funds based on plan fiduciary instructions properly
furnished to the Funds and, in the case of defined contribution plans (e.g.
401(k) Plans), based on the periodic contribution and exchange of assets to plan
participant accounts in accordance with elections properly made by participants
under their particular plans. A purchase order will be processed at the net
asset value next determined with respect to the shares of the Fund being
purchased after the purchase order has been received and accepted by State
Street Bank and Trust Company ("State Street"), the Trust's custodian and
transfer agent. For a description of the manner of calculating a Fund's net
asset value, see "Net Asset Value."
Purchase orders for shares of a Fund will be accepted by the Trust only on a day
on which the Fund's net asset value is calculated. See "Net Asset Value" below.
The Trust may in its discretion reject any order for the purchase of shares of a
Fund. For the convenience of shareholders and in the interest of economy, the
Trust will not issue physical certificates representing shares in any Fund.
REDEMPTION OF SHARES
Redemptions in General
Shares of each Fund may be redeemed without charge on any day on which the
Fund's net asset value is calculated as described below under "Net Asset Value."
Redemption requests are submitted to the Fund's based on plan fiduciary
instructions properly furnished to the Funds and, in the case of defined
contribution plans, the withdrawal, distribution and exchange elections properly
made by plan participants under their particular plans. 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 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.
<PAGE>34
Involuntary Redemptions
An account of a shareholder of a Fund that is reduced by redemptions, and not
by reason of market fluctuations or by payroll deductions, 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. Proceeds of such a redemption will be mailed to
the shareholder.
Distributions in Kind
If the Trust's Board of Trustees 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 Fund'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.
EXCHANGE PRIVILEGE
Under an exchange privilege offered by the Trust, shares of a Fund offered by
this Prospectus may be exchanged for shares of any other Fund offered by this
Prospectus at their respective net asset values. In addition, shares of a Fund
offered by this Prospectus may be exchanged for shares of GE Money Market Fund
or for Class D shares of other GE Funds at their relative net asset values. 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.
Shareholders exercising the exchange privilege should review the prospectus
disclosure for the Fund they are considering investing in carefully prior to
making an exchange. The Trust reserves the right to reject any exchange request.
<PAGE>35
NET ASSET VALUE
Each Fund's net asset value per share is calculated on each day, Monday through
Friday, except on days on which the NYSE is closed. The NYSE is currently
scheduled to be closed on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on the
preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively. Each Fund's net asset value per share is
determined as of the close of regular trading on the NYSE (currently 4:00 p.m.,
New York time). Net asset value per share of a Fund is computed by dividing the
value of the Fund's net assets attributable to that Fund by the total number of
shares outstanding. The assets of each Fund consist primarily of the Underlying
GE Funds, which are valued at their respective net asset values at the time of
computation. In general, the Underlying GE Funds value their portfolio
securities at market value or, in the absence of market value, at fair value as
determined by or under the direction of the GE Funds' Board of Trustees.
Any short-term investments of the Funds that mature in 60 days or less, will be
valued on the basis of amortized cost (which involves valuing an investment 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 investment) when the Trust's Board of Trustees
determines that amortized cost is fair value.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions
Net investment income (that is, income other than long- and short-term capital
gains) and net realized long- and short-term capital gains will be determined
separately for each Fund. Dividends of a Fund which are derived from net
investment income and distributions of net realized long- and short-term capital
gains paid by a Fund to a shareholder will be automatically reinvested in
additional shares of the Fund and deposited in the shareholder's account, unless
the shareholder instructs the Trust, in writing, to pay all dividends and
distributions in cash. Shareholders may contact the Trust for details concerning
this election. However, if it is determined that the U.S. Postal Service cannot
properly deliver Fund mailings to a shareholder, the Fund may terminate the
shareholder's election to receive dividends and other distributions in cash.
Thereafter, the shareholder's subsequent dividends and other distributions will
be automatically reinvested in additional shares of the Fund
<PAGE>36
until the shareholder notifies the Fund in writing of his or her correct address
and requests in writing that the election to receive dividends and other
distributions in cash be reinstated. Dividends attributable to investment income
are declared and paid annually. If a shareholder redeems all of his shares of a
Fund at any time during a month, all dividends to which the shareholder is
entitled will be paid to the shareholder along with the proceeds of his
redemption. Written confirmations relating to the automatic reinvestment of
dividends will be sent to shareholders within five days following the end of
each fiscal year. Distributions of any net realized long-term and short-term
capital gains earned by a Fund will be made annually. These dividends and
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. All expenses of the Funds
are accrued daily and deducted from net asset value before declaration of
dividends to shareholders.
Each Fund is subject to a 4% non-deductible excise tax measured with respect to
certain undistributed amounts of net investment income and capital gains. If
necessary to avoid the imposition of this tax, and if in the best interests of
the Fund's shareholders, the Trust will declare and pay dividends of the Fund's
net investment income and distributions of the Fund's net capital gains more
frequently than stated above.
Taxes
Each Fund is treated as a separate entity for Federal income tax purposes. As a
result, the amounts of net investment income and net realized capital gains
subject to tax are determined separately for each Fund (rather than on a
Trust-wide basis).
The Trust intends that each Fund qualify each year as a regulated investment
company under the Code. Dividends paid from a Fund's net investment income and
distributions of a Fund's net realized short-term capital gains will be treated
as ordinary income dividends for Federal income tax purposes, regardless of how
long shareholders have held their shares of the Fund and whether the dividends
or distributions are received in cash or reinvested in additional shares of the
Fund. Distributions of a Fund's net realized long-term capital gains will be
treated as long-term capital gains for Federal income tax purposes, regardless
of how long shareholders have held their shares of the Fund and whether the
distributions are received in cash or are reinvested in additional shares of the
Fund. In addition, as a general rule, a shareholder's gain or loss on a sale or
redemption (including a redemption in kind) 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 and will be a short-term capital gain or loss if the shareholder
has held the shares for one year or less.
<PAGE>37
Net investment income or capital gains earned by the Underlying GE Funds
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 Underlying GE 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 the Underlying
GE Funds' assets to be invested within various countries is not now known. The
Trust expects that the Funds will seek to operate so as to qualify for
treaty-reduced rates of tax when applicable.
If more than 50% in value of an Underlying GE Fund's assets at the close of any
taxable year consists of stocks or securities of foreign corporations, that
Underlying GE Fund may elect to treat certain foreign taxes paid by it as paid
by its shareholders. The shareholders would then be required to include their
proportionate portion of the electing fund's foreign income and related foreign
taxes in income even if the shareholder does not receive the amount representing
foreign taxes. Shareholders itemizing deductions could then deduct the foreign
taxes or, subject to certain limitations, claim a direct dollar for dollar tax
credit against their U.S. federal income tax liability attributable to foreign
income. In many cases, a foreign tax credit will be more advantageous than a
deduction for foreign taxes. Each Fund may invest in the International Fund,
which expects to be eligible to make the above-described election. While each
Fund will be able to deduct the foreign taxes that it will be treated as
receiving if the election is made, the Fund will not itself be able to elect to
treat its foreign taxes as paid by its shareholders. Accordingly, the
shareholders of the Funds will not have an option of claiming a foreign tax
credit for foreign taxes paid by the Underlying GE Funds, while persons who
invest directly in such Underlying GE Funds may have that option.
Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually. Shareholders will also receive, as
appropriate, various written notices after the close of their Fund's taxable
year regarding the tax status of certain dividends and distributions that were
paid (or that are treated as having been paid) by the Fund to its shareholders
during the preceding taxable year. Shareholders should consult with their own
tax advisors with specific reference to their own tax situations.
CUSTODIAN AND TRANSFER AGENT
State Street, located at 225 Franklin Street, Boston, Massachusetts 02101,
serves as the Trust's custodian and transfer
<PAGE>38
agent, and is responsible for receiving acceptance orders for the purchase of
shares and processing redemption requests.
DISTRIBUTOR
GE Investment Services Inc., located at 3003 Summer Street, P.O. Box 7900,
Stamford, Connecticut, 06904-7900, serves as distributor of the Funds' shares.
The Distributor, a wholly-owned subsidiary of GEIM, also serves as Distributor
for the GE Funds and the Elfun Funds. GEIM or its affiliates, at their own
expense, may allocate portions of their revenues or other resources to assist
the Distributor in distributing shares of the Funds, by providing additional
promotional incentives to dealers. In some instances, these incentives may be
limited to certain dealers who have sold or may sell significant numbers of
shares of the Funds. The Distributor routinely offers dealers in Fund shares the
opportunity to participate in contests for which prizes include tickets to
theater and sporting events, dining, travel to meetings and conferences held in
locations remote from their offices and other items.
THE FUNDS' PERFORMANCE
Certain information about the Funds' performance is set out below.
Yield
The Trust may, from time to time, advertise a 30-day "yield" for each Fund. The
yield of a Fund refers to the income generated by an investment in a Fund over
the 30-day period identified in the advertisement and is computed by dividing
the net investment income per share earned by a Fund during the period by the
net asset value per share for that Fund on the last day of the period. This
income is "annualized" by assuming that the amount of income is generated each
month over a one-year period and is compounded semi-annually. The annualized
income is then shown as a percentage of the Fund's net asset value.
Total Return
From time to time, the Trust may advertise an "average annual total return" over
various periods of time for each Fund. This total return figure shows an average
percentage change in value of an investment in the Fund from the beginning date
of the measuring period to the ending date of the period. The figure reflects
changes in the price of a Fund's 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 Fund. Figures will be given for recent one-,
five- and 10-year periods (if applicable), and may be given for other periods as
<PAGE>39
well (such as from commencement of a Fund's operations, or on a year-by-year
basis). When considering average annual total return figures for periods longer
than one year, investors should note that a Fund's annual total return for any
one year in the period might have been greater or less than the average for the
entire period.
The Trust may use "aggregate total return" figures for various periods,
representing the cumulative change in value of an investment in a Fund, for the
specific period (again reflecting changes in the Fund's share price and assuming
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). Reflecting
compounding over a longer period of time, aggregate total return data generally
will be higher than average annual total return data, which reflects compounding
of return.
The Trust may, in addition to quoting a Fund's average annual and aggregate
total returns, advertise the actual annual and annualized total return
performance data for various periods of time. Actual annual and annualized total
returns 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, which reflects compounding of return.
Yield and total return figures are based on historical earnings and are thus not
intended to indicate future performances. The Statement of Additional
Information describes the method used to determine a Fund's yield and total
return.
Comparative Performance Information
In reports or other communications to shareholders of a Fund or in advertising
materials, the Trust may compare the Fund's performance with (1) the performance
of other mutual funds as listed in the rankings prepared by Lipper Analytical
Services, Inc. or similar independent services that monitor the performance of
mutual funds, (2) various unmanaged indexes, including the Russell Index, S&P
Index, and the Dow Jones Industrial Average or (3) other appropriate indexes of
investment securities or with data developed by GEIM derived from those indexes.
The performance information may also include evaluations of a Fund published by
nationally recognized ranking services and by financial publications that are
nationally recognized, such as Barron's, 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
<PAGE>40
Today. These ranking services or publications may compare a Fund's performance
to, or rank it within, a universe of mutual funds with investment objectives and
policies similar, but not necessarily identical to, the Fund's. Such comparisons
or rankings are made on the basis of several factors, including objectives and
policies, management style and strategy, and portfolio composition, and may
change over time if any of those factors change.
ADDITIONAL MATTERS
The Trust was formed as a business trust pursuant to a Declaration of Trust, as
amended from time to time (the "Declaration"), under the laws of The
Commonwealth of Massachusetts on June 21, 1996. The Declaration authorizes the
Trust's Board of Trustees to create separate series, and within each series
separate classes, of an unlimited number of shares of beneficial interest, par
value $.001 per share. As of the date of this Prospectus, the Trustees have
established six such series, each offering a single class of shares. The other
three series of the Trust are currently being offered by a separate prospectus.
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.
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 Trust's Board of Trustees.
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) a matter affecting the interests of one or more
of the Funds, in which case only shares of the affected Funds would be entitled
to vote or (2) when the 1940 Act or a separate agreement applicable to a Fund
requires that shares of the Funds be voted by 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
<PAGE>41
will be assisted by the Trust in communicating with other shareholders in
seeking the holding of the meeting.
Each Fund will vote its Underlying GE Fund shares in proportion to the votes
of all other shareholders in each respective Underlying GE Fund.
The Trust will send to each shareholder of each Fund a semiannual report and
an audited annual report, each of which includes a list of the investment
securities held by each Fund. Only one report each will be mailed to a single
address at which more than one shareholder with the same last name had
indicated mail is to be delivered. Shareholders may request additional copies
of any report by calling the toll free numbers listed on the back cover page
of the Prospectus or by writing to the Trust at the address set forth on the
front cover page of the Prospectus.
GE LIFESTYLE FUNDS
o GE Conservative Allocation Fund
o GE Moderate Allocation Fund
o GE Aggressive Allocation Fund
For information contact your investment professional or
call the following toll free number: 1-800-242-0134
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN THE
STATEMENT OF ADDITIONAL INFORMATION INCORPORATED INTO THIS PROSPECTUS
BY REFERENCE IN CONNECTION WITH THE OFFERING OF SHARES OF LIFESTYLE FUNDS,
AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY LIFESTYLE FUNDS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY
PERSON TO WHOM, AN OFFER MAY NOT LAWFULLY BE MADE.
- -----------------------------------------------------------------------------
<PAGE>A-1
FURTHER INFORMATION: ADDITIONAL INVESTMENTS AND CERTAIN INVESTMENT TECHNIQUES
AND STRATEGIES USED BY THE UNDERLYING GE FUNDS
The Underlying GE Funds may engage in a number of investment techniques and
strategies, including those described below. No Underlying GE Fund is under
any obligation to use any of the techniques and strategies at any given time
or under any particular economic condition. In addition, no assurance can be
given that the use of any practice will have its intended result or that the
use of any practice is, or will be, available to any Underlying GE Fund.
Money Market Instruments
Each Fund and each Underlying GE Fund, other than the Money Market Fund, may
invest only in the following types of money market instruments: (i) securities
issued or guaranteed by the U.S. Government or one of its agencies or
instrumentalities, (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.
<PAGE>A-2
Each Fund and each Underlying GE Fund, other than the Money Market Fund, may
also invest up to 25% of its assets in GEI Short-Term Investment Fund (the
"Investment Fund"), a fund created specifically to serve as a vehicle for the
collective investment of cash balances of the Funds and the Underlying GE Funds
(other than the Money Market Fund) and other accounts advised by GEIM and 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 the Investment Fund, nor will the Funds or the
Underlying GE Funds incur any sales charge, redemption fee, distribution fee or
service fee in connection with their investments in the Investment Fund.
Repurchase Agreements. Each Underlying GE Fund may engage in repurchase
agreement transactions with respect to instruments in which the Underlying GE
Fund is authorized to invest. The Underlying GE 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, an Underlying GE 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 an Underlying GE Fund are monitored on an ongoing basis by GEIM to
ensure that the value is at least equal at all times to the total amount of the
repurchase obligation, including interest. GEIM also monitors, on an ongoing
basis to evaluate potential risks, the creditworthiness of those banks and
dealers with which an Underlying GE Fund enters into repurchase agreements.
<PAGE>A-3
The Money Market Fund may engage in reverse repurchase agreements, subject to
its investment restrictions. A reverse repurchase agreement, which is considered
a borrowing by the Money Market 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. The Money Market 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
or other liquid assets equal in value to the Money Market Fund's obligations
with respect to reverse repurchase agreements are segregated and maintained with
GE Funds' custodian or designated sub-custodian.
Non-publicly Traded and Illiquid Securities. Each Underlying GE 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 GE Funds' Board of Trustees based
upon the trading markets for the securities. In addition, each Underlying GE
Fund, other than the Money Market Fund, may invest up to 15% 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 an Underlying GE 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 an Underlying GE Fund 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 GEIM has determined are not liquid under guidelines
established by the GE Funds' Board of Trustees. In no event, however, will any
Underlying GE Fund's investments in illiquid and non-publicly traded securities,
in the aggregate, exceed 15% of its assets.
Indexed Securities. The Income Fund and the Government Fund may also invest in
indexed securities, the value of which is linked to currencies, interest rates,
commodities, indexes or other financial indicators ("reference instruments").
The interest rate or (unlike most fixed income securities) the principal amount
payable at maturity of an indexed security may be increased or decreased,
depending on changes in the value of the reference instrument. 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
<PAGE>A-4
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 Income Fund and the Government Fund will bear
the market risk of the reference instrument.
Purchasing Put and Call Options on Securities. Each Underlying GE 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. An
Underlying GE 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, an
Underlying GE 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 an Underlying GE 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.
An Underlying GE 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 an Underlying GE 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
an Underlying GE Fund. In addition, the premiums paid by an Underlying GE Fund
in purchasing options on securities, options on securities indexes, options on
foreign currencies and options on futures contracts will not exceed 20% of the
Fund's net assets.
Covered Option Writing. Each Underlying GE Fund, other than the Money Market
Fund, may write covered put and call options on securities. An Underlying GE
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
<PAGE>A-5
option holder an underlying security at a specified price at any time during the
option period.
The Underlying GE Funds with option-writing authority write only covered
options. A put or call option written by an Underlying GE Fund will be deemed
covered in any manner permitted under the 1940 Act or the rules and regulations
thereunder or any other method determined by the SEC to be permissible. See
"Strategies Available to Some But Not All Underlying GE Funds -- Covered Option
Writing" in the Statement of Additional Information for specific situations
where put and call options will be deemed to be covered by an Underlying GE
Fund.
An Underlying GE 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, an Underlying GE
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 an Underlying GE 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. To facilitate closing purchase transactions, the Underlying GE
Funds with option-writing authority will ordinarily write options only if a
secondary market for the options exists on a U.S. or foreign securities exchange
or in the over-the-counter market.
Option writing for an Underlying GE 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 Code for qualification as a
regulated investment company. In addition to writing covered put and call
options to generate current income, an Underlying GE 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 position's being offset by a loss on the hedge
position. No Underlying GE Fund will enter into a transaction involving options
for speculative purposes.
Securities Index Options. In seeking to hedge all or a portion of its
investments, an Underlying GE Fund, other than the Money Market Fund, may
purchase and write put and call options on securities indexes listed on U.S.
or foreign securities exchanges
<PAGE>A-6
or traded in the over-the-counter market, which indexes include securities held
in the Underlying GE Fund's portfolio. The Underlying GE Funds with such option
writing authority may write only covered options. An Underlying GE Fund may also
use securities index options as a means of participating in a securities market
without making direct purchases of securities. No Underlying GE Fund will enter
into a transaction involving securities index options for speculative purposes.
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 indexes do not
involve the delivery of an underlying security; the option in the case of an
option on a securities index represents the holder's right to obtain from the
writer in cash a fixed multiple of the amount by which the exercise price
exceeds (in the case of a call) or is less than (in the case of a put) the
closing value of the underlying securities index on the exercise date.
A securities index option written by an Underlying GE Fund will be deemed
covered in any manner permitted under the 1940 Act or the rules and regulations
thereunder or any other method determined by the SEC to be permissible. See
"Strategies Available to Some But Not All Underlying GE Funds--Covered Option
Writing" in the Statement of Additional Information for specific situations
where securities index options will be deemed to be covered by an Underlying GE
Fund. If the Underlying GE Fund has written a securities index option, it may
terminate its obligation by effecting a closing purchase transaction, which is
accomplished by purchasing an option of the same series as the option previously
written.
Futures and Options on Futures. Each Underlying GE Fund, other than 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, for duration management, or when the transactions are
economically appropriate to the reduction of risks inherent in the management of
the Fund involved. No Underlying GE Fund will enter into a transaction involving
futures and options on futures for speculative purposes.
An Underlying GE Fund may not enter into futures and options contracts for which
aggregate initial margin deposits and
<PAGE>A-7
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 SEC staff 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 (see "Strategies Available to
Some But Not All Underlying GE Funds--Covered Option Writing" in the Statement
of Additional Information) and designed to eliminate any potential leveraging.
An interest rate futures contract provides for the future sale by one party and
the purchase by the other party of a specified amount of a particular financial
instrument (debt security) at a specified price, date, time and place. Financial
futures contracts are contracts that obligate the holder to deliver (in the case
of a futures contract that is sold) or receive (in the case of a futures
contract that is purchased) at a future date a specified quantity of a financial
instrument, specified securities, or the cash value of a securities index. A
municipal bond index futures contract is based on an index of long-term,
tax-exempt municipal bonds and a corporate bond index futures contract is based
on an index of corporate bonds. Stock index futures contracts are based on
indexes that reflect the market value of common stock of the companies included
in the indexes. 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.
Forward Currency Transactions. Each Underlying GE Fund, other than the Money
Market Fund, may hold currencies to meet settlement requirements for foreign
securities and 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 Underlying GE 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
<PAGE>A-8
fixed for the term of the contract at the time that an Underlying GE 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. An Underlying GE Fund, however, may enter into forward currency
contracts requiring deposits or involving the payment of commissions. To assure
that an Underlying GE Fund's forward currency contracts are not used to achieve
investment leverage, cash or other liquid assets will be segregated with GE
Funds' 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, an Underlying GE 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. GE Funds may also be able to negotiate such an
offset on behalf of an Underlying GE 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 an Underlying GE Fund.
In hedging a specific portfolio position, an Underlying GE 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 GEIM. An Underlying GE
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.
Options on Foreign Currencies. Each Underlying GE Fund, other than 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 Underlying GE Funds with such option
writing authority may write only covered options. No Underlying GE Fund will
enter into a transaction involving options on foreign currencies for speculative
purposes. Options on foreign currencies to be written or purchased by an
Underlying GE Fund are traded on U.S. or foreign exchanges or in the
over-the-counter market. GE Funds will limit the premiums paid on an Underlying
GE Fund's options on foreign currencies to 5% of the value of the Underlying GE
Fund's total assets.
<PAGE>A-9
When-Issued and Delayed-Delivery Securities. To secure prices or yields deemed
advantageous at a particular time, an Underlying GE 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 Underlying
GE Fund, however, prior to the actual delivery or payment by the other party to
the transaction. Each Underlying GE 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 an Underlying
GE 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 Underlying GE Fund's when-issued or delayed-delivery purchase commitments
will be segregated with the GE Funds' 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 an
Underlying GE 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 an
Underlying GE Fund's net asset value.
Lending Portfolio Securities. Each Underlying GE 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% of an
Underlying GE Fund's assets taken at value. The Underlying GE Fund's loans of
securities will be collateralized by cash, letters of credit or Government
Securities. Cash or instruments collateralizing an Underlying GE Fund's loans of
securities are segregated and maintained at all times with the GE Funds'
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, an
Underlying GE 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.
Rule 144A Securities. Each of the Underlying GE Funds may purchase Rule 144A
Securities. Certain Rule 144A Securities may
<PAGE>A-10
be considered illiquid and therefore subject to an Underlying GE Fund's
limitation on the purchase of illiquid securities, unless the GE Funds' Board of
Trustees determines on an ongoing basis that an adequate trading market exists
for the Rule 144A Securities. An Underlying GE 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 GE Funds' Board of
Trustees has established standards and procedures for determining the liquidity
of a Rule 144A Security and monitors GEIM'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.
Depositary Receipts. The U.S. Equity Fund and the International Fund may each
invest in securities of foreign issuers in the form of American Depositary
Receipts ("ADRs"), which are U.S. dollar-denominated receipts typically issued
by domestic banks or trust companies that represent the deposit with those
entities of securities of a foreign issuer, 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. The U.S. Equity Fund and the International Fund may each
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.
Supranational Agencies. The Income Fund and the Money Market Fund may each
invest up to 10% of its assets in securities of supra-national 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
<PAGE>A-11
the Asian and Pacific regions. Securities of supranational agencies are not
considered Government Securities and are not supported, directly or
indirectly, by the U.S. Government.
Investments In Other Investment Funds. The International Fund, the Income Fund
and the Government Fund may each invest in investment funds that invest
principally in securities in which the Fund is authorized to invest. Under the
1940 Act and as a condition to the exemptive relief that was granted to the
Trust by the SEC, a Fund may invest a maximum of 10% of its total assets in the
securities of other investment companies. In addition, under the 1940 Act and as
a condition to the exemptive relief that was granted to the Trust by the SEC,
not more than 5% of a Fund's total assets may be invested in the securities of
any one investment company, and the Fund may not own more than 3% of the
securities of any investment company. To the extent an Underlying GE Fund
invests in other investment companies, the Fund's shareholders will incur
certain duplicative fees and expenses, including investment advisory fees.
Floating and Variable Rate Instruments. The Income Fund, the Government Fund and
the Money Market Fund may each 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. The amount by which the rates paid
on an income security may increase or decrease may be subject to periodic or
lifetime caps. Floating and variable rate income securities include securities
whose rates vary inversely with changes in market rates of interest. Such
securities may also pay a rate of interest determined by applying a multiple to
the variable rate. The extent of increases and decreases in the value of
securities whose rates vary inversely with changes in market rates of interest
generally will be larger than comparable changes in the value of an equal
principal amount of a fixed rate security having similar credit quality,
redemption provisions and maturity.
Zero Coupon Obligations. The Income Fund and the Government Fund 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
<PAGE>A-12
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 the Income Fund and the Government Fund will
receive no payments on its zero coupon securities prior to their maturity or
disposition, it will be required for federal income tax purposes generally to
include in its dividends each year an amount equal to the annual income that
accrues on its zero coupon securities. Such dividends will be paid from the cash
assets of the Fund, from borrowings or by liquidation of portfolio securities,
if necessary, at a time that the Fund otherwise would not have done so. To the
extent the Income Fund and the Government Fund 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 the
Income Fund or the Government Fund 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 Government Fund may 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.
Mortgage Related Securities. The mortgage related securities in which the Income
Fund and the Government Fund will invest 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
<PAGE>A-13
companies. 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 the Income Fund or the Government Fund.
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 the Income Fund and the Government Fund. Because
prepayments of principal generally occur when interest rates are declining, the
Income Fund and the Government Fund will likely have to reinvest the proceeds of
prepayments at lower interest rates than those at which its assets were
previously invested, resulting in a corresponding decline in the Fund's yield.
Thus, mortgage related securities may have less potential for capital
appreciation in periods of falling interest rates than other fixed income
securities of comparable maturity, although those other fixed income securities
may have a comparable risk of decline in market value in periods of rising
interest rates. To the extent that the Income Fund or the Government Fund
purchases mortgage related securities at a premium, unscheduled prepayments,
which are made at par, will result in a loss equal to any unamortized premium.
ARMs have interest rates that reset at periodic intervals, thereby allowing the
Income Fund and the Government Fund 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, the Income Fund or the Government Fund generally will be
able to reinvest these amounts in securities with a higher current rate of
return. Neither the Income Fund nor the Government Fund, 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
<PAGE>A-14
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, the Income Fund's and the Government Fund's 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 the Income Fund or
the Government Fund before the interest rates on the underlying mortgages are
adjusted to reflect current market rates.
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 the Income Fund and the Government Fund 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 GEIM, each of the
Income Fund and the Government Fund limit their investments in these securities,
together with other illiquid instruments, to not more than 15% of the value of
its net assets.
Government Stripped Mortgage Related Securities. The Income Fund and the
Government Fund 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. The Income Fund and the
Government Fund 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 GEIM 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 the Income Fund
or the Government Fund.
Investing in government stripped mortgage related securities involves risks
normally associated with investing in mortgage
<PAGE>A-15
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 the Income Fund's or the Government Fund's not fully
recovering its initial investment in an interest-only government stripped
mortgage related security. Under current market conditions, the Income Fund and
the Government Fund expect that investments in government stripped mortgage
related securities will consist primarily of interest-only securities. The
sensitivity of an interest-only security that represents the interest portion of
a particular class, as opposed to the interest portion of an entire pool, to
interest rate fluctuations, may be increased because of the characteristics of
the principal portion to which they relate. Government stripped mortgage related
securities are currently traded in an over-the-counter market maintained by
several large investment banking firms. No assurance can be given that the
Income Fund or the Government Fund will be able to effect a trade of a
government stripped mortgage related security at a desired time. The Income Fund
and the Government Fund 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 GE Funds' Board of Trustees, the GE Funds treat
government stripped mortgage related securities as illiquid and will limit each
of the Income Fund's and the Government Fund's investments in these securities,
together with other illiquid investments, to not more than 15% of its net
assets.
Asset-Backed and Receivable-Backed Securities. The Income Fund and the
Government Fund 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
<PAGE>A-16
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,
the Income Fund or the Government Fund 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 the Income Fund's and the Government Fund's investment objective and
policies and subject to the review and approval of the GE Funds' Board of
Trustees, the Income Fund and the Government Fund may also invest in other types
of asset-backed and receivable-backed securities.
Mortgage Dollar Rolls. With respect to up to 10% of their total assets each of
the Income Fund and the Government Fund may, enter into mortgage "dollar rolls"
in which the Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterpart to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Underlying GE Fund loses the right to receive principal and interest
paid on the securities sold. However, the Underlying GE 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 Underlying
GE Fund compared with what such performance would have been without the use of
mortgage dollar rolls. The Underlying GE Fund will hold and maintain in a
segregated account until the settlement date cash or other liquid assets in an
amount equal to the forward purchase price. The benefits derived from the use of
mortgage dollar rolls may depend upon GEIM'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 the Income Fund and the
Government Fund propose to treat mortgage dollar rolls as
<PAGE>A-17
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. The International Fund may sell securities "short
against the box." Whereas a short sale is the sale of a security the
International 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. Short sales against the box are typically used by sophisticated investors
to defer recognition of capital gains or losses.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.
<PAGE>1
SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 1996
STATEMENT OF ADDITIONAL INFORMATION
October __, 1996
GE LIFESTYLE FUNDS
3003 Summer Street, Stamford, Connecticut 06905
For information, call (203) 326-4040
* GE Conservative Strategy * GE Conservative Allocation
Fund Fund
* GE Moderate Strategy Fund * GE Moderate Allocation
Fund
* GE Aggressive Strategy Fund * GE Aggressive Allocation
Fund
Contents
Page
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES...............................2
INVESTMENT RESTRICTIONS OF THE FUNDS.......................................12
INVESTMENT RESTRICTIONS OF THE UNDERLYING GE FUNDS.........................16
MANAGEMENT OF THE LIFESTYLE FUNDS..........................................21
REDEMPTION OF SHARES.......................................................24
EXCHANGE PRIVILEGE.........................................................25
NET ASSET VALUE............................................................25
DIVIDENDS, DISTRIBUTIONS AND TAXES.........................................25
THE FUNDS' PERFORMANCE.....................................................28
ADDITIONAL INFORMATION.....................................................30
COUNSEL....................................................................31
INDEPENDENT ACCOUNTANTS....................................................31
FINANCIAL STATEMENTS.......................................................31
APPENDIX..................................................................A-1
This Statement of Additional Information supplements the
information contained in the current Prospectuses of GE LifeStyle Funds (the
"Trust") dated October __, 1996 (each, a "Prospectus," together the
"Prospectuses"), and should be read in conjunction with the Prospectuses. Copies
of the Prospectuses describing the Funds offered by the Trust 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 1-800-___-_____ or by writing to the Trust at P.O. Box
120065, Stamford, CT 06912-0065. This Statement of Additional Information,
although not a prospectus, is incorporated in its entirety by reference into the
Prospectuses.
<PAGE>2
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
This Statement of Additional Information furnishes
supplemental data and descriptions for Funds described in two Prospectuses. One
Prospectus discusses the investment objectives and policies of the following
three asset allocation investment funds offered by the Trust: GE Conservative
Strategy Fund, GE Moderate Strategy Fund and GE Aggressive Strategy Fund
(collectively, the "Strategy Funds"). The other Prospectus discusses the
investment objectives and policies of the following three asset allocation
investment funds also offered by the Trust: GE Conservative Allocation Fund, GE
Moderate Allocation Fund and GE Aggressive Allocation Fund (collectively, the
"Allocation Funds"). The Strategy Funds and the Allocation Funds are
collectively referred to herein as the "Funds". Each Fund seeks to achieve its
investment by investing in the following five portfolios of GE Funds: GE U.S.
Equity Fund, GE International Equity Fund, GE Fixed Income Fund, GE Short-Term
Government Fund and GE Money Market Fund (collectively, the "Underlying GE
Funds"), except that neither GE Aggressive Strategy Fund nor GE Aggressive
Allocation Fund will invest in GE Short-Term Government Fund. The Funds may also
invest directly in money market instruments. Each Strategy Fund will only
purchase Class A shares of the Underlying GE Funds and each Allocation Fund will
only purchase Class D shares of the Underlying GE Funds, except in each case
with respect to the GE Money Market Fund which only offers one class of shares.
Supplemental information is set out below concerning the certain
of the securities and other instruments in which the Underlying GE Funds may
invest (including money market instruments in which the Funds and/or the
Underlying GE Funds may invest), the investment policies and strategies that the
Underlying GE Funds may utilize and certain risks attendant to those
investments, policies and strategies. Additional information is set out in the
prospectus and statement of additional information for GE Funds which is
available from the Trust upon request.
Investment Objective and Certain Policies of the Underlying GE Funds
GE U.S. Equity Fund. GE U.S. Equity Fund (the "U.S. Equity Fund")
pursues its investment objective of long-term growth of capital by investing
primarily in equities securities of U.S. companies as described in the
Prospectuses. In addition, under normal market conditions, the U.S. Equity
Fund may invest a certain percentage of its assets in debt securities of the
types described in the Prospectuses. GE Investment Management Incorporated
("GEIM") believes that such a determination could be made, for example, upon
the U.S. Equity Fund's investing in the debt securities of a company whose
securities GEIM anticipates
<PAGE>3
will increase in value as a result of a development particularly or uniquely
applicable to the company, such as a liquidation, reorganization,
recapitalization or merger, material litigation, technological breakthrough or
new management or management policies. In addition, GEIM believes such a
determination could be made with respect to an investment by the U.S. Equity
Fund in debt instruments issued by a governmental entity upon GEIM's concluding
that the value of the instruments will increase as a result of improvements or
changes in public finances, monetary policies, external accounts, financial
markets, exchange rate policies or labor conditions of the country in which the
governmental entity is located.
GE International Equity Fund. GE International Equity Fund (the
"International Fund") pursues its investment objective of long-term growth of
capital by investing primarily in foreign equity securities of the types
described in the Prospectuses. In addition, under normal market conditions, the
International Fund may invest a certain percentage of its assets in debt
securities of the types described in the Prospectuses. GEIM believes that such a
determination could be made, for example, upon the International Fund's
investing in the debt securities of a company whose securities GEIM anticipates
will increase in value as a result of a development particularly or uniquely
applicable to the company, such as a liquidation, reorganization,
recapitalization or merger, material litigation, technological breakthrough or
new management or management policies. In addition, GEIM believes such a
determination could be made with respect to an investment by the International
Fund in debt instruments issued by a governmental entity upon GEIM's concluding
that the value of the instruments will increase as a result of improvements or
changes in public finances, monetary policies, external accounts, financial
markets, exchange rate policies or labor conditions of the country in which the
governmental entity is located.
In addition to the cash management strategies described in the
Prospectuses, during periods when GEIM believes there are unstable market,
economic, political or currency conditions abroad, the International Fund may
assume a temporary defensive posture and restrict the securities markets in
which its assets will be invested and invest all or a significant portion of its
assets in securities of the types described in the Prospectuses issued by
companies incorporated in and/or having their principal activities in the United
States.
GE Fixed Income Fund. GE Fixed Income Fund (the "Income Fund")
pursues its investment objective of seeking maximum income consistent with
prudent investment management and the preservation of capital by investing
primarily in fixed income securities of the types described in the Prospectuses.
In addition, up to 35% of the Income Fund's total assets may be invested in
obligations of foreign companies or foreign
<PAGE>4
governments or their agencies and instrumentalities. Investments in foreign
companies and agencies or instrumentalities of foreign governments made by the
Income Fund usually will involve currencies of foreign countries.
GE Short-Term Government Fund. GE Short-Term Government Fund (the
"Government Fund") pursues its investment objective of seeking a high level
income consistent with prudent investment management and the preservation of
capital by investing primarily in Government Securities (as defined in the
Prospectuses). In pursuing the Government Fund's investment objective, GEIM will
seek to stabilize share price fluctuation by investing in securities that are
not highly sensitive to interest rate changes. In selecting securities for the
Government Fund, GEIM will attempt to maintain the Fund's overall sensitivity to
interest rates in a range similar to the average for short- to intermediate-term
government bonds with maturities of one to four years.
GE Money Market Fund. GE Money Market Fund pursues its investment
objective of seeking a high level of current income consistent with the
preservation of capital and the maintenance liquidity by investing primarily in
short-term money market instruments of the types described in the Prospectuses.
Strategies Available to All Underlying GE Funds
When-Issued and Delayed-Delivery Securities. When an Underlying GE
Fund engages in when-issued or delayed-delivery securities transactions, it
relies on the other party to consummate the trade. Failure of the seller to do
so may result in the Underlying GE Fund's incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.
Lending Portfolio Securities. An Underlying GE Fund will adhere to
the following conditions whenever its portfolio securities are loaned: (1) the
Underlying GE 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 Underlying GE Fund must be able to terminate the loan at any
time; (4) the Underlying GE 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 Underlying GE 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, GE Funds' Board of Trustees must terminate the loan and regain the right
to vote the securities. From time to time, an Underlying GE Fund may pay a part
of the interest earned from the investment of collateral received for securities
loaned to the borrower
<PAGE>5
and/or a third party that is unaffiliated with the Fund and is acting as a
"finder."
Bank Obligations. Domestic commercial banks organized under
Federal law are supervised and examined by the U.S. Comptroller of the Currency
and are required to be members of the Federal Reserve System and to be insured
by the Federal Deposit Insurance Corporation ("FDIC"). Foreign branches of U.S.
banks and foreign banks are not regulated by U.S. banking authorities and
generally are not bound by mandatory reserve requirements, loan limitations,
accounting, auditing and financial reporting standards comparable to U.S. banks.
Obligations of foreign branches of U.S. banks and foreign banks are subject to
the risks associated with investing in foreign securities generally. These
obligations entail risks that are different from those of investments in
obligations in domestic banks, including foreign economic and political
developments outside the United States, foreign governmental restrictions that
may adversely affect payment of principal and interest on the obligations,
foreign exchange controls and foreign withholding or other taxes on income.
A U.S. branch of a foreign bank may or may not be subject to
reserve requirements imposed by the Federal Reserve System or by the state in
which the branch is located if the branch is licensed in that state. In
addition, branches licensed by the Comptroller of the Currency and branches
licensed by certain states ("State Branches") may or may not be required to: (1)
pledge to the regulator by depositing assets with a designated bank within the
state, an amount of its assets equal to 5% of its total liabilities; and (2)
maintain assets within the state in an amount equal to a specified percentage of
the aggregate amount of liabilities of the foreign bank payable at or through
all of its agencies or branches within the state. The deposits of State Branches
may not necessarily be insured by the FDIC. In addition, less information may be
available to the public about a U.S. branch of a foreign bank than about a U.S.
bank.
Ratings as Investment Criteria. The ratings of nationally
recognized statistical rating organizations ("NRSROs") such as Standard & Poor's
Corporation ("S&P") or Moody's Investors Service, Inc. ("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 GEIM as initial criteria for the selection of
portfolio securities on behalf of the Underlying GE Funds, GEIM also relies upon
its own analysis to evaluate potential investments.
Subsequent to its purchase by an Underlying GE Fund, an issue of
securities may cease to be rated or its rating may be reduced below the minimum
required for purchase by an Underlying GE Fund. Although neither event will
require the sale of the
<PAGE>6
securities by an Underlying GE Fund, other than the GE Money Market Fund, GEIM
will consider the event in its determination of whether the Fund should continue
to hold the securities. In the event of a lowering of the rating of a security
held by the GE Money Market Fund or a default by the issuer of the security, the
Fund will dispose of the security as soon as practicable, unless GE Funds' Board
of Trustees determines that disposal of the security would not be in the best
interests of the Fund. To the extent that a NRSRO's ratings change as a result
of a change in the NRSRO or its rating system, the Underlying GE Funds will
attempt to use comparable ratings as standards for their investments in
accordance with their investment objectives and policies.
Strategies Available to Some But Not All Underlying GE Funds
Securities of Other Investment Companies. An Underlying GE Fund
may invest in securities of other investment companies to the extent permitted
under the Investment Company Act of 1940, as amended (the "1940 Act"). Under the
1940 Act, and as a condition to the exemptive relief that was granted by the
Securities and Exchange Commission (the "SEC"), no Underlying GE Fund may hold
securities of another investment company in amounts which (a) exceed 3% of the
total outstanding voting stock of such company, (b) exceed 5% of the value of
the Underlying GE Fund's total assets and (c) when added to all other investment
company securities held by the Underlying GE Fund, exceed 10% of the value of
the Underlying GE Fund's total assets.
Mortgage Related Securities. The average maturity of pass-through
pools of mortgage related securities in which certain of the Underlying GE Funds
may invest varies with the maturities of the underlying mortgage instruments. In
addition, a pool's stated maturity may be shortened by unscheduled payments on
the underlying mortgages. Factors affecting mortgage prepayments include the
level of interest rates, general economic and social conditions, the location of
the mortgaged property and age of the mortgage. Because prepayment rates of
individual mortgage pools vary widely, the average life of a particular pool
cannot be predicted accurately.
Mortgage related securities may be classified as private,
governmental or government-related, depending on the issuer or guarantor.
Private mortgage related securities represent pass-through pools consisting
principally of conventional residential mortgage loans created by
non-governmental issuers, such as commercial banks, savings and loan
associations and private mortgage insurance companies. Governmental mortgage
related securities are backed by the full faith and credit of the United States.
GNMA, the principal U.S. guarantor of these securities, is a wholly-owned U.S.
government corporation within the Department of Housing and Urban Development.
Government-related mortgage related securities are not backed by
<PAGE>7
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. GEIM assesses new types of mortgage related securities as they are
developed and offered to determine their appropriateness for investment by the
relevant Underlying GE Fund.
Covered Option Writing. The Underlying GE Funds with
option-writing authority will write only options that are covered. A call option
written by an Underlying GE 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 or other liquid assets, equal to the fluctuating
market value of the optioned securities, is segregated with GE Funds' 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 GE Funds' custodian or with a
designated sub-custodian, or (2) if the Underlying GE Fund continues to own an
equivalent number of puts of the same "series" (that is, puts on the same
underlying securities having the same exercise prices and expiration dates as
those written by the Fund), or an equivalent number of puts of the same "class"
(that is, puts on the same underlying securities) with exercise prices greater
than those that it has written (or if the exercise prices of the puts it holds
are less than the exercise prices of those it has written, the difference is
segregated with GE Funds' custodian or designated sub-custodian).
<PAGE>8
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 an Underlying GE 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 an Underlying GE 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 an Underlying GE 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 Underlying GE Fund effects a closing purchase
transaction. An Underlying GE 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, an Underlying GE 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.
An option position may be closed out only if a secondary market
exists for an option of the same series on a recognized securities exchange or
in the over-the-counter market. In light of the need for a secondary market in
which to close an option position, the Underlying GE Funds are expected to
purchase only call or put options issued by the Clearing Corporation. GEIM
expects that the Underlying GE Funds will write options, other than those on
Government Securities, only on national securities
<PAGE>9
exchanges. Options on Government Securities may be written by the Underlying
GE Funds in the over-the-counter market.
An Underlying GE Fund may realize a profit or loss upon entering
into closing transactions. When an Underlying GE 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 an
Underlying GE 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.
Stock Index Options. An Underlying GE Fund may purchase and write
put and call options on stock indexes or stock 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
stock index fluctuates with changes in the market values of the stocks included
in the index. Stock 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 stock indexes differ from
options on stock. Unlike a stock option, which contemplates the right to take or
make delivery of stock at a specified price, an option on a stock 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 stock 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 stock index options prior to expiration by entering into a closing
transaction on an exchange or it may allow the option to expire unexercised.
<PAGE>10
The effectiveness of purchasing or writing stock 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 stock 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 stock,
whether an Underlying GE Fund realizes a gain or loss from the purchase or
writing of options on an index depends upon movements in the level of stock
prices in the stock market generally or, in the case of certain indexes, in an
industry or market segment, rather than movements in the price of a particular
stock. As a result, successful use by an Underlying GE Fund of options on stock
indexes is subject to GEIM's ability to predict correctly movements in the
direction of the stock 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 stocks.
Futures Contracts. No consideration is paid or received by an
Underlying GE Fund upon trading a futures contract. Upon entering into a futures
contract, cash or other liquid assets equal to approximately 1% to 10% of the
contract amount will be segregated with GE Fund'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
Underlying GE 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 Underlying GE 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 Underlying GE Fund's existing position in the contract.
Although GE Funds intends that the Underlying GE 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
<PAGE>11
movements, an Underlying GE Fund would be required to make daily cash payments
of variation margin. In such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may partially or completely
offset losses on the futures contract.
If an Underlying GE Fund has hedged against the possibility of an
increase in interest rates adversely affecting the value of securities held in
its portfolio and rates decrease instead, the Underlying GE 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 Underlying GE 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.
Options on Futures Contracts. 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.
Forward Currency Transactions. The cost to an Underlying GE 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, an Underlying GE Fund may
not be able to sell
<PAGE>12
currency at a price above the anticipated devaluation level. An Underlying GE
Fund will not enter into a currency transaction if, as a result, it will fail to
qualify as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), for a given year.
Options on Foreign Currencies. 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 an Underlying GE Fund to liquidate
open positions at a profit prior to exercise or expiration, or to limit losses
in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options
are subject to the risks of the availability of a liquid secondary market as
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exercise and settlement of
exchange-traded foreign currency options must be made exclusively through the
Clearing Corporation, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the Clearing Corporation may,
if it determines that foreign governmental restrictions or taxes would prevent
the orderly settlement of foreign currency option exercises, or would result in
undue burdens on the Clearing Corporation or its clearing members, impose
special procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
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 an Underlying GE 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
<PAGE>13
procedures and margin requirements than in the United States and (5) lesser
trading volume.
INVESTMENT RESTRICTIONS OF THE FUNDS
Investment restrictions numbered 1 through 7 below have been
adopted by the Trust as fundamental policies of the Funds. Under the 1940 Act, a
fundamental policy may not be changed with respect to a Fund without the vote of
a majority of the outstanding voting securities (as defined in the 1940 Act) of
the Fund. Investment restrictions 8 through 15 may be changed by a vote of the
Board of Trustees at any time.
1. No Fund may borrow money or issue senior securities, except
that each Fund may borrow from banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests and cash payments of
dividends and distributions that might otherwise require the untimely
disposition of securities, in an amount not to exceed 33-1/3% of the value of
the Fund's total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the borrowing is
made. Whenever borrowings of 5% or more of a Fund's total assets are
outstanding, the Fund will not make any additional investments.
2. No Fund may lend its assets or money to other persons,
except through (a) purchasing debt obligations, (b) lending portfolio securities
in an amount not to exceed 30% of the Fund's assets taken at market value, and
(c) entering into repurchase agreements.
3. 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").
4. 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 or (b) purchase securities issued by companies that invest or deal in
real estate, mortgages or interests in real estate or mortgages.
5. 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
<PAGE>14
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.
6. 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.
7. No Fund may invest in commodities.
8. No Fund may purchase or sell put options, call options,
spreads or combinations of put options, call options and spreads.
9. No Fund may purchase securities of other investment
companies, except (a) a security acquired in connection with a merger,
consolidation, acquisition, reorganization or offer of exchange; (b) as
permitted by an exemptive order issued by the SEC (Investment Company Release
No. IC-22207, September 10, 1996) (the "Exemptive Order"); and (c) as otherwise
permitted under the 1940 Act.
10. No Fund may invest in a company for the purpose of
exercising control or management.
11. No Fund may purchase securities (other than Government
Securities) if, as a result of the purchase, the Fund would then have more than
5% of its total assets invested in securities of companies (including
predecessors) that have been in continuous operation for fewer than three years
(except for underlying investment companies in which a Fund may invest).
12. No Fund may purchase or retain securities of any company
if, to the knowledge of the Trust, any of the Trust's officers or Trustees or
any officer or director of GEIM individually owns more than 1/2 of 1% of the
outstanding securities of the company (except for an underlying investment
company in which a Fund may invest) and together they own beneficially more than
5% of the securities.
13. 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 of which not more
than 2% of the value of the Fund's net assets may be invested in warrants not
listed on the New York Stock Exchange, Inc. (the "NYSE") or the American Stock
Exchange. For purposes of this restriction, warrants acquired by a Fund in units
or attached to securities may be deemed to be without value.
14. No Fund may purchase illiquid securities if more than
15% of the total assets of the Fund would be invested in
<PAGE>15
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.
15. 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 Trust's
Board of Trustees based upon the trading markets for the securities. In no
event, however, will any Fund's investment in illiquid and non-publicly traded
securities, in the aggregate, exceed 15% of its assets. In addition, no
Underlying GE Fund may invest more than 50% of its net assets in securities of
unseasoned issuers and restricted securities, including for purposes of this
restriction, Rule 144A Securities.
The Trust may make commitments more restrictive than the
restrictions listed above with respect to a Fund to permit the sale of shares of
the Fund in certain states. Should the Trust determine that any such commitment
is no longer in the best interests of a Fund and its shareholders, the Trust
will revoke the commitment by terminating the sale of shares of the Fund in the
state involved or may otherwise modify its commitment based on a change in the
state's restrictions. The percentage limitations in the restrictions listed
above apply at the time of purchases of securities.
Notwithstanding the foregoing investment restrictions, the
Underlying GE Funds in which the Funds invest have adopted certain investment
restrictions which may be more or less restrictive than those listed above,
thereby permitting a Fund to engage in investment strategies indirectly that are
prohibited under the investment restrictions listed above. See "Investment
Restrictions of the Underlying GE Funds."
Because of their investment objectives and policies, the Funds
will each concentrate more than 25% of its assets in the mutual fund industry.
In accordance with the Funds' investment programs set forth in the Prospectuses,
each of the Funds may invest more than 25% of its assets in certain Underlying
GE Funds. However, each of the Underlying GE Funds in which each Fund will
invest will not concentrate more than 25% of its total assets in any one
industry.
<PAGE>16
INVESTMENT RESTRICTIONS OF THE UNDERLYING GE FUNDS
Investment restrictions numbered 1 through 10 below have been
adopted by GE Funds as fundamental policies of the Underlying GE Funds. Under
the 1940 Act, as noted above, a fundamental policy may not be changed with
respect to an Underlying GE Fund without the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Underlying GE
Fund. Investment restrictions 11 through 18 may be changed by a vote of GE
Funds' Board of Trustees at any time.
1. No Underlying GE Fund may borrow money, except that GE Money
Market Fund may enter into reverse repurchase agreements, and except that each
Underlying GE Fund may borrow from banks for temporary or emergency (not
leveraging) purposes, including the meeting of redemption requests and cash
payments of dividends and distributions that might otherwise require the
untimely disposition of securities, in an amount not to exceed 33-1/3% of the
value of the Underlying GE Fund's total assets (including the amount borrowed)
valued at market less liabilities (not including the amount borrowed) at the
time the borrowing is made. Whenever borrowings, including reverse repurchase
agreements, of 5% or more of an Underlying GE Fund's total assets are
outstanding, the Underlying GE Fund will not make any additional investments.
2. No Underlying GE 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 Underlying GE 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 Underlying GE Fund may purchase securities (other than
Government Securities) of any issuer if, as a result of the purchase, more than
5% of the Underlying GE Fund's total assets would be invested in the securities
of the issuer, except that up to 25% of the value of the total assets of each
Underlying GE Fund, other than GE Money Market Fund, may be invested without
regard to this limitation. All securities of a foreign government and its
agencies will be treated as a single issuer for purposes of this restriction.
4. No Underlying GE 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 an
Underlying GE Fund's
<PAGE>17
investments in Government Securities and (b) up to 25% of the value of the
assets of an Underlying GE Fund, other than GE 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 Underlying GE Fund may invest more than 25% of the value of
its total assets in securities of issuers in any one industry 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. In addition, securities
held by GE Money Market Fund that are issued by domestic banks are excluded from
this restriction.
6. No Underlying GE Fund may underwrite any issue of securities,
except to the extent that the sale of portfolio securities in accordance with
the Underlying GE Fund's investment objective, policies and limitations may be
deemed to be an underwriting, and except that the Underlying GE Fund may acquire
securities under circumstances in which, if the securities were sold, the
Underlying GE Fund might be deemed to be an underwriter for purposes of the
Securities Act of 1933, as amended (the "1933 Act").
7. No Underlying GE 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 an Underlying GE
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 Underlying GE Fund may make short sales of securities or
maintain a short position, unless at all times when a short position is open,
the Underlying GE 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 Underlying GE Fund may purchase securities on margin, except
that an Underlying GE 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
<PAGE>18
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 an Underlying GE
Fund.
10. No Underlying GE Fund may invest in commodities, except that
each Underlying GE Fund (other than GE 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 GE Funds' Prospectus and Statement of Additional Information.
11. No Underlying GE Fund may purchase or sell put options, call
options, spreads or combinations of put options, call options and spreads,
except that (a) each Underlying GE Fund, other than GE 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) GE Money Market
Fund may acquire "puts" and "unconditional puts" as defined in Rule 2a-7 under
the 1940 Act.
12. No Underlying GE Fund may purchase securities of other
investment companies, except (a) a security acquired in connection with a
merger, consolidation, acquisition, reorganization or offer of exchange, (b) as
permitted by the Exemptive Order and (c) as otherwise permitted under the 1940
Act.
13. No Underlying GE Fund may invest in companies for the
purpose of exercising control or management.
14. No Underlying GE Fund may purchase securities (other than
Government Securities) if, as a result of the purchase, the Underlying GE Fund
would then have more than 5% of its total assets invested in securities of
companies (including predecessors) that have been in continuous operation for
fewer than three years.
15. No Underlying GE Fund may purchase or retain securities of any
company if, to the knowledge of GE Funds, any of GE Funds' officers or Trustees
or any officer or director of GEIM individually owns more than 1/2 of 1% of the
outstanding securities of the company and together they own beneficially more
than 5% of the securities.
16. No Underlying GE Fund may purchase warrants (other than
warrants acquired by the Underlying GE 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 Underlying GE
Fund's net assets of which not more than 2% of the value of the Underlying
<PAGE>19
GE Fund's net assets may be invested in warrants not listed on the New York
Stock Exchange, Inc. (the "NYSE") or the American Stock Exchange. For purposes
of this restriction, warrants acquired by a Fund in units or attached to
securities may be deemed to be without value. GE Money Market Fund may not
invest in any form of warrants.
17. No Underlying GE Fund may purchase illiquid securities if more
than 15% of the total assets of the Underlying GE Fund would be invested in
illiquid securities; GE Money Market Fund will not purchase illiquid securities.
For purposes of this restriction, illiquid securities are securities that cannot
be disposed of by an Underlying GE Fund within seven days in the ordinary course
of business at approximately the amount at which the Underlying GE Fund has
valued the securities.
18. No Underlying GE Fund may purchase restricted securities if
more than 10% of the total assets of the Underlying GE 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 Rule 144A Securities that have been determined to be liquid by GE
Funds' Board of Trustees based upon the trading markets for the securities. In
no event, however, will any Underlying GE Fund's investment in illiquid and
non-publicly traded securities, in the aggregate, exceed 15% of its assets. In
addition, no Underlying GE Fund may invest more than 50% of its net assets in
securities of unseasoned issuers and restricted securities, including for
purposes of this restriction, Rule 144A Securities.
GE Funds may make commitments more restrictive than the
restrictions listed above with respect to an Underlying GE Fund to permit the
sale of shares of the Fund in certain states. Should GE Funds determine that any
such commitment is no longer in the best interests of an Underlying GE Fund and
its shareholders, GE Funds will revoke the commitment by terminating the sale of
shares of the Underlying GE Fund in the state involved or may otherwise modify
its commitment based on a change in the state's restrictions. The percentage
limitations in the restrictions listed above apply at the time of purchases of
securities. For purposes of investment restriction number 5, GE Funds 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, GE
Funds may use the Directory of Companies Required to File Annual Reports with
the SEC and Bloomberg Inc. In addition, GE Funds may select its own industry
classifications, provided such classifications are reasonable.
<PAGE>20
Portfolio Transactions and Turnover
Decisions to buy and sell securities for each Fund are made by
GEIM, subject to review by the Trust's Board of Trustees. Transactions on
domestic stock exchanges and some foreign 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 or an Underlying GE Fund, GEIM seeks the best overall terms
available. In assessing the best overall terms available for any transaction,
GEIM 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 GE Funds and GEIM relating
to each Underlying GE Fund authorizes GEIM, on behalf of the Underlying GE 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 Underlying GE Fund and/or other accounts
over which GEIM or its affiliates exercise investment discretion. The fees under
the investment advisory agreement relating to an Underlying GE Fund will not be
reduced by reason of the Underlying GE Fund's receiving brokerage and research
services. GE Funds' Board of Trustees periodically reviews the commissions paid
by an Underlying GE Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to the benefits
inuring to the Underlying GE Fund.
GE 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 GE Money Market Fund will not result in the
Fund's paying high brokerage commissions.
MANAGEMENT OF THE LIFESTYLE FUNDS
Trustees and Officers
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. The executive officers of the Trust
are employees of organizations that provide services to the Funds. The Trustees
and executive officers of the Trust also serve in such capacities for GE Funds.
An asterisk appears before the name of each Trustee who is an "interested
person" of the Trust, as defined in the 1940 Act.
<TABLE>
<CAPTION>
Positions Held Age and Principal
with Trust Occupation(s)
Name and Address During Past Five Years
---------------- -------------- ----------------------
<S> <C> <C>
*Michael J. Cosgrove Chairman of the Age 46. Executive Vice President - Mutual
3003 Summer Street Board and President Funds of GEIM and General Electric Investment
Stamford, CT 06905 Corporation ("GEIC"), a wholly-owned subsidiary
of General Electric Company ("GE") that is
registered as an investment adviser under the
Investment Advisers Act of 1940, as amended,
since March 1993 (responsibilities include
general management of all mutual funds managed
by GEIM and GEIC) and Director of GEIC and
Executive Vice President and Director of GEIM
since 1988; from 1988 until 1993, Mr. Cosgrove
served as Executive Vice President - Finance and
Administration of GEIM and GEIC.
*Alan M. Lewis Trustee and Age 50. Executive Vice President, General
3003 Summer Street Executive Vice Counsel and Secretary of GEIM since 1988 and of
Stamford, CT 06905 President GEIC since October 1987.
</TABLE>
<PAGE>21
<TABLE>
<CAPTION>
<S> <C> <C>
John R. Costantino Trustee Age 50. Managing Director, Walden Partners,
150 East 58th Street Ltd., consultants and investors, since August
New York, NY 10055 1992; President, CMG Acquisition Corp., Inc., a
holding company, since 1988; Vice Chairman,
Acoustiguide Holdings, Inc., a holding company,
since 1989; President CMG/IKH, Inc., a holding
company, since 1991; Director, Crossland Federal
Savings Bank, a financial institution; Director,
Brooklyn Bankcorp, Inc., a financial
institution; Director, IK Holdings, Inc., a
holding company since 1991; Director, I.
Kleinfeld & Son, Inc., a retailer, since 1991;
Director, High Performance Appliances, Inc., a
distributor of kitchen appliances ("HPA"), since
1991; Director, HPA Hong King, 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; Partner, Costantino
Melamede-Greenberg Investment Partners, a
general investment partnership, from September
1987 through August 1992.
William J. Lucas Trustee Age 49. Vice President and Treasurer of
Fairfield University Fairfield University since 1983.
North Benson Road
Fairfield, CT 06430
Robert P. Quinn Trustee Age 60. Retired since 1983 from Salomon
45 Shinnecock Road Brothers, Inc.; Director, GP Financial Corp., a
Quogue, NY 11959 holding company, since 1994; Director, The
Greenpoint Savings Bank, a financial
institution, since 1987.
Jeffrey A. Groh Treasurer Age 34. Treasurer and Controller of GEIM and
3003 Summer Street GEIC since August 1994; prior to August 1994,
Stamford, CT 06905 was a Senior Manager in Investment Company
Services Group and certified public accountant
with Price Waterhouse LLP.
Matthew J. Simpson Secretary Age 35. Vice President, Associate General
3003 Summer Street Counsel and Assistant Secretary of GEIM and
Stamford, CT 06905 GEIC since October 1992; attorney with the law
firm of Baker & McKenzie, April 1991 to October
1992; prior to April 1991 was an attorney with
the law firm of Spengler Carlson Gubar Brodsky &
Frischling.
</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, GE Investment Services Inc.
(the "Distributor"), GE, or any affiliate of those companies, receives an annual
fee of $2,000 for services as Trustee. The following table shows the estimated
compensation to be paid to the Trustees by the Trust for the first fiscal year
of the Trust and estimated compensation to be paid to such Trustees by all
other investment companies managed by GEIM or GEIC for the fiscal year ending
September 30, 1997.
<PAGE>22
Trustees' Compensation
<TABLE>
<CAPTION>
Total Compensation from all Investment
Name of Trustee Total Compensation from the Trust Companies Managed by GEIC or GEIM
--------------- --------------------------------- --------------------------------------
<S> <C> <C>
Michael J. Cosgrove None None+
Alan M. Lewis None None+
John R. Costantino $14,000 $19,000++
William J. Lucas $14,000 $19,000++
Robert P. Quinn $14,000 $19,000++
</TABLE>
-----------------------
+ Messrs. Cosgrove and Lewis serve as Trustees of two investment
companies advised by GEIM and of 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.
++ Messrs. Costantino, Lucas and Quinn serve as Trustees of other
investment companies advised by GEIM and the compensation is for their
services as Trustees of such companies.
Investment Adviser and Administrator
GEIM, located at 3003 Summer Street, P.O. Box 7900, Stamford,
Connecticut 06904, a wholly-owned subsidiary of GE, bears all expenses in
connection with the performance of its services as each Fund's investment
adviser and administrator including any fee paid to an investment consultant
retained by the Board of Trustees. The investment advisory and administration
fee for each Fund is calculated at the annual rate of 0.20% of the Fund's
average daily net assets. Under its agreement governing the asset allocation and
administration services it performs with respect to the Funds, GEIM has agreed
to bear all expenses incurred in the operation of each Fund other than
brokerage, interest, advisory and administration fees, fees and expenses of the
Trust's Board of Trustees who are not affiliated with GEIM or its affiliates
(including counsel fees), taxes payable by the Trust, transfer agency costs and
any extraordinary expenses. Such expenses include SEC fees and state Blue Sky
qualification fees; charges of custodians; certain insurance premiums; outside
auditing and legal expenses; costs of
<PAGE>23
maintenance of the Trust's existence; and costs of preparation and printing of
the prospectus for regulatory purposes and for distribution to existing
shareholders; cost of shareholders' reports and shareholder meetings and
meetings of the officers or Board of Trustees.
Investment Consultant
DiMeo, Schneider & Associates, L.L.C. (the "Investment
Consultant") is located at 120 North LaSalle Street, Suite 1140, Chicago,
Illinois 60602, and serves as investment consultant to the Trust's Board of
Trustees and GEIM. Out of its advisory and administration fee, GEIM will pay the
Investment Consultant fees for investment consulting services provided by the
Investment Consultant to the Board of Trustees and GEIM.
Custodian and Transfer Agent
State Street Bank and Trust Company ("State Street") is
located at 225 Franklin Street, Boston, Massachusetts 02101 and serves as
custodian and transfer agent of the Funds' investments. Under its custodian
contract with the Trust, State Street is authorized to appoint one or more
banking institutions as subcustodians of assets owned by each Fund. For its
custody services, State Street receives monthly fees charged to the Funds based
upon the month-end, aggregate net asset value of the Funds, plus certain charges
for securities transactions. The assets of the Trust are held under bank
custodianship in accordance with the 1940 Act. As transfer agent, State Street
is responsible for processing redemption requests and crediting dividends to the
accounts of shareholders of the Funds.
Distributor
GE Investment Services Inc. serves as the distributor of
shares of the Funds on a best efforts basis.
REDEMPTION OF SHARES
Detailed information on how to redeem shares of a Fund is
included in the Prospectuses. 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
<PAGE>24
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.
EXCHANGE PRIVILEGE
The exchange privilege described in the Prospectuses 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.
NET ASSET VALUE
The Trust will not calculate net asset value on certain
holidays. 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.
The value of each Underlying GE Fund will be its net asset
value at the time of computation. Debt securities of U.S. issuers (other than
Government Securities and short-term investments) are valued by GEIM after
consultation with one or more independent pricing services ("Pricing Service")
retained by the Trust. The procedures of the Pricing Service are reviewed
periodically by GEIM under the general supervision and responsibility of the
Board of Trustees of the Trust.
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
<PAGE>25
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 one year period
ending 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)(4)(B) of the Code) that are engaged in the same or similar trades or
businesses or related trades or businesses (other than Government Securities
or the securities of other regulated investment companies).
The requirements for qualification as a regulated investment
company also include two significant rules as to investment results. First, a
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"). Second, a Fund must derive less than 30% of its
gross income from the sale or other disposition of (i) stock or securities held
for less than three months, (ii) options futures, or forward contracts held for
less than three months (other than options, futures, or forward contracts on
foreign currencies), and (iii) foreign currencies (or options, futures or
forward contracts on foreign currencies) held for less than three months, but
only if such currencies (or options, future or forward contracts) are not
directly related to the Fund's principal business of investing in stock or
securities (or options and futures with respect to stocks or securities) (the
"30% Test").
The 30% Test will restrict the extent to which a Fund may,
among other things: (1) sell or purchase put options on
<PAGE>26
securities held for less than three months or purchase put options on
substantially identical securities (unless the option and the security are
acquired on the same day); (2) write options that expire in less than three
months; and (3) close options that were written or purchased within the
preceding three months. For purposes of the 30% Test, a Fund's increases or
decreases in value of short-term investment positions that constitute certain
designated hedging transactions may generally be netted. The Trust does not
expect that the 30% Test will significantly affect the investment policies of
any Fund.
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 each Fund and seeks to make the appropriate entries in a
Fund's books and records when a Fund acquires any option, futures contract or
hedged investment, to mitigate the effect of these rules and prevent
disqualification of a Fund as a regulated investment company.
As a general rule, a shareholder's gain or loss on a sale or
redemption of shares of a Fund will be a long-term capital gain or loss if the
shareholder has held the shares for more than one year. The gain or loss will be
a short-term capital gain or loss if the shareholder has held the shares for one
year or less.
The Fund's net realized long-term capital gains are
distributed as described in the Prospectus. The distributions ("capital gain
dividends"), if any, are taxable to a shareholder of a Fund as long-term capital
gains, regardless of how long a shareholder has held the shares, and will be
designated as capital gain dividends in a written notice mailed by the Trust to
the shareholders of the Fund after the close of the Fund's prior taxable year.
If a shareholder receives a capital gain dividend with respect to any share of a
Fund, and if the share is sold before it has 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. Investors considering buying shares of a Fund on or just prior to the
record date for a taxable dividend
<PAGE>27
or capital gain distribution should be aware that the amount of the dividend
or distribution payment will be a taxable dividend or distribution payment.
No loss will be allowed on the sale, exchange or redemption of
shares in a Fund to the extent that the shareholder acquired other shares in the
Fund within a 61-day period beginning 30 days before the sale or disposition of
the loss shares and ending 30 days after such date. Fund shareholders should
note that such acquisitions may occur through the Direct Deposit Privilege, the
Payroll Savings Plan or the Automatic Investment Plan described in the
Prospectuses.
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. 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
As noted in the Prospectus, the Trust, from time to time, may
quote a Fund's performance, in terms of yield and/or total return, in reports or
other communications to shareholders of the Fund or in advertising material.
Additional information regarding the manner in which performance figures are
calculated is provided below.
<PAGE>28
Yield
The 30-day yield figure described in the Prospectuses is
calculated according to a formula prescribed by the SEC. The formula can be
expressed as follows:
Yield = 2[(a-b + 1)[*SEE FOOTNOTE]-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.
- -----------------------
* The expression (a-b + 1) is being raised to the 6th power.
For the purpose of determining the interest earned (variable
"a" in the formula) on debt obligations that were purchased by a Fund at a
discount or premium, the formula generally calls for amortization of the
discount or premium; the amortization schedule will be adjusted monthly to
reflect changes in the market values of the debt obligations.
Investors should recognize that, in periods of declining
interest rates, the yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates the yield will tend to be
somewhat lower. In addition, when interest rates are falling, moneys received by
a Fund from the continuous sale of its shares will likely be invested in
portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing the current yield of the Fund. In periods of rising
interest rates, the opposite result can be expected to occur.
Yield information is useful in reviewing the performance of a
Fund, but because yields fluctuate, this information cannot necessarily be used
to compare an investment in shares of the Fund with bank deposits, savings
accounts and similar investment alternatives 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.
<PAGE>29
Average Annual Total Return
The "average annual total return" figures described in the
Prospectuses, are computed according to a formula prescribed by the SEC. The
formula can be expressed as follows:
P(1 + T)[SEE FOOTNOTE] = 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 expression (1+T) is being raised to the nth power.
The ERV assumes complete redemption of the hypothetical
investment at the end of the measuring period.
Aggregate Total Return
The "aggregate total return" figures described in the
Prospectuses represent the cumulative change in the value of an investment in a
Fund for the specified period are computed by the following formula:
Aggregate Total Return = ERV - P
-------
P
Where P = a hypothetical initial payment of $1,000; and
ERV = Ending Redeemable Value of a hypothetical $1,000
investment made at the beginning of a 1-, 5- or
10-year period at the end of the 1-, 5- or 10-year
period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
ADDITIONAL INFORMATION
The Trust was organized as an unincorporated business trust
under the laws of The Commonwealth of Massachusetts pursuant to a Declaration of
Trust dated June 21, 1996, as amended from time to time (the "Declaration"). In
the interest of economy and convenience, certificates representing shares of a
Fund are not physically issued. State Street maintains a record of each
shareholder's ownership of shares of a Fund.
Massachusetts law provides that shareholders of the Funds
could, 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 provides that 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
<PAGE>30
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's incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund would be unable to meet its obligations, a possibility that
the Trust's management believes is remote. Upon payment of any liability
incurred by a Fund, the shareholder paying the liability will be entitled to
reimbursement from the general assets of the Fund. The Trustees intend to
conduct the operations of the Trust and the Funds in such a way so as to
avoid, as far as practicable, ultimate liability of the shareholders for
liabilities of the Funds.
On matters submitted for consideration by shareholders of any
Underlying GE Fund, a Fund will vote its shares in proportion to the vote of all
holders of shares of that Fund or, in certain limited instances, the Fund will
vote its shares in the manner indicated by a vote of holders of shares of the
Fund.
COUNSEL
Willkie Farr & Gallagher, 153 East 53rd Street, New York,
New York 10022, serves as counsel for the Trust.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 160 Federal Street, Boston,
Massachusetts 02110, serves as independent accountants of the Trust.
FINANCIAL STATEMENTS
The Trust's Statement of Assets and Liabilities as of
_____________, 1996 accompanies this Statement of Additional Information and is
incorporated herein by reference.
<PAGE>A-1
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.
<PAGE>A-2
Short-term obligations, including commercial paper, rated A-1+
by IBCA Limited or its affiliate IBCA Inc. are obligations supported by the
highest capacity for timely repayment. Obligations rated A-1 have a very strong
capacity for timely repayment. Obligations rated A-2 have a strong capacity for
timely repayment, although that capacity may be susceptible to adverse changes
in business, economic and financial conditions.
Fitch Investors Services, Inc. employs the rating F-1+ to
indicate issues regarded as having the strongest degree of assurance of timely
payment. The rating F-1 reflects an assurance of timely payment only slightly
less in degree than issues rated F-1+, while the rating 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.
Thompson 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.
<PAGE>A-3
A -- Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB -- Bonds rated BBB have an adequate capacity to pay
interest and repay principal. Adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category (even though they normally exhibit
adequate protection parameters) than for bonds in higher rated categories.
BB, B and CCC -- Bonds rated BB and B are regarded, on
balance, as predominately speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
represents a lower degree of speculation than B, and CCC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
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.
<PAGE>A-4
Baa -- Bonds that are rated Baa are considered as medium-grade
obligations, that is, they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds that are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B -- Bonds that are rated B generally lack characteristics of
desirable investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds that are rated Caa are of poor standing. These
issues may be in default, or present elements of danger may exist with respect
to principal or interest.
Moody's applies numerical modifiers (1, 2 and 3) with respect
to the bonds rated Aa through B, The modifier 1 indicates that the bond being
rated ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the bond ranks
in the lower end of its generic rating category.
Description of S&P Municipal Bond Ratings
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.
<PAGE>A-5
AA -- High Grade -- The investment characteristics of bonds in
this group are only slightly less marked than those of the prime quality issues.
Bonds rated AA have the second strongest capacity for payment of debt service.
A -- Good Grade -- Principal and interest payments on bonds in
this category are regarded as safe although the bonds are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories. This rating describes the
third strongest capacity for payment of debt service. The ratings differ from
the two higher ratings of municipal bonds, because:
General Obligations Bonds -- There is some weakness, either in
the local economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse circumstances,
any one such weakness might impair the ability of the issuer to meet debt
obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not
exceptional. Stability of the pledged revenues could show some variations
because of increased competition or economic influences on revenues. Basic
security provisions, while satisfactory, are less stringent. Management
performance appears adequate.
BBB -- Medium Grade -- Of the investment grade ratings, this
is the lowest. Bonds in this group are regarded as having an adequate capacity
to pay interest and repay principal. Adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category (even though they normally exhibit
adequate protection parameters) than for bonds in higher rated categories.
General Obligation Bonds -- Under certain adverse conditions,
several of the above factors could contribute to a lesser capacity for payment
of debt service. The difference between A and BBB ratings is that the latter
shows more than one fundamental weakness, or one very substantial fundamental
weakness, whereas, the former shows only one deficiency among the factors
considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the
pledged revenues 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
<PAGE>A-6
of speculation and CC the highest degree of speculation. While these bonds
will likely have some quality and protective characteristics, these
characteristics are outweighed by large uncertainties or major risk exposures
to adverse conditions.
C -- The rating C is reserved for income bonds on which no
interest is being paid.
D -- Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus
or a minus sign, which is used to show relative standing within the major rating
categories, except in the AAA-Prime Grade category.
Description of S&P Municipal Note Ratings
Municipal notes with maturities of three years or less are
usually given note ratings (designated SP-1, -2 or -3) to distinguish more
clearly the credit quality of notes as compared to bonds. Notes rated SP-1 have
a very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given the
designation of SP-1+. Notes rated SP-2 have satisfactory capacity to pay
principal and interest.
Description of Moody's Municipal Bond Ratings
Aaa -- Bonds that are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds that are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities, or fluctuation
of protective elements may be of greater amplitude, or there may be other
elements present that make the long-term risks appear somewhat larger than in
Aaa securities.
A -- Bonds that are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present that suggest a susceptibility to impairment sometime in the
future.
<PAGE>A-7
Baa -- Bonds that are rated Baa are considered as medium grade
obligations, that is, they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds that are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterize bonds in this class.
B -- Bonds that are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds that are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger with respect
to principal or interest.
Ca -- Bonds that are rated Ca represent obligations that are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds that are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 in each
generic rating classification from Aa through B. The modifier 1 indicates that
the security ranks in the higher end of its generic ratings category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic ratings category.
Description of Moody's Municipal Note Ratings
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade (MIG) and for variable
rate demand obligations are designated Variable Moody's Investment Grade (VMIG).
This distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG 1/VMIG 1 are the best quality,
enjoying strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both. Loans bearing the designation MIG 2/VMIG 2 are of high
quality, with margins of protection ample, although not as large as the
preceding group.
<PAGE>A-8
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.
<PAGE>C-1
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A of this Registration Statement:
None.
Included in Part B of this Registration Statement:
Statement of assets and liabilities as of
______ __, 1996.*
Statements, schedules and historical information other than
those listed above have been omitted since they are either not
applicable or are not required.
(b) Exhibits:
Exhibit No. Description of Exhibit
----------- ----------------------
1 Declaration of Trust**
2 By-Laws**
3 Inapplicable
4 Inapplicable
5(a) Form of Investment Advisory and Administration Agreement
5(b) Form of Investment Consulting Agreement
6 Form of Distribution Agreement
7 Inapplicable
8 Form of Custodian Contract
9 Form of Transfer Agency and Service Agreement
- ------------------------
* To be filed by amendment.
** Incorporated by reference to Registrant's Registration Statement on
Form N-1A, filed on July 10, 1996.
<PAGE>C-2
10(a) Opinion of Willkie Farr & Gallagher, including consent*
10(b) Opinion of Bingham, Dana & Gould, including consent*
11 Consent of Price Waterhouse LLP*
12 Inapplicable
13 Purchase Agreement*
14 Inapplicable
15 Inapplicable
16 Inapplicable
17 Financial Data Schedule*
- ------------------
* To be filed by amendment.
<PAGE>C-3
Item 25. Persons Controlled by or Under Common Control
with Registrant
See Item 28.
Item 26. Number of Holders of Securities
It is anticipated that GE Investment Management Incorporated will hold all of
the shares par value $.001 per share, of the Registrant on the date
Registrant's Registration Statement becomes effective.
Item 27. Indemnification
Reference is made to Article IV of the Declaration of Trust
of GE LifeStyle Funds ("Registrant") filed as Exhibit 1 to this Registration
Statement. Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted
for Trustees, officers and controlling persons of Registrant pursuant to
provisions of Registrant's Declaration of Trust, or otherwise, Registrant has
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a Trustee, officer, or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Reference is made to "Management of the Trust" in the
Prospectus forming Part A, and "The Management of the Trust" in the Statement of
Additional Information forming Part B, of this Registration Statement.
The list required by this Item 28 of officers and directors
of GEIM, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by those officers
and directors during the past two years, is incorporated by reference to
Schedules A and D of Form ADV filed by GEIM pursuant to the Investment
Advisers Act of 1940, as amended (SEC File No. 801-31947).
<PAGE>C-4
The list required by this Item 28 of officers and directors of
DiMeo Schneider & Associates, L.L.C. ("DSA"), together with information as to
any other business, profession, vocation or employment of a substantial nature
engaged in by those officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by DSA pursuant
to the Investment Advisers Act of 1940, as amended (SEC File No. 801-48820).
Item 29. Principal Underwriters
(a) GE Investment Services Inc. ("GEIS") also serves as
distributor for GE Funds, Elfun Tax-Exempt Income Fund, Elfun Income Fund,
Elfun Global Fund, Elfun Money Market Fund, Elfun Trusts and Elfun Diversified
Fund.
(b) The information required by this Item 29 with respect to
each director and officer of GEIS is incorporated by reference to Schedule A
of Form BD filed by GEIS pursuant to the Securities Exchange Act of 1934 (SEC
File No. 8-45710).
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the Investment Company Act
of 1940, as amended, and the rules thereunder, are maintained at the offices of:
Registrant located at 3003 Summer Street, Stamford, Connecticut 06905; State
Street Bank and Trust Company ("State Street"), Registrant's custodian and
transfer agent, located at 225 Franklin Street, Boston, Massachusetts 02101; and
Boston Financial Data Services, Inc., a subsidiary of State Street, located at 2
Heritage Drive, Quincy, Massachusetts 02171.
Item 31. Management Services
Inapplicable.
Item 32. Undertakings
(a) Registrant undertakes to call a meeting of the
shareholders of each Fund for the purpose of voting upon the question of removal
of a trustee or trustees of Registrant when requested in writing to do so by the
holders of at least 10% of Registrant's outstanding shares and, in connection
with the meeting, to comply with the provisions of Section 16(c) of the 1940 Act
relating to communications with the shareholders of certain common-law trusts.
<PAGE>C-5
(b) The Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be certified, within four
to six months from the effective date of Registrant's initial Registration
Statement under the Securities Act of 1933, as amended.
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>C-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, Registrant has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Stamford,
State of Connecticut, on the 18th day of September, 1996.
By: /s/ Michael J. Cosgrove
Michael J. Cosgrove
President and Chairman
of the Board
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Amendment to the Registration Statement on Form N-1A has been
signed below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
/s/ Michael J. Cosgrove September 18, 1996
Michael J. Cosgrove President and
Chairman of the Board
(Chief Executive Officer)
/s/ John R. Costantino September 18, 1996
John R. Costantino Trustee
/s/ Alan M. Lewis September 18, 1996
Alan M. Lewis Executive Vice President
and Trustee
/s/ William J. Lucas September 18, 1996
William J. Lucas Trustee
/s/ Robert P. Quinn September 18, 1996
Robert P. Quinn Trustee
/s/ Jeffrey A. Groh
Jeffrey A. Groh Treasurer (Chief Financial
and Accounting Officer) September 18, 1996
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Sequence
- ----------- ---------------------- --------
5(a) Form of Investment Advisory and
Administration Agreement
5(b) Form of Investment Consulting Agreement
6 Form of Distribution Agreement
8 Form of Custodian Contract
9 Form of Transfer Agency and
Service Agreement
<PAGE>
GE LIFESTYLE FUNDS
GE CONSERVATIVE STRATEGY FUND
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
September __, 1996
GE Investment Management Incorporated
3003 Summer Street
P.O. Box 7900
Stamford, Connecticut 06904
Ladies and Gentlemen:
GE LifeStyle Funds, a business trust organized under the laws
of The Commonwealth of Massachusetts (the "Trust"), confirms its agreement with
GE Investment Management Incorporated ("GEIM") with respect to GEIM's serving as
the investment adviser and administrator of GE Conservative Strategy Fund (the
"Fund"), a series of the Trust. The Trust has been organized for the purpose of
investing its assets in certain portfolios of a registered investment company
(collectively, "Underlying Funds"). Terms not defined herein have the meanings
assigned to such terms as set forth in the Trust's Registration Statement on
Form N-1A, as amended from time to time (the "Registration Statement"). GEIM
agrees to provide services upon the following terms and conditions:
Section 1. Services as Investment Adviser and Administrator.
-------------------------------------------------
(a) The Trust anticipates that the Fund will employ its
capital by investing and reinvesting in investments of the type specified in the
Trust's Declaration of Trust dated June 21, 1996, as amended from time to time
(the "Declaration of Trust"), in the Trust's By-Laws, as amended from time to
time, and in the Registration Statement, and in the manner and to the extent
approved by the Board of Trustees of the Trust (the "Trustees"). Copies of the
Registration Statement have been submitted to GEIM.
(b) Subject to the supervision and direction of the Trustees,
GEIM, as the Fund's investment adviser, will manage the Fund's portfolio in
accordance with the investment objective and policies of the Fund as stated in
the Registration Statement, including the determination of how the Fund's assets
will be invested in the Underlying Funds and in money market instruments, will
place purchase and sale orders for the Fund's portfolio transactions, will
allocate and reallocate the Fund's assets to the Underlying Funds within the
Investment Limits and will determine which of the Underlying Funds should be
classified as equity-oriented or fixed- income-oriented for purposes of the
Asset Allocation Ranges determined by the Trustees from
<PAGE>
time to time. In conjunction with any investment consultant retained by the
Trust, GEIM shall make recommendations to the Trustees concerning changes to (a)
the Underlying Funds in which the Fund may invest, (b) the Asset Allocation
Ranges and (c) the Investment Limits.
(c) Subject to the supervision and direction of the Board of
Trustees, GEIM, as administrator, will (1) furnish the Trust with statistical
and research data, clerical help and accounting, data processing, bookkeeping,
internal auditing services and certain other services required by the Trust, (2)
prepare reports to the shareholders of the Fund, and (3) assist in the
preparation of tax returns and reports to and filings with the Securities and
Exchange Commission (the "Commission") and state securities laws authorities;
(d) GEIM will, at its own expense, maintain sufficient staff,
and employ or retain sufficient personnel and consult with any other persons
(including any investment consultant retained by the Trust) that it determines
may be necessary to the performance of its obligations under this Agreement.
(e) GEIM will keep the Trust informed of developments
materially affecting the Fund, and will, on its own initiative, furnish the
Trust from time to time with whatever information GEIM believes is appropriate
for this purpose.
Section 2. Costs and Expenses.
-------------------
GEIM will bear the cost of rendering the services it is
obligated to provide under this Agreement and will, at its own expense, pay the
salaries of all officers and employees who are employed by both it and the
Trust. In addition, GEIM will bear all expenses of the Fund other than those
expenses specifically borne by the Trust including, but not limited to,
custodial fees, transfer agency costs, legal and accounting fees, printing costs
and registration fees, the costs of regulatory compliance, the costs associated
with maintaining the Trust's legal existence and the costs involved in
communicating with shareholders of the Funds. GEIM will provide the Fund with
investment officers who are authorized by the Trustees to execute purchases and
sales of securities on behalf of the Fund and will employ a professional staff
of portfolio managers who draw upon a variety of sources for research
information for the Fund. Expenses to be incurred in the operation of the Fund
that will specifically be borne by the Fund are brokerage fees and commissions,
interest, advisory and administration fees, fees and expenses of the Trustees
who are not affiliated with GEIM and its affiliates (including counsel fees),
taxes payable by the Trust and any extraordinary expenses.
Section 3. Compensation.
-------------
In consideration of services rendered pursuant to this
Agreement, the Trust will pay GEIM on the Trust's first business day of each
month a fee that is accrued daily at the annual rate of .20% of the value of the
Fund's average daily net assets. In addition, the Fund, and each other fund of
the Trust, as a shareholder in the Underlying Funds, will indirectly bear its
<PAGE>
proportionate share of any investment advisory and administration fees and other
expenses paid by the Underlying Fund. For the purpose of determining fees
payable to GEIM under this Agreement, the value of the Fund's net assets will be
computed in the manner described in the Registration Statement.
Section 4. Services to Other Companies or Accounts.
----------------------------------------
(a) The Trust understands and acknowledges that GEIM now acts
and will continue to act as investment manager or adviser to various fiduciary
or other managed accounts and the Trust has no objection to GEIM's so acting, so
long as that when the Fund and any account 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 and the account. The Trust recognizes that, in some cases,
this procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund.
(b) The Trust understands and acknowledges that the persons
employed by GEIM to assist in the performance of its duties under this Agreement
will not devote their full time to that service and agrees that nothing
contained in this Agreement will be deemed to limit or restrict the right of
GEIM or any affiliate of GEIM to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature.
Section 5. Continuance and Termination of the Agreement.
---------------------------------------------
(a) This Agreement will become effective as of the date the
Fund commences its investment operations and will continue for an initial
two-year term and will continue thereafter so long as the continuance is
specifically approved at least annually (a) by the Trustees of the Trust or (b)
by a vote of a majority of the Fund's outstanding voting securities, as defined
in the Investment Company Act of 1940, as amended (the "1940 Act"), provided
that in either event the continuance is also approved by a majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on the approval.
(b) This Agreement is terminable without penalty, by the Trust
on not less than 30 days' written notice to GEIM, by vote of holders of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act, or by GEIM on not less than 30 days' notice to the Trust.
(c) This Agreement will terminate automatically in the event
of its assignment (as defined in the 1940 Act or in rules adopted under the 1940
Act).
Section 6. Filing of Declaration of Trust.
-------------------------------
The Trust represents that a copy of the Declaration of Trust
is on file with the
<PAGE>
Secretary of The Commonwealth of Massachusetts and with the Boston City Clerk.
Section 7. Limitation of Liability.
------------------------
(a) GEIM will exercise its best judgment in rendering the
services described in this Agreement, except that GEIM will not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, other than a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
GEIM in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Any person, even though also an
officer, director, employee or agent of GEIM, who may be or become an officer,
Trustee, employee or agent of the Trust, will be deemed, when rendering services
to the Trust or acting on any business of the Trust, to be rendering services
to, or acting solely for, the Trust and not as an officer, director, employee or
agent, or one under the control or direction of, GEIM even though paid by GEIM.
(b) The Trust and GEIM agree that the obligations of the Trust
under this Agreement will not be binding upon any of the Trustees, shareholders,
nominees, officers, employees or agents, whether past, present or future, of the
Trust, individually, but are binding only upon the assets and property of the
Fund, as provided in the Declaration of Trust. The execution and delivery of
this Agreement have been authorized by the Trustees of the Trust, and signed by
an authorized officer of the Trust, acting as such, and neither the
authorization by the Trustees nor the execution and delivery by the officer will
be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but will bind only the trust property of
the Trust as provided in the Declaration of Trust. No series of the Trust,
including the Fund, will be liable for any claims against any other series.
Section 8. Dates.
------
This Agreement has been executed by the Trust and GEIM as of
____________, 1996 and will become effective as of the date the Fund first
commences its investment operations.
Section 9. Miscellaneous.
--------------
The Trust recognizes that directors, officers and employees of
GEIM and its affiliates may from time to time serve as directors, trustees,
officers and employees of corporations, partnerships, group trusts and business
trusts (including other investment companies) and that such other entities may
include the initials "GE" or the words "General Electric" as part of their name,
and that GEIM or its affiliates may enter into distribution, investment advisory
or other agreements with such other corporations and trusts. If GEIM ceases to
act as the investment adviser to the Trust, the Trust agrees that, at GEIM's
request, the Trust's license to use the initials "GE" will terminate and that
the Trust will cease and discontinue completely further use of such initials and
will take all necessary action to change the name of the Trust and the Fund to a
name not including the initials "GE."
<PAGE>
If the terms and conditions described above are in accordance
with your understanding, kindly indicate your acceptance of this Agreement by
signing and returning to us the enclosed copy of this Agreement.
GE LIFESTYLE FUNDS
By:__________________________
Name:
Title:
Accepted:
GE INVESTMENT MANAGEMENT
INCORPORATED
By:_____________________________
Name:
Title:
<PAGE>1
GE LIFESTYLE FUNDS
GE CONSERVATIVE STRATEGY FUND
INVESTMENT CONSULTING AGREEMENT
September 11, 1996
DiMeo Schneider & Associates, L.L.C.
120 North LaSalle Street
Suite 1140
Chicago, Illinois 60602
Ladies and Gentlemen:
GE LifeStyle Funds, a business trust organized under the laws of
The Commonwealth of Massachusetts (the "Trust"), and GE Investment Management
Incorporated, a Delaware corporation ("GEIM"), confirm their agreement with
DiMeo Schneider & Associates, L.L.C., an Illinois limited liability company (the
"Investment Consultant"), with respect to the Investment Consultant's serving as
the investment consultant for GE Conservative Strategy Fund (the "Fund"), a
series of the Trust. The Trust has been organized for the purpose of investing
its assets in shares or units of interest issued by one or more registered
investment companies (collectively, "Underlying Funds"). Terms not defined
herein have the meanings assigned to such terms as set forth in the Trust's
Registration Statement on Form N-1A, as amended from time to time (the
"Registration Statement"). The Investment Consultant agrees to provide services
upon the following terms and conditions:
Section 1. Services as Investment Consultant.
----------------------------------
(a) The Trust anticipates that the Fund will employ its capital
by investing and reinvesting in investments of the type specified in the Trust's
Declaration of Trust dated June 21, 1996, as amended from time to time (the
"Declaration of Trust"), in the Trust's By-Laws, as amended from time to time,
and in the Registration Statement, and in the manner and to the extent approved
by the Board of Trustees of the Trust (the "Trustees"). Copies of the
Registration Statement have been submitted to the Investment Consultant.
(b) Subject to the supervision and direction of the Trustees,
GEIM, as the Fund's investment adviser, will manage the Fund's portfolio in
accordance with the investment objective and policies of the Fund as stated in
the Registration Statement, including the determination of how the Fund's assets
will be invested in the Underlying Funds and in money market instruments, will
place purchase and sale orders for the Fund's portfolio transactions, will
allocate and reallocate the
<PAGE>2
Fund's assets to the Underlying Funds within the Investment Limits. The
Investment Consultant will review and analyze the Underlying Funds and the
allocation of the Fund's assets among the Underlying Funds taking into account
the Fund's stated investment objective. In conjunction with GEIM, the Investment
Consultant will determine which of the Underlying Funds should be classified as
equity-oriented or fixed-income-oriented for purposes of the Asset Allocation
Ranges determined by the Trustees from time to time and shall make
recommendations to the Trustees concerning changes to (a) the Underlying Funds
in which the Fund may invest, (b) the Asset Allocation Ranges and (c) the
Investment Limits.
(c) In connection with its services to be provided under this
Agreement, the Investment Consultant will perform a comprehensive analysis of
each Underlying Fund involving both quantitative and qualitative research,
including, but not limited to, comparisons of performance relative to
appropriate indices and peer groups, style analysis to determine consistency and
adherence to an Underlying Fund's stated investment objective, and conversations
with the Underlying Funds' portfolio managers and analysts regarding the
investment process. On an ongoing basis, the Investment Consultant will monitor
the performance, risk and style consistency of the Fund and the Underlying
Funds. To assist GEIM in making its formal recommendations to the Trustees, the
Investment Consultant will prepare detailed analyses and formal recommendations,
including rebalancing strategies.
(d) The Investment Consultant will, at its own expense, maintain
sufficient staff, and employ or retain sufficient personnel and consult with any
other persons that it determines may be necessary to the performance of its
obligations under this Agreement.
(e) The Investment Consultant will keep the Trust and GEIM
informed of developments materially affecting the Fund, and will, on its own
initiative, furnish the Trust and GEIM from time to time with whatever
information GEIM believes is appropriate for this purpose.
Section 2. Costs and Expenses.
-------------------
During the term of this Agreement, the Investment Consultant will
pay all expenses incurred by it in connection with its activities under this
Agreement, including without limitation all expenses incurred in connection with
the participation by any officer or employee of the Investment Consultant at the
request of GEIM or the Trust at any meeting of the Board of Trustees, except
that any reasonable travel expenses associated with the in-person attendance by
such officer or employee of the Investment Consultant at such meeting will be
borne by the Trust. Notwithstanding the foregoing, the Trust shall reimburse the
Investment Consultant for any expenses of the Trust, the Fund or GEIM as may be
reasonably incurred by the Investment Consultant on behalf of the Fund or GEIM.
The Investment Consultant shall keep and supply to the Trust and GEIM reasonable
records of all such expenses.
Section 3. Compensation.
-------------
As soon as practicable but in any case within 45 days after the
end of each calendar quarter, GEIM shall pay (from and out of its advisory and
administration fee received from the Fund) compensation to the Investment
Consultant for the services provided for under this Agreement
<PAGE>3
as described in Schedule A to this Agreement. Appropriate prorated adjustments
of the fee shall be made in the event that this Agreement is terminated prior to
the end of a calendar quarter.
Section 4. Services to Other Companies or Accounts.
----------------------------------------
(a) The Trust and GEIM understand and acknowledge that the
Investment Consultant now acts and will continue to act as investment
consultant, manager or adviser to various fiduciary or other managed accounts
and the Trust and GEIM have no objection to the Investment Consultant so acting.
(b) The Trust and GEIM understand and acknowledge that the
persons employed by the Investment Consultant to assist in the performance of
its duties under this Agreement will not devote their full time to that service
and agree that nothing contained in this Agreement will be deemed to limit or
restrict the right of the Investment Consultant or any affiliate of the
Investment Consultant to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
Section 5. Continuance and Termination of the Agreement.
---------------------------------------------
(a) This Agreement will become effective as of the date the Fund
commences its investment operations and will continue for an initial two-year
term and will continue thereafter so long as the continuance is specifically
approved at least annually (i) by the Trustees of the Trust or (ii) by a vote of
a majority of the Fund's outstanding voting securities, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), provided that in
either event the continuance is also approved by a majority of the Trustees who
are not "interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote case in person at a meeting called for the purpose of voting
on the approval.
(b) This Agreement is terminable without penalty, by the Trust or
GEIM on not less than 30 days' written notice to the Investment Consultant, by
vote of holders of a majority of the Fund's outstanding voting securities, as
defined in the 1940 Act, or by the Investment Consultant on not less than 30
days' notice to the Trust and GEIM.
(c) This Agreement will terminate automatically in the event of
its assignment (as defined in the 1940 Act or in rules adopted under the 1940
Act).
Section 6. Representations and Warranties.
-------------------------------
(a) Representations and Warranties of Investment Consultant. The
Investment Consultant represents and warrants to GEIM and the Trust as follows:
(i) The Investment Consultant is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the
"Advisers Act");
(ii) The Investment Consultant is a limited liability company
duly organized and validly existing under the laws of the State of
Illinois with the power to own and possess its assets and carry on its
business as it is now being conducted;
<PAGE>4
(iii) The execution, delivery and performance by the Investment
Consultant of this Agreement are within the Investment Consultant's
powers and have been duly authorized by all necessary action on the part
of its shareholders, and no action by or in respect of, or filing with,
any governmental body, agency or official is required on the part of the
Investment Consultant for the execution, delivery and performance by the
Investment Consultant of this Agreement, and the execution, delivery and
performance by the Investment Consultant of this Agreement do not
contravene or constitute a default under (A) any provision of applicable
law, rule or regulation, (B) the Investment Consultant's governing
instruments, or (C) any agreement, judgment, injunction, order, decree
or other instrument binding upon the Investment Consultant;
(iv) The Form ADV of the Investment Consultant previously
provided to GEIM is a true and complete copy of the form filed with the
SEC and the information contained therein is accurate and complete in
all material respects and does not omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading; and
(b) Representations and Warranties of GEIM. GEIM represents and
warrants to the Investment Consultant as follows:
(i) GEIM is registered as an investment adviser under the
Advisers Act;
(ii) GEIM is a corporation duly organized and validly existing
under the laws of the State of Delaware with the power to own and
possess its assets and carry on its business as it is now being
conducted;
(iii) The execution, delivery and performance by GEIM of this
Agreement are within GEIM's powers and have been duly authorized by all
necessary action on the part of its shareholders, and no action by or in
respect of, or filing with, any governmental body, agency or official is
required on the part of GEIM for the execution, delivery and performance
by the Adviser of this Agreement, and the execution, delivery and
performance by GEIM of this Agreement do not contravene or constitute a
default under (A) any provision of applicable law, rule or regulation,
(B) GEIM's governing instruments, or (C) any agreement, judgment,
injunction, order, decree or other instrument binding upon GEIM;
(iv) The Form ADV of GEIM previously provided to the Investment
Consultant is a true and complete copy of the form filed with the SEC
and the information contained therein is accurate and complete in all
material respects and does not omit to state any material fact necessary
in order to make the statements made, in light of the circumstances
under which they were made, not misleading; and
(v) GEIM acknowledges that it received a copy of the Investment
Consultant's Form ADV prior to the execution of this Agreement.
<PAGE>5
(c) Representations and Warranties of the Trust and the Fund.
(i) The Trust is registered as an investment company under the
1940 Act and the Fund's shares are registered under the Securities Act
of 1933, as amended;
(ii) The Trust is a Massachusetts business trust duly organized
and validly existing under the laws of the Commonwealth of Massachusetts
with the power to own and possess its assets and carry on its business
as it is now being conducted and a copy of the Trust's Declaration of
Trust is on file with the Secretary of The Commonwealth of Massachusetts
and with the Boston City Clerk; and
(iii) The Trust and the Fund have full power and authority under
applicable law and have taken all actions necessary and appropriate to
enter into and perform this Agreement.
(d) Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by the Investment
Consultant, the Trust and GEIM pursuant to this Section 6 shall survive for the
duration of this Agreement and the parties hereto shall promptly notify each
other in writing upon becoming aware that any of the foregoing representations
and warranties are no longer true.
Section 7. Limitation of Liability.
------------------------
(a) The Investment Consultant will exercise its best judgment in
rendering the services described in this Agreement, except that the Investment
Consultant will not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to which this
Agreement relates, other than a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Consultant in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
(b) The Trust, GEIM and the Investment Consultant agree that the
obligations of the Trust under this Agreement, if any, will not be binding upon
any of the Trustees, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Trust, individually, but are binding
only upon the assets and property of the Fund, as provided in the Declaration of
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust, and signed by an authorized officer of the Trust, acting
as such, and neither the authorization by the Trustees nor the execution and
delivery by the officer will be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but will bind
only the trust property of the Trust as provided in the Declaration of Trust. No
series of the Trust, including the Fund, will be liable for any claims against
any other series.
Section 8. Indemnification.
----------------
(a) The Investment Consultant agrees to defend, hold harmless and
indemnify the Trust, the Fund and GEIM and any of their respective trustees,
directors, officers, employees and affiliates from and against any liability,
claim, loss, cost (including, without limitation, reasonable
<PAGE>6
legal fees and disbursements), damages and expenses (collectively, "Losses")
directly or indirectly arising out of or relating to either of the following:
(i) the Investment Consultant's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties hereunder; or
(ii) any breach (as finally determined by a court or arbitrator
with jurisdiction) by the Investment Consultant of any representation,
warranty, or covenant.
(b) GEIM, and not the Trust or the Fund, agree to defend, hold
harmless and indemnify the Investment Consultant, its members, officers,
employees and affiliates from and against all Losses directly or indirectly
arising out of or relating to any of the following:
(i) GEIM's willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties hereunder; or
(ii) any breach (as finally determined by a court or arbitrator
with jurisdiction) by GEIM of any representation, warranty or covenant.
Section 9. Independent Contractor.
-----------------------
In the performance of its duties hereunder, the Investment
Consultant is and shall all be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Trust, the Fund or GEIM in any way or
otherwise be deemed an agent of the Trust, the Fund or GEIM.
Section 10. Notice.
-------
Notices hereunder shall be by confirmed telex, telecopy or other
written form of electronic communication or by letter which shall be mailed by
certified mail, postage paid, addressed (except as the same may by like notice
be changed) as follows:
<PAGE>7
(a) To the Investment Consultant:
DiMeo Schneider & Telephone No.: (312) 345-6660
Associates, L.L.C. Fax No.: (312) 345-1619
120 North LaSalle Street
Suite 1140
Chicago, Illinois 60602
Attn: William A. Schneider, CIMA
Managing Director
(b) To GEIM or the Trust:
GE Investment Management Telephone No.: (203) 326-2466
Incorporated Fax No.: (203) 326-4177
3003 Summer Street
P.O. Box 7900
Stamford, CT 06904
Attn: Michael J. Cosgrove
Executive Vice President
Sect 11. Entire Agreement.
-----------------
This Agreement embodies the entire understanding of the parties
hereto with respect to its subject matter, supersedes any prior or
contemporaneous agreements or understandings between the parties with respect to
such subject matter and cannot be altered, waived, amended, supplemented or
abridged except by the written agreement of the parties.
If the terms and conditions described above are in accordance
with your understanding, kindly indicate your acceptance of this Agreement by
signing and returning to us the enclosed copy of this Agreement.
GE LIFESTYLE FUNDS
By:_______________________________________
Name: Michael J. Cosgrove
Title: Chairman of the Board and President
GE INVESTMENT MANAGEMENT
INCORPORATED
By:_______________________________________
Name: Michael J. Cosgrove
Title: Executive Vice President
<PAGE>8
Accepted:
DIMEO SCHNEIDER & ASSOCIATES, L.L.C.
By:_________________________________
Name:
Title:
<PAGE>
SCHEDULE A
----------
Description of Fees
-------------------
Net Assets of GE Conservation Strategy Fund X $16,500 = Compensation to
- ------------------------------------------- ------- be paid pursuant
Aggregate Net Assets of GE LifeStyle Funds 4 to Section 3 of
this Agreement
<PAGE>
DISTRIBUTION AGREEMENT
_____________, 1996
GE Investment Services Inc.
3003 Summer Street
Stamford, Connecticut 06904
Dear Sirs:
This is to confirm that, in consideration of the agreements set out
below, GE LifeStyle Funds, a business trust organized under the laws of The
Commonwealth of Massachusetts (the "Trust"), has agreed that GE Investment
Services Inc. ("GEIS") will be, for the period of this Agreement, the
distributor of shares of beneficial interest of each series of the Trust
(individually a "Fund" and collectively the "Funds").
1. Services as Distributor.
------------------------
1.1 GEIS agrees to solicit orders for the sale of shares of the Trust
and to undertake advertising and promotion that it believes reasonable in
connection with the solicitation.
1.2 GEIS will act as agent for the distribution of shares of the Trust
covered by, and in accordance with, the Trust's Registration Statement on Form
N-1A then in effect under the Securities Act of 1933, as amended (the
"Securities Act"), the Registration Statement on Form N-1A, together with the
prospectuses (the "Prospectuses") and statement of additional information (the
"Statement") included as part of the Registration Statement on Form N-1A, any
amendments to the Registration Statement on Form N-1A, and any supplements to,
or material incorporated by reference into the Prospectuses or Statement, being
referred to collectively in this Agreement as the "Registration Statement."
1.3 All activities by GEIS as distributor of shares of the Trust will
comply with all applicable laws, rules and regulations, including, without
limitation, all rules and regulations made or adopted pursuant to the Securities
Act or the Investment Company Act of 1940, as amended (the "1940 Act"), by the
Securities and Exchange Commission (the "Commission") or any securities
association registered under the Securities Exchange Act of 1934 (the "Exchange
Act").
1.4 (a) GEIS will have the right to purchase from the Trust the shares
needed, but not more than the shares needed (except for clerical errors in
transmission), to fill unconditional orders for shares placed through GEIS. The
price
1
<PAGE>
that GEIS will pay for the shares so purchased from the Trust will be the
current public offering price on which the orders were based, as described in
paragraph (b) of this Section 1.4.
(b) The public offering price of the shares of the Trust
will be the net asset value determined as set forth in the Registration
Statement, plus any applicable sales charge.
(c) GEIS will have the right to enter into selected dealer
agreements. All dealers of Trust shares will act in accordance with the
Registration Statement and Prospectuses then in effect under the Securities Act.
All activities by dealers of Trust shares will comply with all applicable laws,
rules and regulations, including, without limitation, all rules and regulations
made or adopted pursuant to the Securities Act and the 1940 Act by the
Commission or any securities association registered under the Exchange Act.
(d) The Trust's transfer and dividend agent, or any other
agent designated in writing by the Trust, will be promptly advised by GEIS of
all purchase orders for shares of the Trust. The Trust may cease, on the basis
of market, economic or political conditions, or on the basis of any other
abnormal conditions, to accept any orders for Trust shares or continue to sell
shares until the Trustees deem it advisable to accept the orders and to make the
sales. The Trust will promptly advise GEIS of the determination to recommence
accepting orders or selling shares. The Trust (or its agent) will confirm orders
for shares upon their receipt, or in accordance with any exemptive order of the
Commission, and will make appropriate book entries pursuant to the instructions
of GEIS. GEIS agrees to cause payment for shares and instructions as to book
entries to be delivered promptly to the Trust (or its agent).
1.5 The outstanding shares of the Trust are subject to redemption as
set forth in the Trust's Declaration of Trust dated as of June 21, 1996, as
amended from time to time (the "Declaration of Trust"), and in accordance with
the applicable provisions set forth in the Prospectuses. The price to be paid to
redeem the shares will be equal to their net asset value, determined as set
forth in the Prospectuses.
1.6 GEIS will provide one or more persons, during normal business
hours, to respond to telephone questions with respect to the Trust.
1.7 The Trust agrees at its own expense to execute any and all
documents, to furnish any and all information, and to take any other actions,
that may be reasonably necessary in connection with (a) registering shares under
the Securities Act to the extent necessary to have available for sale the number
of shares as may reasonably be expected to be purchased and (b) the
qualification and maintenance of the qualification of shares of
2
<PAGE>
the Trust for sale in such states as GEIS may designate, except that the Trust
will not be obligated to execute a general consent to service of process in any
state.
1.8 The Trust will furnish GEIS from time to time, for use in
connection with the sale of shares of the Trust such information with respect to
the Trust and its shares as GEIS may reasonably request, all of which
information must be signed by one or more of the Trust's duly authorized
officers; and the Trust warrants that the statements contained in any such
information, when so signed by the Trust's officers, will be true and correct.
The Trust will also furnish GEIS upon request with: (a) financial statements of
the Trust or any series of the Trust audited at least annually by independent
public accountants regularly retained by the Trust, (b) quarterly earnings
statements of the Trust or any series of the Trust prepared by the Trust, (c) a
monthly itemized list of the securities in the portfolio of the Trust or any
series of the Trust, (d) monthly balance sheets with respect to the Trust or any
series of the Trust as soon as practicable after the end of each month and (e)
from time to time any additional information regarding the financial condition
of the Trust or any series of the Trust as GEIS may reasonably request.
1.9 The Trust represents to GEIS that the Registration Statement filed
by the Trust with the Commission under the Securities Act has been carefully
prepared in conformity with the requirements of the Securities Act and the 1940
Act and the respective rules and regulations of the Commission thereunder. The
Trust represents and warrants to GEIS that the Registration Statement, upon its
becoming effective, will contain all statements required to be stated therein in
conformity with the Securities Act and the rules and regulations of the
Commission thereunder; that all statements of fact contained in the Registration
Statement will be true and correct when the Registration Statement becomes
effective; and that the Registration Statement, upon its becoming effective,
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading. The Trust may, but will not be obligated to, propose
from time to time such amendment or amendments to the Registration Statement and
such supplement or supplements to the Prospectuses as may, in the Trust's
judgment, be necessary or advisable. If the Trust does not propose an amendment
or amendments or supplement or supplements within 15 days after receipt by the
Trust of a written request from GEIS to do so, GEIS may, at its option,
terminate this Agreement in accordance with the requirements of Section 2 of
this Agreement or decline to make offers of the Trust's securities until the
amendments are made. The Trust will not file any amendment to the Registration
Statement or supplement to the Prospectuses without giving GEIS reasonable
notice thereof in advance; provided, however, that nothing contained in this
Agreement will in any way limit the Trust's right to file at any time such
3
<PAGE>
amendments to the Registration Statement or supplements to the Prospectuses, of
whatever character, as the Trust may deem advisable, this right being in all
respects absolute and unconditional.
1.10 (a) The Trust authorizes GEIS to use any prospectuses with
respect to the Trust or series of the Trust in the forms furnished to GEIS from
time to time in connection with the sale of Trust shares and agrees to furnish
such quantities of the prospectuses as GEIS may reasonably request. GEIS will
devote reasonable time and effort to effect sales of Trust shares, but will not
be obligated to sell any specific number of shares. The services of GEIS under
this Agreement are not to be deemed exclusive and nothing contained in this
Agreement should be deemed to prevent GEIS from entering into distribution
arrangements with other investment companies so long as the performance of its
obligations under this Agreement is not impaired by GEIS's doing so.
(b) In selling the shares of the Trust, GEIS and selected
dealers will use their best efforts in all respects duly to conform with the
requirements of all federal and state laws and regulations of the National
Association of Securities Dealers, Inc. (the "NASD") relating to the sale of the
shares. Neither GEIS nor any other person is authorized by the Trust to give any
information or to make any representations, other than those contained in the
Registration Statement or the Prospectuses or in any sales literature
specifically approved by the Trust.
(c) GEIS will adopt and follow procedures, as approved by
the Trust, for the confirmation of sales to purchasers of Trust shares, the
collection of amounts payable by those purchasers, and the cancellation of
unsettled transactions, as may be necessary to comply with the requirements of
the NASD and applicable rules and regulations of the Commission.
1.11 (a) The Trust agrees promptly to notify GEIS of the commencement
of any litigation or proceedings against the Trust or any of its officers or
trustees in connection with the issuance and sale of any shares of the Trust.
(b) The Trust agrees to indemnify and hold GEIS, its several
officers and directors, and any person who controls GEIS within the meaning of
Section 15 of the Securities Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending those claims, demands or liabilities and any counsel fees incurred
in connection with them) that GEIS, its officers and directors, or the
controlling person may incur under the Securities Act or under common law or
otherwise, arising out of or based upon any untrue statement, or alleged untrue
statement, of a material fact contained in the Registration Statement or the
Prospectuses or arising out of or based upon any omission, or
4
<PAGE>
alleged omission, to state a material fact required to be stated in either the
Registration Statement or Prospectuses or necessary to make the statements in
either not misleading; provided, however, that the Trust's agreement to
indemnify GEIS, its officers and directors, and the controlling person will not
be deemed to cover any claims, demands, liabilities or expenses arising out of
any untrue statement or alleged untrue statement or omission or alleged omission
in the Registration Statement or Prospectuses made in reliance upon and in
conformity with written information furnished to the Trust by GEIS specifically
for use in the preparation of the Registration Statement or the Prospectuses.
(c) The Trust's agreement to indemnify GEIS, its officers
and directors, and any controlling person, described in paragraph (b) of this
Section 1.11, is expressly conditioned upon the Trust's being notified of any
action brought against GEIS, its officers or directors, or any controlling
person, such notification to be given by letter or by telegram addressed to the
Trust at its principal office in Stamford, Connecticut within ten days after the
summons or other first legal process is served. The failure to notify the Trust
in this manner of any such action will relieve the Trust from any liability that
the Trust may have to the person against whom the action is brought by reason of
any such untrue, or alleged untrue, statement or omission, or alleged omission,
otherwise than on account of the Trust's indemnity agreement contained in this
Section 1.11.
(d) The Trust will be entitled to assume the defense of any
suit brought to enforce any claim, demand or liability contemplated by this
Section 1.11, but, in such case, the defense will be conducted by counsel of
good standing chosen by the Trust and approved by GEIS (who will not, except
with the consent of GEIS, be counsel to the Trust). In the event the Trust
elects to assume the defense of any such suit and retain counsel of good
standing approved by GEIS, the defendant or defendants in the suit will bear the
fees and expenses of any additional counsel retained by any of them; but in case
the Trust does not elect to assume the defense of any such suit, or in case GEIS
does not approve of counsel chosen by the Trust, the Trust will reimburse GEIS,
its officers and directors, or the controlling person or persons named as
defendant or defendants in the suit, for the fees and expenses of any counsel
retained by GEIS or them.
(e) The Trust's indemnification agreement contained in this
Section 1.11 and the Trust's representations and warranties in this Agreement
will remain operative and in full force and effect regardless of any
investigation made by or on behalf of GEIS, its officers and directors, or any
controlling person, and will survive the delivery of any shares of the Trust.
The Trust's agreement of indemnity will inure exclusively to GEIS's benefit, to
the benefit of its several officers and directors, and their respective estates,
and to the benefit of
5
<PAGE>
any controlling persons and their successors, except that the Trust will not be
obligated to indemnify any entity or person pursuant to this Section 1.11
against any liability to which GEIS, its officers and directors, or any
controlling person would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in performance of, or reckless disregard of, the
obligations and duties set forth in this Agreement.
1.12 (a) GEIS agrees to indemnify and hold the Trust, its several
officers and trustees, and any person, if any, who controls the Trust within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending those claims, demands or liabilities and any counsel
fees incurred in connection with them) that the Trust, its officers or trustees,
or the controlling person, may incur under the Securities Act, or under common
law or otherwise, but only to the extent that the liability or expense incurred
by the Trust, its officers or trustees, or the controlling person resulting from
the claims or demands arise out of or are based upon any untrue, or alleged
untrue statement of a material fact contained in information furnished in
writing by GEIS to the Trust specifically for use in the Registration Statement
and used in the Trust's answers to any of the items of the Registration
Statement or in the corresponding statements made in the Prospectuses, or arise
out of or are based upon any omission, or alleged omission, to state a material
fact in connection with the information furnished in writing by GEIS to the
Trust and required to be stated in the answers or necessary to make the
information not misleading.
(b) GEIS's agreement to indemnify the Trust, its officers
and trustees, and any controlling person under this Section 1.12 is expressly
conditioned upon GEIS being notified of any action brought against the Trust,
its officers or trustees, or any controlling person, such notification to be
given by letter or telegram addressed to GEIS at its principal office in
Stamford, Connecticut and sent to GEIS by the person against whom the action is
brought, within ten days after the summons or other first legal process is
served. The failure to notify GEIS of any such action will not relieve GEIS from
any liability that GEIS may have to the Trust, its officers or trustees, or to
the controlling person otherwise than on account of GEIS's indemnity agreement
contained in this Section 1.12.
(c) GEIS will have the right to control the defense of any
action contemplated by this Section 1.12, with counsel of its own choosing,
satisfactory to the Trust, unless the action referred to in paragraph (a) of
this Section 1.12 is not based solely upon an alleged misstatement or omission
on GEIS's part. In such event, the Trust, its officers or trustees or the
controlling person will each have the right to participate in the defense or
preparation of the defense of the action.
6
<PAGE>
(d) GEIS will not be obligated to indemnify any entity or
person pursuant to this Section 1.12 against any liability to which the Trust,
its officers and trustees, or any controlling person would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in performance
of, or reckless disregard of, the obligations and duties set forth in this
Agreement.
1.13 No shares of the Trust may be offered by GEIS, selected dealers
or the Trust under any of the provisions of this Agreement, and no orders for
the purchase or sale of shares of the Trust pursuant to this Agreement may be
accepted by the Trust if and so long as the effectiveness of the Registration
Statement is suspended under any of the provisions of the Securities Act or if
and so long as a current prospectus as required by Section 10 of the Securities
Act is not on file with the Commission; provided, however, that nothing
contained in this Section 1.13 will in any way restrict or have an application
to or bearing upon the Trust's obligation to redeem its shares from any
shareholder in accordance with the provisions of Section 1.5 of this Agreement
and provided, further, that GEIS may continue to offer shares of the Trust until
GEIS has been notified in writing of the occurrence of any of the foregoing
events.
1.14 The Trust agrees to advise GEIS immediately in writing:
(a) of any request by the Commission for amendments to the
Registration Statement or the Prospectuses or any additional information
regarding the Trust or any of its series;
(b) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the Registration Statement or the
Prospectuses or that requires the making of any change in the Registration
Statement or the Prospectuses in order to make the statements therein not
misleading; and
(d) of all actions of the Commission with respect to any
amendments to the Registration Statement or the Prospectuses that may from time
to time be filed with the Commission.
2. Term.
-----
This Agreement will become effective as of _______, 1996 and
thereafter will continue automatically for successive annual periods, so long as
its continuance is specifically approved at least annually (a) by the Trustees
of the Trust or (b) by a vote of a majority (as defined in the 1940 Act) of the
Trust's outstanding voting securities, provided that in either event the
7
<PAGE>
continuance is also approved by a majority of the Trustees who are not parties
to this Agreement or interested persons (as defined in the 1940 Act) of any
party by vote cast in person at a meeting called for the purpose of voting on
the approval. This Agreement is terminable without penalty, (a) on not less than
60 days' notice (i) by action of the Trustees who are not interested persons (as
defined in the 1940 Act) of the Trust, or (ii) by the vote of holders of a
majority of the Trust's shares, or (b) upon not less than 60 days' written
notice by GEIS. This Agreement will also terminate automatically in the event of
its assignment (as defined in the 1940 Act and the rules under the 1940 Act).
3. Amendments.
-----------
This Agreement may be amended by the parties only if the amendment is
specifically approved by (a) the Trustees of the Trust, or by the vote of a
majority of outstanding voting securities of the Trust, and (b) a majority of
those Trustees of the Trust who are not parties to this Agreement or interested
persons (as defined in the 1940 Act) of any party cast in person at a meeting
called for the purpose of voting on the approval.
4. Miscellaneous.
--------------
4.1 (a) The Trust will bear all costs and expenses including fees and
disbursements of its counsel and independent accountants, in connection with the
preparation and filing of any registration statements and prospectuses under the
Securities Act and the 1940 Act, and all amendments and supplements thereto, and
the expense of preparing, printing, mailing and otherwise distributing
prospectuses, annual or interim reports or proxy materials to shareholders.
(b) The Trust will bear all costs and expenses of
qualification of its shares for sale in such states of the United States or
other jurisdictions as selected by GEIS pursuant to Section 1.7 of this
Agreement and the cost and expenses payable to each for continuing qualification
therein.
4.2 (a) The Trust represents that a copy of the Declaration of Trust
is on file with the Secretary of the Commonwealth of Massachusetts and with the
Boston City Clerk.
(b) The Trust and GEIS agree that the obligations of the
Trust under this Agreement will not be binding upon any of the Trustees,
shareholders, nominees, officers, employees or agents, whether past, present or
future, of the Trust, individually, but are binding only upon the assets and
property of the Trust, as provided in the Declaration of Trust. The execution
and delivery of this Agreement have been authorized by the Trustees of the
Trust, and signed by an authorized officer of the Trust, acting as such, and
neither the authorization by the Trustees nor the execution and delivery by the
officer will be deemed to have been made by any of them individually or to
impose
8
<PAGE>
any liability on any of them personally, but will bind only the trust property
of the Trust as provided in the Declaration of Trust. No series of the Trust
will be liable for any claims against any other series.
5. Dates.
------
This Agreement has been executed by the Trust as of _________, 1996
and will become effective as of ________, 1996.
* * * * *
If the terms and conditions described above are in accordance with
your understanding, kindly indicate your acceptance of this Agreement by signing
and returning to us the enclosed copy of this Agreement.
Very truly yours,
GE LIFESTYLE FUNDS
By:----------------------------
Name:
Title:
Accepted:
GE INVESTMENT SERVICES INC.
By:----------------------------
Name:
Title:
9
<PAGE>
FORM OF
CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES INDICATED ON APPENDIX A
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It...............
2. Duties of the Custodian with Respect to Property of
the Fund Held By the Custodian in the United States..................2
2.1. Holding Securities ...........................................2
2.2. Delivery of Securities .......................................3
2.3. Registration of Securities ...................................8
2.4. Bank Accounts ................................................9
2.5. Availability of Federal Funds ...............................10
2.6. Collection of Income ........................................10
2.7. Payment of Fund Monies ......................................11
2.8. Liability for Payment in Advance of Receipt
of Securities Purchased .....................................14
2.9. Appointment of Agents .......................................15
2.10 Deposit of Securities in Securities Systems .................15
2.11 Segregated Account ..........................................20
2.12 Ownership Certificates for Tax Purposes .....................21
2.13 Proxies .....................................................22
2.14 Communications Relating to Fund Portfolio Securities ........22
2.15 Reports to Fund by Independent Public Accountants ...........23
3. Duties of the Custodian with Respect to Property of the
Fund Held Outside of the United States.............................24
3.1. Appointment of Foreign Sub-Custodians........................24
3.2. Assets to be Held............................................25
3.3. Foreign Securities Depositories..............................25
3.4. Segregation of Securities....................................25
3.5. Agreements with Foreign Banking Institutions.................26
3.6. Access of Independent Accountants of the Fund................27
3.7. Reports by Custodian.........................................27
3.8. Transactions in Foreign Custody Account......................28
3.9. Liability of Foreign Sub-Custodians..........................29
3.10. Liability of Custodian.......................................29
3.11. Reimbursement for Advances...................................30
3.12. Monitoring Responsibilities..................................31
3.13. Branches of U.S. Banks.......................................32
<PAGE>
4 Payments for Repurchases or Redemptions and
Sales of Shares of the Fund..................................33
5 Proper Instructions .........................................34
6 Actions Permitted without Express Authority .................35
7 Evidence of Authority .......................................35
8 Duties of Custodian with Respect to the Books
of Account and Calculation of Net Asset Value
and Net Income...............................................36
9 Records .....................................................37
10 Opinion of Fund's Independent Accountant ....................37
11 Compensation of Custodian ...................................38
12 Responsibility of Custodian .................................38
13 Effective Period, Termination and Amendment .................40
14 Successor Custodian .........................................42
15 Interpretive and Additional Provisions ......................43
16 Massachusetts Law to Apply ..................................44
17 Prior Contracts .............................................44
18 Notices .....................................................44
19 The Parties .................................................45
<PAGE>1
CUSTODIAN CONTRACT
This Contract between State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts 02110, hereinafter called the "Custodian"
and each Fund listed on Appendix A which evidences its agreement to be bound
hereby by executing a copy of this Contract (each such Fund individually
hereinafter referred to as the "Fund").
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of its assets,
including securities it desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Fund Agreement.
The Fund agrees to deliver to the Custodian all securities and cash owned by it,
and all payments of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Fund from time to
time, and the cash consideration received by it for such new or treasury shares
of beneficial interest ("Shares"), of the Fund as may be issued or sold from
time to time. The Custodian shall not be responsible for any property of the
Fund held or received by the Fund and not delivered to the Custodian.
<PAGE>2
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall from time to time employ one or more sub-custodians
located in the United States, but only in accordance with an applicable vote by
the Board of Directors of the Fund, and provided that the Custodian shall have
no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodians
for the Fund's securities and other assets the foreign banking institutions and
foreign securities depositories designated in Schedule A hereto but only in
accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
-------------------------------------------------------------------------------
Custodian in the United States
------------------------------
2.1. Holding Securities. The Custodian shall hold and physically
segregate for the account of the Fund all non-cash property, to
be held by it in the United States, including all domestic
securities owned by the Fund, other than (a) securities which are
maintained pursuant to Section 2.10 in a clearing agency which
acts as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury, collectively
referred to herein as "Securities System" and (b) commercial
paper of an issuer for which State Street Bank and Trust Company
acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper
<PAGE>3
System of the Custodian pursuant to Section 2.10A. The Custodian
shall disclose the Securities System in use at the time that this
Contract is executed and shall disclose from time to time at the
Fund's request any changes thereto.
2.2. Delivery of Securities. The Custodian shall promptly release and
deliver domestic securities owned by the Fund held by the
Custodian or in a Securities System account of the Custodian or
in the Custodian's Direct Paper book-entry system account
("Direct Paper System Account") only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the
Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Fund;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section
2.10 hereof;
4) To the depository agent in connection with tender or
other similar offers for portfolio securities of the
Fund;
<PAGE>4
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
otherwise become payable; provided that, in any such
case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Fund or into the name of any
nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed pursuant
to Section 2.9 or into the name or nominee name of
of any sub-custodian appointed pursuant to Article 1;
or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Fund, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for
any loss
<PAGE>5
arising from the delivery of such securities prior to
receiving payment for such securities except as may
arise from the Custodian's own negligence or willful
misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the
new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities,
the surrender thereof in the exercise of such warrants,
rights or similar securities or the surrender of
interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
10) For delivery in connection with any loans of securities
made by the Fund, but only against receipt of adequate
collateral as agreed upon
<PAGE>6
from time to time by the Custodian and the Fund, which
may be in the form of cash or obligations issued by the
United States government, its agencies or
instrumentalities, except that in connection with any
loans for which collateral is to be credited to the
Custodian's account in the book-entry system authorized
by the U.S. Department of the Treasury, the Custodian
will not be held liable or responsible for the delivery
of securities owned by the Fund prior to the receipt of
such collateral;
11) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets by
the Fund, but only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a
broker-dealer registered under the Securities Exchange
Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange, or of any similar
organization or
<PAGE>7
organizations, regarding escrow or other arrangements
in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or
organizations, regarding account deposits in connection
with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the Fund's currently
effective prospectus and statement of additional
information ("prospectus"), in satisfaction of requests
by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a
<PAGE>8
resolution of the Board of Directors or of the
Executive Committee signed by an officer of the Fund
and certified by the Secretary or an Assistant
Secretary, specifying the securities to be delivered,
setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to
whom delivery of such securities shall be made.
2.3. Registration of Securities. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in
the name of the Fund or in the name of any nominee of the Fund or
of any nominee of the Custodian which nominee shall be assigned
exclusively to the Fund, unless the Fund has authorized in writing
the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser
as the Fund, or in the name or nominee name of any agent appointed
pursuant to Section 2.9 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Fund under the terms of
this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts
<PAGE>9
only to timely collect income due the Fund on such securities and
to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4. Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the United States in the name of the
Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such
account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Fund, other than
cash maintained by the Fund in a bank account established and used
in accordance with Rule 17f-3 under the Investment Company Act of
1940. Funds held by the Custodian for the Fund may be deposited by
it to its credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it may in
its discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to act as
a custodian under the Investment Company Act of 1940 and that each
such bank or trust company and the funds to be deposited with each
such bank or trust company shall be approved by vote of a majority
of the Board of Directors of the Fund. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall
be withdrawable by the Custodian only in that capacity.
2.5. Availability of Federal Funds. Upon mutual agreement between the
Fund and the Custodian, the Custodian shall, upon the receipt of
Proper Instructions, make federal funds available to the Fund as
of specified times agreed upon from time to time by the Fund and
the Custodian in the amount of checks received in payment for
Shares of the Fund which are deposited into the Fund's account.
2.6. Collection of Income. Subject to the provisions of Section 2.3,
the Custodian shall collect on a timely basis all income and other
payments with respect to United States registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall collect
on a timely basis all income and other payments with respect to
United States bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and when
they become due and shall collect interest when due on securities
held hereunder. Income due the Fund on United States
<PAGE>10
securities loaned pursuant to the provisions of Section 2.2 (10)
shall be the responsibility of the Fund. The Custodian will have
no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be necessary
to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Fund is properly entitled.
2.7. Payment of Fund Monies. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out monies of the Fund in the
following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts for
the account of the Fund but only (a) against the
delivery of such securities, or evidence of title to
such options, futures contracts or options on futures
contracts, to the Custodian (or any bank, banking firm
or trust company doing business in the United States or
abroad which is qualified under the Investment Company
Act of 1940, as amended, to act as a custodian and has
been designated by the Custodian as its agent for this
purpose) registered in the name of the Fund or in the
name of a nominee of the Custodian referred to in
Section 2.3
<PAGE>11
hereof or in proper form for transfer; (b) in the case
of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section
2.10 hereof; (c) in the case of a purchase involving
the Direct Paper System, in accordance with the
conditions set forth in Section 2.10A; (d) in the case
of repurchase agreements entered into between the Fund
and the Custodian, or another bank, or a broker-dealer
which is a member of NASD, (i) against delivery of the
securities either in certificate form or through an
entry crediting the Custodian's account at the Federal
Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Fund
of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to
repurchase such securities from the Fund or (e) for
transfer to a time deposit account of the Fund in any
bank, whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a
broker and/or the applicable bank pursuant to Proper
<PAGE>12
Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section
2.2 hereof;
3) For the redemption or repurchase of Shares issued by
the Fund as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: interest, taxes,
management, accounting, transfer agent and legal fees,
and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or
treated as deferred expenses;
5) For the payment of any dividends declared pursuant to
the governing documents of the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short; and
7) For any other proper purpose, but only upon receipt of,
in addition to Proper
<PAGE>13
Instructions, a certified copy of a resolution of the
Board of Directors or of the Executive Committee of the
Fund signed by an officer of the Fund and certified by
its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person
or persons to whom such payment is to be made.
2.8. Liability for Payment in Advance of Receipt of Securities
Purchased. Except as specifically stated otherwise in this
Contract, in any and every case where payment for purchase of
domestic securities for the account of the Fund is made by the
Custodian in advance of receipt of the securities purchased in the
absence of specific written instructions from the Fund to so pay
in advance, the Custodian shall be absolutely liable to the Fund
for such securities to the same extent as if the securities had
been received by the Custodian.
2.9. Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank
or trust company which is itself qualified under the Investment
Company Act of 1940, as amended, to act as a custodian, as its
agent to carry
<PAGE>14
out such of the provisions of this Article 2 as the Custodian may
from time to time direct; provided, however, that the appointment
of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.10. Deposit of Securities in Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by the Fund in a
clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of
1934, which acts as a securities depository, or in the book-entry
system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as
"Securities System" in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep domestic securities of the Fund
in a Securities System provided that such securities
are represented in an account ("Account") of the
Custodian in the Securities System which shall not
include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for
customers;
<PAGE>15
2) The records of the Custodian with respect to domestic
securities of the Fund which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Fund;
3) The Custodian shall pay for domestic securities
purchased for the account of the Fund upon (i) receipt
of advice from the Securities System that such
securities have been transferred to the Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer
domestic securities sold for the account of the Fund
upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred
to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of all
advices from the Securities System of transfers of
domestic securities for the account of the Fund shall
identify the Fund, be maintained for the Fund by the
Custodian and be provided to the Fund at its request.
<PAGE>16
Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account of
the Fund in the form of a written advice or notice and
shall furnish to the Fund copies of daily transaction
sheets reflecting each day's transactions in the
Securities System for the account of the Fund;
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding domestic securities
deposited in the Securities System;
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 13
hereof; and
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Fund for any loss or damage to the Fund resulting from
use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their
employees or from failure of the Custodian or any such
agent to enforce effectively
<PAGE>17
such rights as it may have against the Securities
System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the
Custodian with respect to any claim against the
Securities System or any other person which the
Custodian may have as a consequence of any such loss or
damage if and to the extent that the Fund has not been
made whole for any such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System The
Custodian may deposit and/or maintain securities owned by the Fund
in the Direct Paper System of the Custodian subject to the
following provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of Proper
Instructions;
2) The Custodian may keep securities of the Fund in the
Direct Paper System only if such securities are
represented in an account ("Account") of the Custodian
in the Direct Paper System which shall not include any
assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities
of the Fund which are maintained
<PAGE>18
in the Direct Paper System shall identify by book-entry
those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for
the account of the Fund upon the making of an entry on
the records of the Custodian to reflect such payment
and transfer of securities to the account of the Fund.
The Custodian shall transfer securities sold for the
account of the Fund upon the making of an entry on the
records of the Custodian to reflect such transfer and
receipt of payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation of
each transfer to or from the account of the Fund, in
the form of a written advice or notice, of Direct Paper
on the next business day following such transfer and
shall furnish to the Fund copies of daily transaction
sheets reflecting each day's transaction in the Direct
Paper System for the account of the Fund; and
6) The Custodian shall provide the Fund with any report on
its system of internal accounting
<PAGE>19
control as the Fund may reasonably request from time to
time.
2.11. Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar organization
<PAGE>20
or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection with
options purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or sold by the
Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666,
or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated
<PAGE>21
accounts by registered investment companies and (iv) for other
proper purposes, but only, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board of Directors or of the Executive
Committee signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to
be proper trust purposes.
2.12. Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to domestic securities of
the Fund held by it and in connection with transfers of such
securities.
2.13. Proxies. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the
registered holder of such securities, if the securities are
registered otherwise than in the name of the Fund or a nominee of
the Fund, all proxies, without indication of the manner in which
such proxies are to be voted, and shall promptly deliver to the
Fund such proxies, all proxy soliciting materials and all notices
relating to such securities.
2.14. Communications Relating to Fund Portfolio Securities Subject to
the provisions of Section 2.3, the Custodian
<PAGE>22
shall transmit promptly to the Fund all written information
(including, without limitation, pendency of calls and maturities
of domestic securities and expirations of rights in connection
therewith and notices of exercise of call and put options written
by the Fund and the maturity of futures contracts purchased or
sold by the Fund) received by the Custodian from issuers of the
domestic securities being held for the Fund. With respect to
tender or exchange offers, the Custodian shall transmit promptly
to the Fund all written information received by the Custodian from
issuers of the domestic securities whose tender or exchange is
sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect to
any tender offer, exchange offer or any other similar transaction,
the Fund shall notify the Custodian at least three business days
prior to the date on which the Custodian is to take such action
or, if later than three business days prior, the Custodian shall
use its reasonable best efforts to take such action.
2.15. Reports to Fund by Independent Public Accountants The Custodian
shall provide the Fund, at such times as the Fund may reasonably
require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including domestic securities deposited and/or
maintained in a Securities System, relating to the services
provided by the Custodian under this Contract; such reports shall
be of sufficient scope and in sufficient detail as may reasonably
be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and,
if there are no such inadequacies, the reports shall so state.
<PAGE>23
3. Duties of the Custodian with Respect to Property of the
--------------------------------------------------------
Fund Held Outside of the United States
- --------------------------------------
3.1. Appointment of Foreign Sub-Custodians
--------------------------------------
The Fund hereby authorizes and instructs the Custodian to employ
as sub-custodians for the Fund's securities and other assets
maintained outside the United States the foreign banking
institutions and foreign securities depositories designated on
Schedule A hereto ("foreign sub-custodians"). Upon receipt of
"Proper Instructions", as defined in Section 5 of this Contract,
together with a certified resolution of the Fund's Board of
Directors, the Custodian and the Fund may agree to amend Schedule
A hereto from time to time to designate additional foreign banking
institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more
such sub-custodians for maintaining custody of the Fund's assets.
<PAGE>24
3.2. Assets to be Held. The Custodian shall limit the securities and
other assets maintained in the custody of the foreign
sub-custodians to: (a) "foreign securities", as defined in
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of
1940, and (b) cash and cash equivalents in such amounts as the
Custodian or the Fund may determine to be reasonably necessary to
effect the Fund's foreign securities transactions.
3.3. Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by the Custodian and the Fund, assets of the Fund
shall be maintained in foreign securities depositories only
through arrangements implemented by the foreign banking
institutions serving as sub-custodians pursuant to the terms
hereof. Where possible, such arrangements shall include entry into
agreements containing the provisions set forth in Section 3.5
hereof.
3.4. Segregation of Securities The Custodian shall identify on its
books as belonging to the Fund, the foreign securities of the Fund
held by each foreign sub-custodian. Each agreement pursuant to
which the Custodian employs a foreign banking institution shall
require that such institution
<PAGE>25
establish a custody account for the Custodian on behalf of the
Fund and physically segregate in that account, securities and
other assets of the Fund, and, in the event that such institution
deposits the Fund's securities in a foreign securities depository,
that it shall identify on its books as belonging to the Custodian,
as agent for the Fund, the securities so deposited. 3.5.
Agreements with Foreign Banking Institutions. Each agreement with
a foreign banking institution shall be substantially in the form
set forth in Exhibit 1 hereto and shall provide that: (a) the
Fund's assets will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the foreign
banking institution or its creditors or agent, except a claim of
payment for their safe custody or administration; (b) beneficial
ownership of the Fund's assets will be freely transferable without
the payment of money or value other than for custody or
administration; (c) adequate records will be maintained
identifying the assets as belonging to the Fund; (d) officers of
or auditors employed by, or other representatives of the
Custodian, including to the extent permitted under applicable law
the independent public accountants for the Fund, will be given
access to the books and records of the foreign banking institution
relating to its actions under its agreement
<PAGE>26
with the Custodian; and (e) assets of the Fund held by the foreign
sub-custodian will be subject only to the instructions of the
Custodian or its agents.
3.6. Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the
books and records of any foreign banking institution employed as a
foreign sub-custodian insofar as such books and records relate to
the performance of such foreign banking institution under its
agreement with the Custodian.
3.7. Reports by Custodian. The Custodian will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of
the securities and other assets of the Fund held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Fund's securities and other
assets and advices or notifications of any transfers of securities
to or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of the Fund indicating, as
to securities acquired for the Fund, the identity of the entity
having physical possession of such securities.
3.8. Transactions in Foreign Custody Account (a) Except as otherwise
provided in paragraph (b) of this Section 3.8, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, mutatis
mutandis, to the foreign securities of the Fund held outside the
United States by foreign sub-custodians.
<PAGE>27
(b) Notwithstanding any provision of this Contract to the
contrary, settlement and payment for securities received for the
account of the Fund and delivery of securities maintained for the
account of the Fund may be effected in accordance with the
customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which
the transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from
such purchaser or dealer.
(c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of this
Contract, and the Fund agrees to hold any such nominee harmless
from any liability as a holder of record of such securities.
3.9. Liability of Foreign Sub-Custodians. Each agreement pursuant to
which the Custodian employs a foreign banking institution as a
foreign sub-custodian shall require the institution to exercise
reasonable care in the performance of its duties and to indemnify,
and hold harmless, the Custodian and each Fund from and against
<PAGE>28
any loss, damage, cost, expense, liability or claim arising out of
or in connection with the institution's performance of such
obligations. At the election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian with respect to any
claims against a foreign banking institution as a consequence of
any such loss, damage, cost, expense, liability or claim if and to
the extent that the Fund has not been made whole for any such
loss, damage, cost, expense, liability or claim.
3.10. Liability of Custodian. The Custodian shall be liable for the acts
or omissions of a foreign banking institution to the same extent
as set forth with respect to sub-custodians generally in this
Contract and, regardless of whether assets are maintained in the
custody of a foreign banking institution, a foreign securities
depository or a branch of a U.S. bank as contemplated by paragraph
3.13 hereof, the Custodian shall not be liable for any loss,
damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of
war or terrorism or any loss where the sub-custodian has otherwise
exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.10, in delegating custody duties to
State Street London Ltd., the Custodian shall not be relieved of
any responsibility to the Fund for any loss due to
<PAGE>29
such delegation, except such loss as may result from (a) political
risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other
losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God,
nuclear incident or other losses under circumstances where the
Custodian and State Street London Ltd. have exercised reasonable
care.
3.11. Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose including the purchase
or sale of foreign exchange or of contracts for foreign exchange,
or in the event that the Custodian or its nominee shall incur or
be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any
property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available
cash and to dispose of the Fund assets to the extent necessary to
obtain reimbursement.
3.12. Monitoring Responsibilities. The Custodian shall furnish annually
to the Fund, during the month of June,
<PAGE>30
information concerning the foreign sub-custodians employed by the
Custodian. Such information shall be similar in kind and scope to
that furnished to the Fund in connection with the initial approval
of this Contract. In addition, the Custodian will promptly inform
the Fund in the event that the Custodian learns of a material
adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in
the case of any foreign sub-custodian not the subject of an
exemptive order from the Securities and Exchange Commission is
notified by such foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline
below $200 million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below $200 million (in
each case computed in accordance with generally accepted U.S.
accounting principles).
3.13. Branches of U.S. Banks
----------------------
(a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of the Fund assets are
maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment Company Act
of 1940 meeting the qualification set forth in Section 26(a) of
said Act. The appointment of any such branch as a sub-custodian
shall be governed by paragraph 1 of this Contract.
<PAGE>31
(b) Cash held for the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Fund
with the Custodian's London branch, which account shall be subject
to the direction of the Custodian, State Street London Ltd. or
both.
4. Payments for Repurchases or Redemptions and Sales of
----------------------------------------------------
Shares of the Fund
- -------------------
From such funds as may be available for the purpose but subject to
the limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of the fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
<PAGE>32
The Custodian shall receive from the distributor for the Fund's
Shares or from the Transfer Agent of the Fund and deposit into the Fund's
account such payments as are received for Shares of the Fund issued or sold from
time to time by the Fund. The Custodian will provide timely notification to the
Fund and the Transfer Agent of any receipt by it of payments for Shares of the
Fund.
5. Proper Instructions
-------------------
Proper Instructions as used herein means a writing signed or
initialled by one or more person or persons as the Board of Directors shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of Directors of the Fund
accompanied by a detailed description of procedures approved by the Board of
Directors, Proper Instructions may include communications effected directly
between electromechanical or electronic devices provided that the Board of
Directors and the Custodian are satisfied that such procedures afford adequate
safeguards for the Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.11.
<PAGE>33
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority
from the Fund:
1) make payments to others for minor expenses of handling
securities or other similar items relating to its duties under this Contract or
to itself in reimbursement for such payments, provided, that all such payments
shall be accounted for to the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Fund except as otherwise
directed by the Board of Directors of the Fund.
7. Evidence of Authority
----------------------
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been
<PAGE>34
properly executed by or on behalf of the Fund. The Custodian may receive and
accept a certified copy of a vote of the Board of Directors of the Fund as
conclusive evidence (a) of the authority of any person to act in accordance
with such vote or (b) of any determination or of any action by the Board of
Directors pursuant to the Articles of Incorporation as described in such vote,
and such vote may be considered as in full force and effect until receipt by
the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of
----------------------------------------------------
Account and Calculation of Net Asset Value and Net Income
- ----------------------------------------------------------
Unless otherwise directed in writing by the Fund, the Custodian
shall keep the books of account of the Fund and shall compute the net asset
value per share of the outstanding shares of the Fund. The Custodian shall also
calculate daily the net income of the Fund as described in the Fund's currently
effective prospectus and shall advise the Fund and the Transfer Agent daily of
the total amounts of such net income and, if instructed in writing by an officer
of the Fund to do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The calculations of
the net asset value per share and the daily income of the Fund shall be made at
the time or times described from time to time in the Fund's currently effective
prospectus.
9. Records
-------
The Custodian shall create and maintain all records relating to
its activities and obligations under this Contract in
<PAGE>35
such manner as will meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31 thereof and
Rules 3la-1 and 3la-2 thereunder, applicable federal and state tax laws and
any other law or administrative rules or procedures which may be applicable
to the Fund. All such records shall be the property of the Fund and shall at
all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by the Fund and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
10. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund may
from time to time request, to obtain from year to year favorable opinions from
the Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
<PAGE>36
11. Compensation of Custodian
---------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
12. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the title, validity
or genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel reasonably acceptable to
the Fund (who may be counsel for the Fund) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
Notwithstanding the foregoing, the responsibility of the Custodian with respect
to redemptions effected by check shall be in accordance with a separate
Agreement entered into between the Custodian and the Fund.
<PAGE>37
The Custodian shall be liable for the acts or omissions of a
foreign banking institution appointed pursuant to the provisions of Article 3 to
the same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States and, regardless of whether assets are maintained in
the custody of a foreign banking institution, a foreign securities depository or
a branch of a U.S. bank as contemplated by paragraph 3.11 hereof, the Custodian
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from, or caused by, the direction of or authorization by the Fund to
maintain custody or any securities or cash of the Fund in a foreign country
including, but not limited to, losses resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism.
If the Fund requires the Custodian to take any action with
respect to securities, which action involves the payment of money or which
action may, in the opinion of the Custodian, result in the Custodian or its
nominee assigned to the Fund being liable for the payment of money or incurring
liability of some other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the Custodian in an
amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or securities
for any purpose or in the event that the Custodian or its nominee shall incur or
be assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with
<PAGE>38
the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement.
13. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however, that the Custodian shall not act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors of the Fund has approved the initial use
of a particular Securities System and the receipt of an annual certificate of
the Secretary or an Assistant Secretary that the Board of Directors has reviewed
the use by the Fund of such Securities System, as required in each case by Rule
17f-4 under the Investment Company Act of 1940, as amended, and that the
Custodian shall not act under Section 2.10A hereof in the absence of receipt of
an initial certificate of the Secretary or
<PAGE>39
an Assistant Secretary that the Board of Directors has approved the initial use
of the Direct Paper System and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Directors has reviewed the
use by the Fund of the Direct Paper System; provided further, however, that the
Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Articles of
Incorporation, and further provided, that the Fund may at any time by action of
its Board of Directors (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the
Custodian such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
14. Successor Custodian
-------------------
If a successor custodian shall be appointed by the Board of
Directors of the Fund, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities then held by it hereunder and shall transfer
to an
<PAGE>40
account of the successor custodian all of the Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of Directors of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Directors shall have been
delivered to the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the Investment Company Act of
1940, doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of termination hereof
owing to failure of the Fund to
<PAGE>41
procure the certified copy of the vote referred to or of the Board of Directors
to appoint a successor custodian, the Custodian shall be entitled to fair
compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
15. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian
and the Fund may from time to time agree on such provisions interpretive of or
in addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Fund Agreement of the Fund. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment of this
Contract.
16. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of the Commonwealth of
Massachusetts.
<PAGE>42
17. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof,
all prior contracts between the Fund and the Custodian relating to the custody
of the Fund's assets.
18. Notices
-------
Written notices issued pursuant to this agreement shall be
personally delivered or mailed postage prepaid to the respective parties as
follows:
To the Fund: c/o General Electric Investment Corp.
3003 Summer Street
Stamford, CT 06904
Attn: Manager, Pension Accounting and
Trading Support
Telephone: 203-326-2398 Facsimile: 203-326-4268
To the Custodian: State Street Bank and Trust Company
Master Trust Division
One Monarch Drive
North Quincy, MA 02171
Attn: Judith Hackstaff
Telephone: 617-847-2703 Facsimile: 617-786-5046
or to such other address as a party may hereafter specify in writing.
19. The Parties
-----------
All references herein to the "Fund" are to each of the Funds listed on Appendix
A individually, as if this Contract were between such individual Fund and the
Custodian. In the case of a series Fund or trust, all references to the "Fund"
are to the individual series or portfolio of such Fund or trust, or to such Fund
or trust on behalf of the individual series or portfolio, as appropriate. With
respect to any Fund listed on Appendix A which is organized as a trust,
references herein to Board of Directors
<PAGE>43
and Articles of Incorporation shall be deemed a reference to Board of
Trustees and Declaration of Trust respectively and reference to shares of
capital stock shall be deemed a reference to shares of beneficial interest.
<PAGE>44
IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the day of , 19 .
ATTEST STATE STREET BANK AND TRUST COMPANY
- ------------------------------ By---------------------------------
Assistant Seceretary Vice President
ATTEST (FOR EACH OF THE S&S FUNDS NAMED ON
APPENDIX A HERETO)
- ----------------------------- By--------------------------------
ATTEST (FOR EACH OF THE ELFUN FUNDS NAMED
ON APPENDIX A HERETO)
- ----------------------------- By--------------------------------
<PAGE>
Appendix A
----------
Fund Name
- ---------
GE S&S Program Mutual Fund
GE S&S Long-Term Interest Fund
Elfun Diversified Fund
Elfun Global Fund
Elfun Money Market Fund
Elfun Trust
Elfun Tax
Exempt Income Fund
Elfun Income Fund
ATTEST
________________________ By:-----------------------
Assistant Secretary Vice President
<PAGE>
Appendix A
----------
Fund Name
- ---------
GE S&S Program Mutual Fund
GE S&S Long-Term Interest Fund
Elfun Diversified Fund
Elfun Global Fund
Elfun Money Market Fund
Elfun Trusts
Elfun Tax Exempt Income Fund
Elfun Income Fund
GE U.S. Equity Fund
GE Global Equity Fund
GE Fixed Income Fund
GE Tax-Exempt Fund
GE Money Market Fund
GE Strategic Investment Fund
ATTEST
STATE STREET BANK AND TRUST COMPANY
- -------------------------- By:---------------------------
Assistant Secretary Vice President
ATTEST (FOR EACH OF THE FUNDS
HEREINABOVE DESCRIBED)
- -------------------------- By:--------------------------
Alan M. Lewis Michael J. Cosgrove
December 14, 1992
<PAGE>
Appendix A
----------
This Appendix supersedes all previous Appendixes created with respect
to the Custodian Contract between State Street and GE Funds, dated July 1, 1989.
It is intended that the Custodian Contract apply to each Fund set forth below.
Fund Name
- ---------
GE S&S Program Mutual Fund
GE S&S Long-Term Interest Fund
Elfun Diversified Fund
Elfun Global Fund
Elfun Money Market Fund
Elfun Trusts
Elfun Tax Exempt Income Fund
Elfun Income Fund
GE U.S. Equity Fund
GE Global Equity Fund
GE Fixed Income
Fund GE Tax-Exempt Fund
GE Money Market Fund
GE Strategic Investment Fund
GE International Equity Fund
GE Short-Term Government Fund
ATTEST
STATE STREET BANK AND TRUST COMPANY
- -------------------------- By:---------------------------
Assistant Secretary Vice President
ATTEST (FOR EACH OF THE FUNDS
HEREINABOVE DESCRIBED)
- -------------------------- By:--------------------------
Alan M. Lewis Michael J. Cosgrove
March 1, 1994
<PAGE>
Appendix A
----------
This Appendix supersedes all previous Appendixes created with respect
to the Custodian Contract between State Street and the parties listed in
Appendix A thereto, dated July 1, 1989 (as thereafter amended). It is intended
that the Custodian Contract apply to each Fund set forth below.
Fund Name
- ---------
GE S&S Program Mutual Fund
GE S&S Long-Term Interest Fund
Elfun Diversified Fund
Elfun Global Fund
Elfun Money Market Fund
Elfun Trusts
Elfun Tax Exempt Income Fund
Elfun Income Fund
GE U.S. Equity Fund
GE Global Equity Fund
GE Fixed Income Fund
GE Tax-Exempt Fund
GE Money Market Fund
GE Strategic Investment Fund
GE International Equity Fund
GE Short-Term Government Fund
GE Mid-Cap Growth Fund
GE International Fixed Income Fund
GE U.S. Equity Portfolio
GE International Equity Portfolio
GE Strategic Investment Portfolio
GE Fixed Income Portfolio
GE Money Market Portfolio
ATTEST
STATE STREET BANK AND TRUST COMPANY
- -------------------------- By:---------------------------
Assistant Secretary Vice President
ATTEST (FOR EACH OF THE FUNDS
HEREINABOVE DESCRIBED)
- -------------------------- By:--------------------------
Alan M. Lewis Michael J. Cosgrove
June 30, 1994
<PAGE>
All Funds Listed on Appendix A
August 12, 1994
To: Our Global Mutual Fund Clients
Re: Board Approval of State Street's Global Custody Network
In conjunction with the release of State Street's 1994 Annual Review of Foreign
Custody at the end of June, please find enclosed a blank copy of the Schedule A
Amendment to the Custody Contract. The Schedule A documents for State Street the
countries, subcustodians and depositories within its Global Custody Network
which have been approved by a mutual fund's Board of Directors or Trustees to
maintain the fund's assets outside of the United States. Per S.E.C. Rule 17f-5,
a fund's Board must approve foreign custody arrangements prior to the fund's
holding assets in a foreign country. The Board must also review and approve the
continuance of such arrangements at least annually.
This blank Schedule A contains State Street's most recent Global Custody Network
or mutual fund clients. It provides a uniform and convenient format for the
fund's authorized officer to indicate which foreign custody arrangements have
been approved by the Board. Please return the Schedule A to us in the
accompanying pre-printed envelope after the Board has voted.
At this time, we would also like to ask that you provide us with a copy of the
fund's Prospectus and Statement of Additional Information. These materials
greatly assist us in responding to your foreign custody questions and providing
information which is fund-specific.
Thank you for your assistance.
Mats Hansson
Assistant Vice President
17f-5 Compliance
<PAGE>
SCHEDULE A
17f-5 APPROVAL
The Board of Directors/Trustees of all Funds listed on Appendix A has approved
certain foreign banking institutions and foreign securities depositories within
State Street's Global Custody Network for use as a subcustodians for the Fund's
securities, cash and cash equivalents held outside of the United States. Board
approval is as indicated by the Fund's Authorized Officer:
Fund
Officer
Initials Country Subcustodian Central Depository
Argentina Citibank, N.A. Caja de Valores S.A.
Australia Westpac Banking Austraclear Limited;
Corporation
Reserve Bank
Information and
Transfer System
(RITS)
Austria GiroCredit Bank Oesterreichische
Aktiengesellschaft Kontrollbank AG
der Sparkassen
Bangladesh Standard Chartered None
Bank
Belgium Generale Bank Caisse
Interprofessionnelle
de Depots et de
Virements de Titres
S.A. (CIK);
Banque Nationale de
Belgique
Botswana Barclays Bank of None
Botswana Limited
Brazil Citibank, N.A. Bolsa de Valores de
Sao Paulo (Bovespa);
Banco Central do
Brasil, Systema
Especial de
Liquidacao e Custodia
(SELIC)
<PAGE>
Fund
Officer
Initials Country Subcustodian Central Depository
Canada Canada Trustco The Canadian
Mortgage Company Depository for
Securities Limited
(CDS)
Chile Citibank, N.A. None
China The Hongkong and Shanghai Securities
Shanghai Banking Central Clearing and
Corporation Limited Registration
Corporation (SSCCRC);
Shenzhen Securities
Registrars Co., Ltd.
and its designated
agent banks
Colombia Cititrust Colombia None
S.A. Sociedad
Fiduciaria
Cyprus Barclays Bank PLC None
Czech Ceskoslovenska Stredisko Cennych
Republic Obchodni Banka A.S. Papiru (SCP);
Czech National Bank
(CNB)
Denmark Den Danske Bank Vaerdipapircentralen-
The Danish Securities
Center (VP)
Egypt National Bank of None
Egypt
Finland Kansallis-Osake- The Central Share
Pankki Register of Finland
France Banque Paribas Societe
Interprofessionnelle
pour la Compensation
des Valeurs
Mobilieres (SICOVAM);
Banque de France,
Saturne System
<PAGE>
Fund
Officer
Initials Country Subcustodian Central Depository
Germany Berliner Handels - The Deutsche
und Frankfurter Kassenverein AG
Bank
Ghana Barclays Bank of None
Ghana Limited
Greece National Bank of The Central
Greece S.A. Securities Depository
(Apothetirio Titlon
A.E.)
Hong Kong Standard Chartered The Central Clearing
Bank and Settlement System
(CCASS)
Hungary Citibank Budapest None
Rt.
India The Hongkkong and None
Shanghai Banking
Corporation Limited
Indonesia Standard Chartered None
Bank
Ireland Bank of Ireland None;
The Central Bank of
Ireland, The Gilt
Settlement Office
(GSO)
Israel Bank Hapoalim B.M. The Clearing House of
the Tel Aviv Stock
Exchange
Italy Morgan Guaranty Monte Titoli S.p.A;
Trust Company
Banca d'Italia
Japan Sumitomo Trust & None;
Banking Co., Ltd.
Bank of Japan Net
System
Jordan The British Bank of None
the Middle East
<PAGE>
Fund
Officer
Initials Country Subcustodian Central Depository
Kenya Barclays Bank of None
Kenya Limited
Korea Bank of Seoul Korea Securities
Depository (KSD)
Malaysia Standard Chartered None
Bank Malaysia
Berhad
Mexico Citibank, N.A. S.D. INDEVAL, S.A. de
C.V. (Instituto para
el Deposito de
Valores);
Banco de Mexico
Morocco Banque Commerciale None
du Maroc
Netherlands MeesPierson N.V. Nederlands Centraal
Insituut voor Giraal
Effectenverkeer B.V.
(NECIGEF)
New Zealand ANZ Banking Group None;
(New Zealand)
Limited
The Reserve Bank of
New Zealand,
Autraclear NZ
Norway Christiania Bank og Verdipapirsentralen-
Kreditkasse The Norwegian
Registry of
Securities (VPS)
Pakistan Deutsche Bank AG None
Peru Citibank, N.A. Caja de Valores
(CAVAL)
Philippines Standard Chartered None
Bank
<PAGE>
Fund
Officer
Initials Country Subcustodian Central Depository
Poland Citibank Poland The National
S.A. Depository of
Securities (Centrum
Krajowego Depozytu
Papierow
Wartosciowych)
Portugal Banco Comercial Central de Valores
Portugues Mobiliarios (Central)
Singapore The Development The Central
Bank of Singapore Depository (Pte)
Limited (CDP)
South Standard Bank of None
Africa South Africa
Limited
Spain Banco Santander, Servicio de
S.A. Compensacion y
Liqidacion de Valores
(SCLV);
Banco de Espana,
Anotaciones en Cuenta
Sri Lanka The Hongkong and The Central
Shanghai Banking Depository System
Corporation Limited Pvt) Limited
Sweden Skandinaviska Vardepapperscentralen
Enskilda Banken The Swedish
Securities Register
Center (VPC)
Switzerland Union Bank of Schweizerische
Switzerland Effekten - Giro AG
(SEGA)
Taiwan Central Trust of The Taiwan Securities
China Central Depository
Company, Ltd. (TSCD)
Thailand Standard Chartered The Share Depository
Bank Center (SDC)
<PAGE>
Fund
Officer
Initials Country Subcustodian Central Depository
Turkey Citibank, N.A. Istanbul Stock
Exchange Settlement
and Custody Co., Inc.
(I.M.K.B. Takas ve
Saklama A.S.)
United State Street Bank None;
Kingdom and Trust Company
The Bank of England,
The Central Gilts
Office (CGO);
The Central
Moneymarkets Office
(CMO)
Uruguay Citibank, N.A. None
Venezuela Citibank, N.A. None
Zambia Barclays Bank of None
Zambia Limited
Zimbabwe Barclays Bank of None
Zimbabwe Limited
Euroclear/State Street London
Limited
Cedel/State Street London
Limited
Certified by:
- ------------------------------------------- -----------------------
Fund's Authorized Officer Date
Secretary of all Funds listed
on Appendix A
<PAGE>
APPENDIX A
GE U.S. Equity Fund
GE Global Equity Fund
GE Mid-Cap Growth Fund
GE International Equity Fund
GE Strategic Investment Fund
GE International Fixed Income Fund
GE Tax-Exempt Fund
GE Fixed Income Fund
GE Short-Term Government Fund
GE Money Market Fund
GE International Equity Portfolio
GE U.S. Equity Portfolio
GE Strategic Investment Portfolio
GE Fixed Income Portfolio
GE Money Market Portfolio
<PAGE>
FEE SCHEDULE TO THE CUSTODY CONTRACTS
-------------------------------------
Reference is made to that (i) Custodian Contract dated as of July 1,
1989 between State Street Bank and Trust Company ("State Street") and General
Electric Investment Corporation ("GEIC") and GE Investment Management
Incorporated ("GEIM"), as Investment Managers for certain entities specified
therein (GEIC and GEIM are collectively referred to herein as "GEI"), (as
amended through the date hereof, the "Non-Mutual Fund Contract") and (ii)
Custodian Contract dated as of July 1, 1989 between State Street and each of the
parties indicated on appendix A attached thereto (as amended through the date
hereof, the "Mutual Fund Contract"; the Non-Mutual Fund Contract and Mutual Fund
Contract are collectively referred to herein as the "Custody Contracts").
WHEREAS, Section 5 of the Non-Mutual Fund Contract and Section 11 of
the Mutual Fund Contract provide that compensation due State Street for
providing the services to GEI set forth in the Custody Contracts is to be agreed
to by State Street and GEI; and WHEREAS, State Street and GEI have agreed on
such compensation and wish to set forth terms of such compensation.
NOW, THEREFORE, in consideration of the premises and the mutual
benefits to be derived from this agreement, the parties hereby agree that the
fee schedule attached hereto as Schedule A (the "Fee Schedule") shall constitute
both the fee schedule contemplated in Section 5 of the Non-Mutual Fund Contract
and the agreement referred to in Section 11 of the
<PAGE>
Mutual Fund Contract. Except as expressly provided herein, this Fee Schedule
shall not, in any way, limit any of the rights, obligations, responsibilities
or duties set forth in the Custody Contracts for any of the parties.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of this 30 day of August, 1994.
General Electric Investment Corporation and
GE Investment Management Incorporated
---------------------------------------------
Donald W. Torey Executive Vice President
General Electric Investment Corporation and
GE Investment Management Incorporated (For
each of the Entities Named on Schedule B
hereto)
---------------------------------------------
Donald W. Torey
Executive Vice President
---------------------------------------------
Donald W. Torey, as Trustee, on behalf of
each of the S&S Funds named on Schedule C
hereto
---------------------------------------------
Donald W. Torey, as Trustee, on behalf of
each of the Elfun Funds named on Schedule C
hereto
---------------------------------------------
Alan M. Lewis, as Trustee, on behalf of each
of the GE Funds named on Schedule C hereto
State Street Bank and Trust Company
---------------------------------------------
By:
Title:
<PAGE>
SCHEDULE A
BASE FEE: GEI will be charged an annual flat fee of $4.7
million for custodial, accounting and recordkeeping
services as outlined in the Custody Contracts. This
$4.7 million fee is effective as of January 1, 1994 and
shall remain in effect, subject to adjustment specified
below, until expiration of the Custody Contracts on
February 28, 1997.
The annual base fee does not include fees for services
which are agreed upon in separate arrangements. For
example, fees for value-added services (e.g., SaFire,
Fixed Income Workstation) and fees for services related
to GEI external clients.
INCREMENTAL FEES (per year):
GEI and State Street agree to examine, on a semiannual
basis (June 30 and December 31), significant changes,
if any, to GEI's current operational or investment
structure which impact State Street and further agree
to discuss amending the base fee set forth above, to
reflect such changes. Examples of such changes,
include, but are not limited to:
-a change in the size of the assets managed by GEI and
(i) custodied by State Street or (ii) for which State
Street provides investment management support services
to GEI, due to acquisition, merger, or
management/custody responsibility realignment within
GEI (changes in asset size due to market related moves
are not included in this criteria);
-a change in the number of portfolios custodied by
State Street pursuant to the Custody Contracts for GEI
affiliates;
-a change from monthly pricing requirements to daily
pricing requirements for any of the non-mutual funds
listed on Schedule B attached hereto, as such Schedule
may be amended from time to time;
-a change in the investment policy of any of the
non-mutual funds listed on Schedule B which has the
effect of significantly increasing the allocation of
funds (i) from U.S. assets to non-U.S. assets or (ii)
with respect to non-U.S.
<PAGE>
assets, from non-emerging markets to emerging markets;
-an increase in the number of portfolios beyond 195
(excluding portfolios listed in Schedule C attached
hereto and portfolios covered under separate fee
schedules, for example, GEI external clients);
-the addition of any mutual fund property listed on
Schedule C; or
-an increase in the number of classes per mutual fund
listed on Schedule C, as such Schedule may be amended,
to a number greater than four.
REIMBURSEMENT FOR STATE STREET PERSONNEL
Should GEI request that State Street provide
personnel to work at GEI's Stamford office, then
State Street shall be reimbursed for providing such
personnel at a monthly rate of 1.5 times the monthly
salary of each individual supplied.
<PAGE>
SCHEDULE B
Account Name
General Electric Pension Trust
General Electric Insurance Plan Trust
General Electric Medical Care Trust for Pensioners
General Electric Relief and Loan Fund
RGE Corporate Base Contribution Trust
RGE Employee Stock Plan
General Electric Company (Corporate Treasury)
General Electric Foundation
General Electric Foundation, Inc.
Electric Mutual Liability Insurance Company
Electric Insurance Company
Employers Reinsurance Corporation
GE Investment Realty Partners I, L.P.
GE Investment Realty Partners II, L.P.
GE Investment Private Placement Partners I, L.P.
GE Investment Hotel Partners, L.P.
GE Investment International Fund
GE Investment International Fund - NYC
Damon Runyon - Walter Winchell Cancer Fund
<PAGE>
SCHEDULE C
Fund Name
GE S&S Program Mutual Fund
GE S&S Long-Term Interest Fund
GE S&S Program Holding Period Fund
GE S&S Program Short Term Interest Fund
GE S&S Program Money Market Fund
Elfun Diversified Fund
Elfun Global Fund
Elfun Money Market Fund
Elfun Trusts
Elfun Tax Exempt Income Fund
Elfun Income Fund
GE U.S. Equity Fund
GE Global Equity Fund
GE Fixed Income Fund
GE Tax-Exempt Fund
GE Money Market Fund
GE Strategic Investment Fund
GE International Equity Fund
GE Short-Term Government Fund
General Electric Savings and Security Plan Trust
<PAGE>
Appendix A
The Appendix supersedes all previous Appendixes created with respect to the
Custodian Contract between State Street and GE Funds, dated July 1, 1989. It is
intended that the Custodian Contract apply to each Fund set forth below.
Fund Name
GE S&S Program Mutual Fund GE Strategic Investment Fund
GE S&S Long-Term Interest Fund GE International Equity Fund
Elfun Diversified Fund GE Short-Term Government Fund
Elfun Global Fund GE Mid-Cap Growth Fund
Elfun Money Market Fund GE International Fixed Income Fund
Elfun Trusts GE U.S. Equity Portfolio
Elfun Tax-Exempt Income Fund GE International Equity Portfolio
Elfun Income Fund GE Strategic Investment Portfolio
GE Premier Growth Equity Fund GE Fixed Income Portfolio
GE U.S. Equity Fund GE Money Market Portfolio
GE Global Equity Fund GE Conservative Strategy Fund
GE Fixed Income Fund GE Moderate Strategy Fund
GE Tax-Exempt Fund GE Aggressive Strategy Fund
GE Money Market Fund GE Conservative Allocation Fund
GE Moderate Allocation Fund GE Aggressive Allocation Fund
ATTEST: STATE STREET BANK AND TRUST COMPANY
- ------------------------------ By:----------------------------------
ATTEST: (FOR EACH OF THE FUNDS HEREINABOVE
DESCRIBED)
- ------------------------------- By:-----------------------------------
September __, 1996
<PAGE>
FORM OF
TRANSFER AGENCY AND SERVICE AGREEMENT
between
GE LIFESTYLE FUNDS
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Article 1. Terms of Appointment; Duties of the Bank..................... 2
Article 2. Fees and Expenses............................................ 6
Article 3. Representations and Warranties of the Bank................... 7
Article 4. Representations and Warranties of the Fund................... 8
Article 5. Data Access Information...................................... 8
Article 6. Indemnification..............................................11
Article 7. Standard of Care.............................................13
Article 8. Covenants of the Fund and the Bank...........................13
Article 9. Termination of Agreement.....................................15
Article 10. Additional Funds.............................................15
Article 11. Assignment...................................................16
Article 12. Amendment....................................................16
Article 13. Massachusetts Law to Apply...................................17
Article 14. Force Majeure................................................17
Article 15. Consequential Damages........................................17
Article 16. Merger of Agreement..........................................17
Article 17. Limitations of Liability of the Trustees and
Shareholders.................................................17
Article 18. Counterparts.................................................18
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the __th day of _________, 19__, by and between
GE LIFESTYLE FUNDS, a Massachusetts business trust, having its principal office
and place of business at 3003 Summer Street, Stamford, Connecticut 06905 (the
"Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company
having its principal office and place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in six series, the
GE Conservative Strategy Fund, the GE Moderate Strategy Fund, the GE Aggressive
Strategy Fund, the GE Conservative Allocation Fund, the GE Moderate Allocation
Fund, and the GE Aggressive Allocation Fund (each such series, together with all
other series subsequently established by the Fund and made subject to this
Agreement in accordance with Article 8, being herein referred to as a
"Portfolio", and collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the
Bank as its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with certain other activities, and the
Bank desires to accept such appointment;
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1. Terms of Appointment; Duties of the Bank
----------------------------------------
1.1. Subject to the terms and conditions set forth in this Agreement,
the Fund, on behalf of the Portfolios, hereby employs and appoints the Bank to
act as, and the Bank agrees to act as its transfer agent for the authorized and
issued shares of beneficial interest of the Fund representing interests in each
of the respective Portfolios ("Shares"), dividend disbursing agent, custodian of
certain retirement plans and agent in connection with any accumulation,
open-account or similar plans provided to the shareholders of each of the
respective Portfolios of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information ("prospectus") of
the Fund on behalf of the applicable Portfolio, including without limitation any
periodic investment plan or periodic withdrawal program.
1.2. The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as applicable
and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof
to the Custodian of the Fund authorized
2
<PAGE>
pursuant to the Declaration of Trust of the Fund (the
"Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof to
the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund who shall thereby be
deemed to be acting on behalf of the Fund;
(v) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or
cause to be paid over in the appropriate manner such monies as
instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
3
<PAGE>
(viii) Issue replacement certificates for those certificates alleged
to have been lost, stolen or destroyed upon receipt by the Bank
of indemnification satisfactory to the Bank and protecting the
Bank and the Fund, and the Bank at its option, may issue
replacement certificates in place of mutilated stock
certificates upon presentation thereof and without such
indemnity;
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) Record the issuance of Shares of the Fund and maintain pursuant
to SEC Rule 17Ad-10(e) a record of the total number of Shares
which are authorized, based upon data provided to it by the
Fund, and issued and outstanding. The Bank shall also provide
the Fund on a regular basis with the total number of Shares
which are authorized and issued and outstanding and shall have
no obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take cognizance of
any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Fund.
4
<PAGE>
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i) perform the
customary services of a transfer agent, dividend disbursing agent, custodian of
certain retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to: maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in writing
those transactions and assets to be treated as exempt from blue sky reporting
for each State and (ii) verify the establishment of transactions for each State
on the system prior to activation and thereafter monitor the daily activity for
each State. The responsibility of the Bank for the Fund's blue sky
5
<PAGE>
State registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and the reporting of
such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
Article 1 may be established from time to time by agreement between the Fund on
behalf of each Portfolio and the Bank per the attached service responsibility
schedule. The Bank may at times perform only a portion of these services and the
Fund or its agent may perform these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing between the
Fund and the Bank.
Article 2. Fees and Expenses
-----------------
2.1. For performance by the Bank pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay the Bank an annual maintenance
fee for each Shareholder account as set out in the initial fee schedule attached
hereto. Such fees and out-of-pocket expenses and advances identified under
Section 2.2 below may be changed from time to time subject to mutual written
agreement between the Fund and the Bank.
2.2. In addition to the fee paid under Section 2.1 above, the Fund
agrees on behalf of each of the Portfolios to reimburse the Bank for
out-of-pocket expenses, including but not limited to confirmation production,
postage, forms, telephone, microfilm, microfiche, tabulating proxies, records
storage or
6
<PAGE>
advances incurred by the Bank for the items set out in the fee schedule attached
hereto. In addition, any other expenses incurred by the Bank at the request or
with the consent of the Fund, will be reimbursed by the Fund on behalf of the
applicable Portfolio.
2.3. The Fund agrees on behalf of each of the Portfolios to pay all
fees and reimbursable expenses within five days following the mailing of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all Shareholder accounts shall be advanced to the
Bank by the Fund at least seven (7) days prior to the mailing date of such
materials.
Article 3. Representations and Warranties of the Bank
------------------------------------------
The Bank represents and warrants to the Fund that:
3.1. It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.2. It is duly qualified to carry on its business in the Commonwealth
of Massachusetts.
3.3. It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.4. All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.5. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
7
<PAGE>
Article 4. Representations and Warranties of the Fund
------------------------------------------
The Fund represents and warrants to the Bank that:
4.1. It is a business trust duly organized and existing and in good
standing under the laws of Massachusetts.
4.2. It is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into and perform this Agreement.
4.3. All corporate proceedings required by said Declaration of Trust
and By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.4. It is an open-end management investment company registered under
the Investment Company Act of 1940, as amended.
4.5. A registration statement under the Securities Act of 1933, as
amended on behalf of each of the Portfolios is currently effective and will
remain effective, and appropriate state securities law filings have been made
and will continue to be made, with respect to all Shares of the Fund being
offered for sale.
Article 5. Data Access Information
-----------------------
5.1. The Fund acknowledges that the data bases, computer programs,
screen format, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of the Fund's ability to
access certain Fund-related data ("Customer Data") maintained by the Bank on
data bases under the control and ownership of the Bank ("Data Access Services")
constitute copyrighted, trade secret, or other proprietary information
(collectively, "Data Access Information")
8
<PAGE>
of substantial value to the Bank. The Fund agrees to treat all Data Access
Information as proprietary to the Bank and further agrees that it shall not
divulge any Data Access Information to any person or organization except as may
be provided hereunder; however, it is further agreed by the Bank that Customer
Data shall not be deemed to be proprietary to the Bank and that the Fund is not
restricted hereunder as to the use of such Customer Data. Without limiting the
foregoing, the Fund agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated
in writing by the Bank and solely in accordance with the Bank's applicable user
documentation;
(b) to refrain from copying or duplicating in any way the Data Access
Information;
(c) to refrain from obtaining unauthorized access to any portion of
the Data Access Information, and if such access is inadvertently obtained, to
inform in a timely manner of such fact and dispose of such information in
accordance with the Bank's instructions;
(d) to refrain from causing or allowing third-party data required
hereunder from being retransmitted to any other computer facility or other
location, except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the
9
<PAGE>
Bank in Data Access Information at common law, under federal copyright law and
under other federal or state law.
Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this Article 5. The obligations of this Article
shall survive any earlier termination of this Agreement.
5.2. If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently issued
user documentation for such services, the Bank shall endeavor in a timely manner
to correct such failure. Organizations from which the Bank may obtain certain
data included in the Data Access Services are solely responsible for the
contents of such data and the Fund agrees to make no claim against the Bank
arising out of the contents of such third-party data, including, but not limited
to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND
SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS,
AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE
EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.3. If the transactions available to the Fund include the ability to
originate electronic instructions to the Bank in order to (i) effect the
transfer or movement of cash of Shares or (ii) transmit Shareholder information
or other information (such transactions constituting a "COEFI"), then in such
event the Bank shall be entitled to rely on the validity and
10
<PAGE>
authenticity of such instruction without undertaking any further inquiry as long
as such instruction is undertaken in conformity with security procedures
established by the Bank from time to time.
Article 6. Indemnification
---------------
6.1. The Bank shall not be responsible for, and the Fund shall on
behalf of the applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, reasonable counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of the Fund
hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors
of information, records or documents which (i) are received by the Bank or its
agents or subcontractors, and (ii) have been prepared, maintained or performed
by the Fund or any other person or firm on behalf of the Fund including but not
limited to any previous transfer agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on behalf of the
applicable Portfolio.
11
<PAGE>
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or regulations
of any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
6.2. At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund on behalf of the applicable Portfolio for any
action taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel. The Bank, its agents and subcontractors shall be
protected and indemnified in acting upon any paper or document furnished by or
on behalf of the Fund, reasonably believed to be genuine and to have been signed
by the proper person or persons, or upon any instruction, information, data,
records or documents provided the Bank or its agents or subcontractors by
machine readable input, telex, CRT data entry or other similar means authorized
by the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund. The Bank, its
agents and subcontractors shall also be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the proper
12
<PAGE>
countersignature of any former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.
6.3. In order that the indemnification provisions contained in this
Article 6 shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund of such
assertion, and shall keep the Fund advised with respect to all developments
concerning such claim. The Fund shall have the option to participate with the
Bank in the defense of such claim or to defend against said claim in its own
name or in the name of the Bank. The Bank shall in no case confess any claim or
make any compromise in any case in which the Fund may be required to indemnify
the Bank except with the Fund's prior written consent.
Article 7. Standard of Care
----------------
7.1. The Bank shall at all times act in good faith and agrees to use
its best efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall not be
liable for loss or damage due to errors unless said errors are caused by its
negligence, bad faith, or willful misconduct of that of its employees.
Article 8. Covenants of the Fund and the Bank
----------------------------------
8.1. The Fund shall on behalf of each of the Portfolios promptly
furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the Fund
authorizing the appointment of the Bank and the execution and delivery of this
Agreement.
13
<PAGE>
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
8.2. The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
8.3. The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
8.4. The Bank and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
8.5. In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the Fund and
to secure instructions from an
14
<PAGE>
authorized officer of the Fund as to such inspection. The Bank reserves the
right, however, to exhibit the Shareholder records to any person whenever it is
advised by its counsel that it may be held liable for the failure to exhibit the
Shareholder records to such person.
Article 9. Termination of Agreement
------------------------
9.1. This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
9.2. Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material will
be borne by the Fund on behalf of the applicable Portfolio(s) and the Bank
reserves the right to charge for any other reasonable expenses associated with
such termination. Additionally, if the Fund should exercise its right to
terminate within twelve (12) months of the execution of this Agreement, the Bank
may impose upon the Fund a charge equivalent to the average of three (3) months'
fees.
Article 10. Additional Funds
----------------
10.1. In the event that the Fund establishes one or more series of
Shares in addition to the GE U.S. Equity Fund, the GE Tax-Exempt Fund, the GE
Fixed Income Fund, the GE Global Equity Fund, the GE Strategic Investment Fund,
the GE Money Market Fund with respect to which it desires to have the Bank
render services as transfer agent under the terms hereof, it shall so notify the
Bank in writing, and if the Bank agrees in
15
<PAGE>
writing to provide such services, such series of Shares shall become a Portfolio
hereunder.
Article 11. Assignment
----------
11.1. Except as provided in Section 11.3 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
11.2. This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
11.3. The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data Services,
Inc., a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended ("Section 17A(c)(l)"), (ii) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS affiliate;
provided, however, that the Bank shall be as fully responsible to the Fund for
the acts and omissions of any subcontractor as it is for its own acts and
omissions.
Article 12. Amendment
---------
12.1. This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the
Trustees of the Fund.
16
<PAGE>
Article 13. Massachusetts Law to Apply
--------------------------
13.1. This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
Article 14. Force Majeure
-------------
14.1. In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
Article 15. Consequential Damages
---------------------
15.1. Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
Article 16. Merger of Agreement
-------------------
16.1. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
Article 17. Limitations of Liability of the Trustees and Shareholders
---------------------------------------------------------
17.1. A copy of the Declaration of Trust of the Trust is on file with
the Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is
17
<PAGE>
executed on behalf of the Trustees of the Trust as Trustees and not individually
and that the obligations of this instrument are not binding upon any of the
Trustees or Shareholders individually but are binding only upon the assets and
property of the Fund.
Article 18. Counterparts
------------
18.1. This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
GE LIFESTYLE FUNDS
BY:_________________________________
Executive Vice President
ATTEST:
____________________________
Secretary
STATE STREET BANK AND TRUST COMPANY
BY:_________________________________
Senior Vice President
ATTEST:
____________________________
Assistant Secretary
19
<PAGE>
STATE STREET BANK AND TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
--------------
Bank Fund
---- ----
1. Receives orders for the purchase x of Shares. x
2. Issue Shares and hold Shares in x Shareholders
accounts. x
3. Receive redemption requests. x
4. Effect transactions 1-3 above x
directly with broker-dealers.
5. Pay over monies to redeeming x
Shareholders.
6. Effect transfers of Shares. x
7. Prepare and transmit dividends x
and distributions.
8. Issue Replacement Certificates. N/A
9. Reporting of abandoned property. x
10. Maintain records of account. x
11. Maintain and keep a current and x
accurate control book for each
issue of securities.
12. Mail proxies. x
13. Mail Shareholder reports. x
14. Mail prospectuses to current x
Shareholders.
15. Withhold taxes on U.S. resident x
and non-resident alien accounts.
16. Prepare and file U.S. Treasury x
Department forms.
17. Prepare and mail account and x
confirmation statements for
Shareholders.
20
<PAGE>
Service Performed Responsibility
--------------
Bank Fund
---- ----
18. Provide Shareholder account x
information.
19. Blue sky reporting. x
* Such services are more fully described in Article 1.02 (a), (b) and (c)
of the Agreement.
GE LIFESTYLE FUNDS
BY:_________________________________
Executive Vice President
ATTEST:
____________________________
Secretary
STATE STREET BANK AND TRUST COMPANY
BY:_________________________________
Senior Vice President
ATTEST:
____________________________
Assistant Secretary
21
<PAGE>
Appendix A
----------
It is intended that the Transfer Agency and Services Agreement between
State Street and GE LifeStyle Funds, dated ________ , 19 , apply to each Fund
set forth below.
Fund Name
- ---------
GE Conservative Strategy Fund
GE Moderate Strategy Fund
GE Aggressive Strategy Fund
GE Conservative Allocation Fund
GE Moderate Allocation Fund
GE Aggressive Allocation Fund
ATTEST: STATE STREET BANK AND TRUST COMPANY
_____________________________ BY:________________________________
Assistant Secretary William M. Mahoney
Vice President
ATTEST: (FOR EACH OF THE FUNDS HEREINABOVE
DESCRIBED)
_____________________________ BY:________________________________
Alan M. Lewis Michael J. Cosgrove
________ __, 19__
<PAGE>
BOSTON FINANCIAL DATA SERVICES, INC.
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
GE LifeStyle Funds/Elfun Funds/S&S Funds
- -----------------------------------------------------------------------------
Base Fee Per Fund
Elfun $6,720
S&S $6,720
GE-Net Assets > $25,000,000 $6,720
GE-Net Assets > $10,000,000 $2,000
GE-Net Assets < $10,000,000 -0-
Any new fund established after May 31, 1994 would assume the full base fee load.
Account Service Fees
- --------------------
Money Market Funds $15.00
Daily Accrual Fund(s) $4.80
Non-Daily Accrual Fund(s) $2.25
Closed Account Fee $1.35
Fees are billable on a monthly basis at the rate of 1/12 of the annual fee. A
charge is made for an account in the month that an account opens or closes.
Fixed Per Account Rate
- ----------------------
Elfun $8.00
S&S $2.00
GE Funds $8.00
Other Fees
- ----------
Annual IRA Maintenance Fee $25.00
to BFDS (Stock IRA)
Out-of-Pocket Expenses
- ----------------------
Out-of-Pocket expenses include but are not limited to: Confirmation statements,
checks, certificates, postage forms, telephone, microfilm, microfiche, year-end
forms and expenses incurred at the specific direction of the fund.
GEIC Funds STATE STREET BANK & TRUST CO.
By:_________________________ By:______________________________________
Title:______________________ Title:___________________________________
Date:_______________________ Date:____________________________________
