<PAGE>1
As filed with the Securities and Exchange Commission
on July 10, 1996
Securities Act File No. 33-______
Investment Company Act File No. 811-______
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. __ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. __ [ ]
(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>2
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
- -----------------------
* 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>3
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
Part B Heading in Statement of
Item No. Additional Information
- -------- -----------------------
12. General Information and History.... The Funds' Performance
<PAGE>4
Part B Heading in Statement of
Item No. Additional Information
- -------- -----------------------
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 JULY 10, 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
request and without charge by calling the Trust at the telephone number listed
<PAGE>2
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
September __, 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........................................................34
RETIREMENT PLANS..........................................................41
REDEMPTION OF SHARES......................................................41
EXCHANGE PRIVILEGE........................................................45
NET ASSET VALUE...........................................................46
DIVIDENDS, DISTRIBUTIONS AND TAXES........................................46
CUSTODIAN AND TRANSFER AGENT..............................................49
DISTRIBUTOR...............................................................49
THE FUNDS' PERFORMANCE....................................................50
ADDITIONAL MATTERS........................................................52
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 will bear directly in connection with an
investment in each Fund's shares. In addition to these direct expenses, Fund
shares will indirectly bear their pro rata share of the expenses of the
Underlying GE Funds.
Fee Table
GE Conservative GE Moderate GE Aggressive
Strategy Fund Strategy Fund Strategy Fund
Shareholder
Transaction Expenses
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
Annual Fund Operating
Expenses (as a
percentage of average
net assets)
Advisory and
Administration
fees: .20% .20% .20%
<PAGE>5
12b-1 fees: None None None
Other expenses: None None None
Total Operating
Expenses: .20% .20%` .20%
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 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, 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 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.
<PAGE>6
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 higher.
Based upon a weighted average of the Class A expense ratios of Underlying GE
Funds in which a particular Fund is expected to invest at the commencement of
investment operations, the approximate expense ratios are expected to be as
follows: GE Conservative Strategy Fund -- _____%; GE Moderate Strategy Fund --
_____%; and GE Aggressive Strategy Fund -- _____%. The expense ratios may be
higher or lower depending on the allocation of the Underlying GE Funds with the
Fund.
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.
<PAGE>7
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
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.
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".
Before changing either the Asset Allocation Ranges or the Investment Limits, the
Board of Trustees will consult with GEIM and the Investment Consultant and
<PAGE>9
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.
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
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.
<PAGE>10
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.
</TABLE>
<TABLE>
<CAPTION>
Investment Limits (Percent of Each Fund's Net Assets)
Conservative Moderate Aggressive
Underlying GE Fund Fund Fund Fund
- ------------------------------------------------------------ --------------------- --------------- ------------------
<S> <C> <C> <C>
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%
============================================================ ===================== =============== ==================
</TABLE>
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 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
<PAGE>11
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.
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 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.
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
<PAGE>12
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. 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 August __, 1996, in excess of
$_____ 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. 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, 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 invest more than 25% of the value of its total assets in
securities of issuers in any one industry (except to the extent that the
Underlying GE Funds are so concentrated).
Certain other investment restrictions adopted by the Trust with respect to the
Funds are described in the Statement of Additional Information. Investment
<PAGE>14
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 may result in higher expenses being incurred
by the Underlying GE Funds. 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
<PAGE>15
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
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.
<PAGE>17
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.
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.
<PAGE>18
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
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
<PAGE>19
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
is significantly greater because low-rated securities generally are unsecured
and frequently are subordinated to the prior payment of senior indebtedness. An
<PAGE>24
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. 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
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
<PAGE>25
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
<PAGE>27
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 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
<PAGE>28
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
<PAGE>29
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>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 August __, 1996, in excess of $___ billion, of
which roughly $__ 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 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
<PAGE>32
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
[____________,] 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
[Day-to-day portfolio manager and biographical data to
follow.]
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
<PAGE>33
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
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)
<PAGE>34
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.
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
<PAGE>35
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.
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:
<PAGE>36
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
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].
<PAGE>37
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
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
<PAGE>38
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:
<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> <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 is
<PAGE>39
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.]
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
<PAGE>40
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
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.
<PAGE>41
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.
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.
<PAGE>42
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:
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
<PAGE>43
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
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:
<PAGE>44
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.
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
<PAGE>45
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
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.
<PAGE>46
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.
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
<PAGE>47
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
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
<PAGE>48
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.
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,
<PAGE>49
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.
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
<PAGE>50
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
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
<PAGE>51
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 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.
<PAGE>52
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 each Fund vote by individual
Fund 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 requires that shares of the Funds be voted in
the aggregate. 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 two-thirds of the outstanding shares of the Trust may remove a Trustee
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.
<PAGE>53
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
- GE Conservative Strategy Fund
- GE Moderate Strategy Fund
- GE Aggressive Strategy Fund
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 Underlying GE Fund, other than the Money
Market Fund, may invest only in the following types of money market instruments:
Government Securities; obligations issued or guaranteed by foreign governments
or by any of their political subdivisions, authorities, agencies or
instrumentalities; bank obligations (including certificates of deposit, time
deposits and bankers' acceptances of foreign or domestic banks, domestic savings
and loan associations and other banking institutions having total assets in
excess of $500 million); commercial paper; and repurchase agreements.
Each of the Funds and Underlying GE Funds may invest in the following types of
Government Securities: debt obligations of varying maturities issued by the U.S.
Treasury or issued or guaranteed by the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association ("GNMA"), General
Services Administration, Central Bank for Cooperatives, Federal Farm Credit
Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation
("FHLMC"), Federal Intermediate Credit Banks, Federal Land Banks, Federal
National Mortgage Association ("FNMA"), Federal Deposit Insurance Corporation,
Maritime Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Student Loan Marketing Association and Resolution Trust Corporation.
Direct obligations of the U.S. Treasury include a variety of securities that
differ in their interest rates, maturities and dates of issuance. Certain of the
Government Securities that may be held by the Funds and Underlying GE Funds are
instruments that are supported by the full faith and credit of the United
States, whereas other Government Securities that may be held by the Funds and
<PAGE>A-2
Underlying GE Funds are supported by the right of the issuer to borrow from the
U.S. Treasury or are supported solely by the credit of the instrumentality.
Because the U.S. Government is not obligated by law to provide support to an
instrumentality that it sponsors, a Fund will invest in obligations issued by an
instrumentality of the U.S. Government only if GEIM determines that the
instrumentality's credit risk does not make its securities unsuitable for
investment by such Fund.
Each Fund and Underlying GE Fund, other than the Money Market Fund, may invest
in money market instruments issued or guaranteed by foreign governments or by
any of their political subdivisions, authorities, agencies or instrumentalities.
The Funds and the International Fund and the U.S. Equity Fund may invest in
these instruments only if they are rated AAA or AA by S&P or Aaa or Aa by
Moody's or have received an equivalent rating from another NRSRO, or if unrated,
are deemed by GEIM to be of equivalent quality. The Income Fund and the
Government Fund may invest in such money market instruments if they are rated no
lower than B by S&P or Moody's or have received an equivalent rating from
another NRSRO, or if unrated, are deemed by GEIM to be of equivalent quality.
Commercial paper held by a Fund or an Underlying GE Fund, other than the Money
Market Fund, may be rated no lower than A-2 by S&P or Prime-2 by Moody's or the
equivalent from another NRSRO, or if unrated, must be issued by an issuer having
an outstanding unsecured debt issue then rated within the three highest
categories. A description of the rating systems of Moody's and S&P is contained
in an Appendix to the Statement of Additional Information. At no time will the
investments of a Fund or an Underlying GE Fund, other than the Money Market
Fund, in bank obligations, including time deposits, exceed 25% of the value of
the Fund's assets.
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
<PAGE>A-3
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, Government Securities or other liquid high grade debt obligations 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
<PAGE>A-4
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 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
<PAGE>A-5
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 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
<PAGE>A-6
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 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
<PAGE>A-7
"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 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 certain
liquid assets held in a segregated account 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
<PAGE>A-8
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 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 readily marketable
securities 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
<PAGE>A-9
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.
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
<PAGE>A-10
restructuring. Cash, Government Securities or other liquid, high-grade debt
obligations 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 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
<PAGE>A-11
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 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
<PAGE>A-12
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 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
<PAGE>A-13
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 companies. Several risks are
associated with mortgage related securities generally. The monthly cash inflow
<PAGE>A-14
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.
<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
<PAGE>A-16
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 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 liquid, high grade debt
securities 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 JULY 10, 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
September __, 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......................................................13
DESCRIPTION OF THE UNDERLYING GE FUNDS..................................14
MANAGEMENT OF THE TRUST.................................................27
RETIREMENT PLANS........................................................31
PURCHASE OF SHARES......................................................32
REDEMPTION OF SHARES....................................................32
EXCHANGE PRIVILEGE......................................................33
NET ASSET VALUE.........................................................34
DIVIDENDS, DISTRIBUTIONS AND TAXES......................................34
CUSTODIAN AND TRANSFER AGENT............................................37
DISTRIBUTOR.............................................................37
THE FUNDS' PERFORMANCE..................................................37
ADDITIONAL MATTERS......................................................39
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 will bear directly in connection with an
investment in each Fund's shares. In addition to these direct expenses, Fund
shares will indirectly bear their pro rata share of the expenses of the
Underlying GE Funds.
Fee Table
<TABLE>
<CAPTION>
GE Conservative GE Moderate GE Aggressive
Shareholder Transaction Expenses Allocation Fund Allocation Fund Allocation Fund
--------------- --------------- ---------------
<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)
Advisory and Administration
fees: .20% .20% .20%
12b-1 fees: None None None
Other expenses (after
reimbursement):* None None None
Total Operating Expenses (after
reimbursement): .20% .20% .20%
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 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,
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 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.
<PAGE>6
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 higher.
Based upon a weighted average of the Class D expense ratios of Underlying GE
Funds in which a particular Fund is expected to invest at the commencement of
investment operations, the approximate expense ratios are expected to be as
follows: GE Conservative Allocation Fund -- _____%; GE Moderate Allocation Fund
- -- _____%; and GE Aggressive Allocation Fund -- _____%. The expense ratios may
be higher or lower depending on the allocation of the Underlying GE Funds with
the Fund.
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 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.
<PAGE>7
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
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.
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".
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
<PAGE>9
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.
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 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:
<PAGE>10
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 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.
Each Fund can invest a certain portion of its cash reserves in GE Money Market
Fund or directly in money market instruments. A
<PAGE>11
reserve position provides flexibility 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.
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,
<PAGE>12
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. 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 August __, 1996, in excess of $_____ 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.
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.
<PAGE>13
1. No Fund may borrow money, 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 invest more than 25% of the value of its total assets in
securities of issuers in any one industry (except to the extent that the
Underlying GE Funds are so concentrated).
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.
<PAGE>14
Higher turnover rates may result in higher expenses being incurred by the
Underlying GE Funds. 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 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
<PAGE>15
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 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
<PAGE>16
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.
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
<PAGE>17
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 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,
<PAGE>18
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 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
<PAGE>19
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
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
<PAGE>20
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 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>21
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.
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
<PAGE>22
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
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.
<PAGE>23
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. 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
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
<PAGE>24
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.
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
<PAGE>25
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.
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
<PAGE>26
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
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
<PAGE>27
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
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
<PAGE>28
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.
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
<PAGE>29
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 August __,
1996, in excess of $___ billion, of which roughly $__ 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
<PAGE>30
affiliates (including counsel fees), taxes payable by the Trust 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 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
[__________,] 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
[Day-to-day portfolio manager and biographical data to follow.]
<PAGE>31
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 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>32
PURCHASE OF SHARES
Purchases in 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>33
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.
<PAGE>34
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>35
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>36
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>37
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>38
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>39
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 each Fund vote by individual
Fund 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 requires that shares of the Funds be voted in
the aggregate. 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 two-thirds of the outstanding shares of the Trust may remove a Trustee
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
<PAGE>40
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
- GE Conservative Allocation Fund
- GE Moderate Allocation Fund
- 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 Underlying GE Fund, other than the Money
Market Fund, may invest only in the following types of money market instruments:
Government Securities; obligations issued or guaranteed by foreign governments
or by any of their political subdivisions, authorities, agencies or
instrumentalities; bank obligations (including certificates of deposit, time
deposits and bankers' acceptances of foreign or domestic banks, domestic savings
and loan associations and other banking institutions having total assets in
excess of $500 million); commercial paper; and repurchase agreements.
Each of the Funds and Underlying GE Funds may invest in the following types of
Government Securities: debt obligations of varying maturities issued by the U.S.
Treasury or issued or guaranteed by the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association ("GNMA"), General
Services Administration, Central Bank for Cooperatives, Federal Farm Credit
Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation
("FHLMC"), Federal Intermediate Credit Banks, Federal Land Banks, Federal
National Mortgage Association ("FNMA"), Federal Deposit Insurance Corporation,
Maritime Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Student Loan Marketing Association and Resolution Trust Corporation.
Direct obligations of the U.S. Treasury include a variety of securities that
differ in their interest rates, maturities and dates of issuance. Certain of the
Government Securities that may be held by the Funds and Underlying GE Funds are
instruments that are supported by the full faith and credit of the United
States, whereas other Government Securities that may be held by the Funds and
Underlying GE Funds are supported by the right of the issuer to borrow from the
U.S. Treasury or are supported solely by the credit of the instrumentality.
Because the U.S. Government is not obligated by law to provide support to an
instrumentality that it sponsors, a Fund will invest in obligations issued by an
<PAGE>A-2
instrumentality of the U.S. Government only if GEIM determines that the
instrumentality's credit risk does not make its securities unsuitable for
investment by such Fund.
Each Fund and Underlying GE Fund, other than the Money Market Fund, may invest
in money market instruments issued or guaranteed by foreign governments or by
any of their political subdivisions, authorities, agencies or instrumentalities.
The Funds and the International Fund and the U.S. Equity Fund may invest in
these instruments only if they are rated AAA or AA by S&P or Aaa or Aa by
Moody's or have received an equivalent rating from another NRSRO, or if unrated,
are deemed by GEIM to be of equivalent quality. The Income Fund and the
Government Fund may invest in such money market instruments if they are rated no
lower than B by S&P or Moody's or have received an equivalent rating from
another NRSRO, or if unrated, are deemed by GEIM to be of equivalent quality.
Commercial paper held by a Fund or an Underlying GE Fund, other than the Money
Market Fund, may be rated no lower than A-2 by S&P or Prime-2 by Moody's or the
equivalent from another NRSRO, or if unrated, must be issued by an issuer having
an outstanding unsecured debt issue then rated within the three highest
categories. A description of the rating systems of Moody's and S&P is contained
in an Appendix to the Statement of Additional Information. At no time will the
investments of a Fund or an Underlying GE Fund, other than the Money Market
Fund, in bank obligations, including time deposits, exceed 25% of the value of
the Fund's assets.
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
<PAGE>A-3
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, Government Securities or other liquid high grade debt obligations 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
<PAGE>A-4
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
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
<PAGE>A-5
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.
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
<PAGE>A-6
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
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.
<PAGE>A-7
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 certain
liquid assets held in a segregated account 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
<PAGE>A-8
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
readily marketable securities 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
<PAGE>A-9
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, Government Securities or other liquid, high-grade debt
obligations 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,
<PAGE>A-10
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.
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
<PAGE>A-11
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
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
<PAGE>A-12
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. 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
<PAGE>A-13
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 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,
<PAGE>A-14
however, will benefit from increases in interest rates to the extent that
interest rates rise to the point at which they cause the current yield of ARMs
to exceed the maximum allowable annual or lifetime reset limits (or "caps") for
a particular mortgage. In addition, fluctuations in interest rates above these
caps could cause ARMs to behave more like long-term fixed rate securities in
response to extreme movements in interest rates. As a result, during periods of
volatile interest rates, 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
<PAGE>A-15
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 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
<PAGE>A-16
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
mortgage dollar rolls. The Underlying GE Fund will hold and maintain in a
segregated account until the settlement date cash or liquid, high grade debt
securities 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
<PAGE>A-17
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 STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.
<PAGE>1
SUBJECT TO COMPLETION, DATED JULY 10, 1996
STATEMENT OF ADDITIONAL INFORMATION
September __, 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.......................................................23
EXCHANGE PRIVILEGE.........................................................24
NET ASSET VALUE............................................................24
DIVIDENDS, DISTRIBUTIONS AND TAXES.........................................24
THE FUNDS' PERFORMANCE.....................................................27
ADDITIONAL INFORMATION.....................................................29
COUNSEL....................................................................30
INDEPENDENT ACCOUNTANTS....................................................30
FINANCIAL STATEMENTS.......................................................30
APPENDIX..................................................................A-1
This Statement of Additional Information supplements the
information contained in the current Prospectuses of GE LifeStyle Funds (the
"Trust") dated September __, 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, Government Securities or other liquid high grade
debt obligations, 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, high grade
debt obligations 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
<PAGE>8
written, the difference is segregated with GE Funds' custodian or designated
sub-custodian).
The principal reason for writing covered call options on a
securities portfolio is to attempt to realize, through the receipt of premiums,
a greater return than would be realized on the securities alone. In return for a
premium, the writer of a covered call option forfeits the right to any
appreciation in the value of the underlying security above the strike price for
the life of the option (or until a closing purchase transaction can be
effected). Nevertheless, the call writer retains the risk of a decline in the
price of the underlying security. Similarly, the principal reason for writing
covered put options is to realize income in the form of premiums. The writer of
a covered put option accepts the risk of a decline in the price of the
underlying security. The size of the premiums that 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
<PAGE>9
than those on Government Securities, only on national securities 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, short-term Government Securities or other U.S.
dollar-denominated, high-grade, short-term money market instruments equal to
approximately 1% to 10% of the contract amount will be segregated with 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
<PAGE>11
positions and subjecting some futures traders to substantial losses. In such a
case, and in the event of adverse price 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
<PAGE>12
of the currency increase. If a devaluation is generally anticipated, an
Underlying GE Fund may not be able to sell 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
<PAGE>13
foreign markets during non-business hours in the United States, (4) the
imposition of different exercise and settlement terms and procedures and margin
requirements than in the United States and (5) lesser trading volume.
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, 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.
<PAGE>14
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 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-_____, _________ __, 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
<PAGE>15
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 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>
Age and Principal
Positions Held Occupation(s)
Name and Address with Trust 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 49. 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.
Jeffrey A. Groh Treasurer Age 33. 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>
<PAGE>21
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 [$10,000] for services as Trustee. In addition, each Trustee receives
[$500] for each meeting of the Trust's Board of Trustees attended by the Trustee
and is reimbursed for expenses incurred in connection with attendance at Board
meetings. 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 compensation
paid to such Trustees by all other investment companies managed by GEIM or GEIC
for the calendar year 1995.
Trustees' Compensation
<TABLE>
<CAPTION>
Total Compensation from all
Investment Companies Managed by
Name of Trustee Total Compensation from the Trust GEIC or GEIM
--------------- --------------------------------- -------------------------------
<S> <C> <C>
Michael J. Cosgrove None None+
Alan M. Lewis None None+
</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.
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
<PAGE>22
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 and any
extraordinary expenses. Such expenses include interest; brokerage fees and
commissions, if any; SEC fees and state Blue Sky qualification fees; charges
of custodians; transfer agent's fees; certain insurance premiums; outside
auditing and legal expenses; costs of maintenance of the Trust's existence;
investor premiums; outside auditing and legal expenses; costs of 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
[______________] (the "Investment Consultant") is located
at____________________________ , 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
<PAGE>23
trading in the markets the Fund normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the SEC, exists, making
disposal of a Fund's investments or determination of its net asset value not
reasonably practicable or (3) for such other periods as the SEC by order may
permit for the protection of the Fund's shareholders. A shareholder who pays
for Fund shares by personal check will receive the proceeds of a redemption of
those shares when the purchase check has been collected, which may take up to
15 days or more. Shareholders who anticipate the need for more immediate
access to their investment should purchase shares with Federal funds or bank
wire or by a certified or cashier's check.
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.
<PAGE>24
Tax Status of the Funds and their Shareholders
Each Fund is treated as a separate entity for Federal income
tax purposes. Each Fund's net investment income and capital gains distributions
are determined separately from any other series that the Trust may designate.
The Trust intends for each Fund to continue to qualify each
year as a "regulated investment company" under the Code. If a Fund (1) is a
regulated investment company and (2) distributes to its shareholders at least
90% of its net investment income (including for this purpose its net realized
short-term capital gains) and 90% of its tax-exempt interest income (reduced by
certain expenses), the Fund will not be liable for Federal income taxes to the
extent that its net investment income and its net realized long-term and
short-term capital gains, if any, are distributed to its shareholders. In
addition, in order to avoid a 4% excise tax, a Fund must declare, no later than
December 31 and distribute no later than the following January 31, at least 98%
of its taxable ordinary income earned during the calendar year and 98% of its
capital gain net income for the 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,
<PAGE>25
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 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
<PAGE>26
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 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>27
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 BELOW] -1]
---
cd
- -------------------------
* The expression (a-b + 1) is being raised to the 6th power.
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
For the purpose of determining the interest earned (variable
"a" in the formula) on debt obligations that were purchased by a Fund at a
discount or premium, the formula generally calls for amortization of the
discount or premium; the amortization schedule will be adjusted monthly to
reflect changes in the market values of the debt obligations.
Investors should recognize that, in periods of declining
interest rates, the yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates the yield will tend to be
somewhat lower. In addition, when interest rates are falling, moneys received by
a Fund from the continuous sale of its shares will likely be invested in
portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing the current yield of the Fund. In periods of rising
interest rates, the opposite result can be expected to occur.
Yield information is useful in reviewing the performance of a
Fund, but because yields fluctuate, this information cannot necessarily be used
to compare an investment in shares of the Fund with bank deposits, savings
accounts and similar investment alternatives 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>28
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 BELOW] = 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 requires 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>29
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 Form of Investment Advisory and
Administration Agreement*
6 Form of Distribution Agreement*
7 Inapplicable
8 Form of Custodian Contract*
9 Form of Transfer Agency and Service
Agreement*
10 Opinion of Willkie Farr & Gallagher
including consent*
- ---------------------
* To be filed by amendment.
<PAGE>C-2
Exhibit No. Description of Exhibit
----------- ----------------------
10(b) Opinion of Bingham, Dana & Gould,
including consent*
11 Consent of Price Waterhouse LLP*
12 Inapplicable
13 Purchase Agreement*
14 Inapplicable
15(a) Inapplicable
15(b) 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
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.
(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-5
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 Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Stamford, State of
Connecticut, on the 9th day of July, 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 Registration Statement on Form N-1A has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Michael J. Cosgrove July 9, 1996
Michael J. Cosgrove President and
Chairman of the Board
(Chief Executive Officer)
/s/ Alan M. Lewis July 9, 1996
Alan M. Lewis Executive Vice President
and Trustee
/s/ Jeffrey A. Groh July 9, 1996
Jeffrey A. Groh Treasurer (Chief Financial and Accounting
Officer)
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
----------- ----------------------
1 Declaration of Trust
2 By-Laws
<PAGE>
---------------------------------------------------------
DECLARATION OF TRUST
OF
GE LIFESTYLE FUNDS
3003 Summer Street
Stamford, Connecticut 06904
Dated June 21, 1996
---------------------------------------------------------
<PAGE>1
DECLARATION OF TRUST
OF
GE LIFESTYLE FUNDS
THE DECLARATION OF TRUST of GE LifeStyle Funds is made this
21st day of June, 1996 by the parties signing hereto, as trustees (such
persons and any successors to such persons and additional persons, so long as
they continue in or be admitted to office in accordance with the terms of this
Declaration of Trust, and all other persons who at the time in question have
been duly elected or appointed as trustees in accordance with the terms of
this Declaration of Trust and are then in office, are hereinafter referred to
as the "Trustees").
W I T N E S S E T H
WHEREAS, the Trustees desire to form a Massachusetts business
trust for the investment and reinvestment of funds contributed thereto; and
WHEREAS, it is proposed that the beneficial interest in the
trust assets shall be divided into transferable shares of beneficial interest
which, in the discretion of the Trustees, may be divided into separate series as
hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that they will
hold in trust, all money and property contributed to the trust fund and manage
and dispose of the same for the benefit of the holders, from time to time, of
the shares of beneficial interest issued hereunder and subject to the provisions
hereof.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is
"GE LifeStyle Funds" (the "Trust").
Section 1.2. Definitions. Wherever they are used herein,
the following terms have the following respective meanings:
(a) "Administrator" means the party, other than the
Trust, to the contract described in Section 3.3 hereof.
(b) "By-laws" means the By-laws referred to in Section
2.8 hereof, as from time to time amended.
(c) "Class" means any class of Shares within a Series, which
Class is or has been established within such Series in accordance with the
provisions of Article V.
<PAGE>2
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) The terms "Commission" and "Interested Person" have the
meanings given them in the 1940 Act. Except as otherwise defined by the
Trustees in conjunction with the establishment of any Series of Shares, the
term "vote of a majority of the Shares outstanding and entitled to vote" shall
have the same meaning as the term "vote of a majority of the outstanding
voting securities" given it in the 1940 Act.
(f) "Custodian" means any Person other than the Trust who
has custody of any Trust Property as required by ss.17(f) of the 1940 Act, but
does not include a system for the central handling of securities described in
said (beta)17(f).
(g) "Declaration" means this Declaration of Trust as amended
from time to time. Reference in this Declaration of Trust to "Declaration,"
"hereof," "herein," and "hereunder" shall be deemed to refer to this
Declaration rather than exclusively to the article or section in which such
words appear.
(h) "Distributor" means the party, other than the
Trust, to the contract described in Section 3.1 hereof.
(i) The "1940 Act" means the Investment Company Act of
1940, as amended from time to time.
(j) "Fund" or "Funds" individually or collectively means the
separate Series of Shares of the Trust, together with the assets and
liabilities assigned thereto.
(k) "His" shall include the feminine and neuter, as
well as the masculine, genders.
(l) "Investment Adviser" means the party, other than
the Trust, to the contract described in Section 3.2 hereof.
(m) "Investment Consultant" means the party, other than the
Investment Adviser or the Trust, to the contract described in Section 3.6
hereof.
(n) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
(o) "Series" individually or collectively means the
separate Series of the Trust as may be established and designated from time to
time by the Trustees pursuant to Section 5.11 hereof. Unless the context
otherwise requires, the term "Series"
<PAGE>3
shall include Classes into which Shares of the Trust, or of a Series, may be
divided from time to time.
(p) "Shareholder" means record owner of Outstanding
Shares.
(q) "Shares" means the equal proportionate units of interest
into which the beneficial interest in the Trust shall be divided from time to
time, including the Shares of any and all Series or of any Class within any
Series (as the context may require) which may be established by the Trustees,
and includes fractions of Shares as well as whole Shares. "Outstanding" Shares
means those Shares shown from time to time on the books of the Trust or its
Transfer Agent as then issued and outstanding, but shall not include Shares
which have been redeemed or repurchased by the Trust and which are at the time
held in the treasury of the Trust.
(r) "Transfer Agent" means any Person other than the Trust
who maintains the Shareholder records of the Trust, such as the list of
Shareholders, the number of Shares credited to each account, and the like.
(s) "Trust" means GE LifeStyle Funds.
(t) "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for the account
of the Trust or the Trustees.
(u) The "Trustees" means the persons who have signed this
Declaration, so long as they shall continue in office in accordance with the
terms hereof, and all other persons who may from time to time be duly
appointed or elected, qualified and serving as Trustees in accordance with the
provisions of Article II hereof, and reference herein to a Trustee or the
Trustees shall refer to such persons in their capacities as trustees
hereunder.
(v) "Underlying Fund" means an investment company registered
under the 1940 Act in which a Series of the Trust may invest its assets.
ARTICLE II
TRUSTEES
Section 2.1. General Powers. The Trustees shall have
exclusive and absolute control over the Trust Property and over the business
of the Trust to the same extent as if the Trustees were the sole owners of the
Trust Property and business in their own right, but with such powers of
delegation as may be permitted by this Declaration. The Trustees shall have
power to conduct the business of the Trust and carry on its operations in any
and
<PAGE>4
all of its branches and maintain offices both within and without The
Commonwealth of Massachusetts, in any and all states of the United States of
America, in the District of Columbia, and in any and all commonwealths,
territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign governments,
and to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. Any determination
as to what is in the interests of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be
construed as limiting the aforesaid power. Such powers of the Trustees may be
exercised without order of or resort to any court.
Section 2.2. Investments. The Trustees shall have the power:
(a) To operate as and carry on the business of an investment
company, and exercise all the powers necessary and appropriate to the conduct of
such operations.
(b) To invest in, hold for investment, or reinvest in,
securities, either directly or indirectly through Underlying Funds, including
common and preferred stocks; warrants; bonds, debentures, bills, time notes and
all other evidences of indebtedness; negotiable or non-negotiable instruments;
government securities, including securities of any state, municipality or other
political subdivision thereof, or any governmental or quasi-governmental agency
or instrumentality; and money market instruments including bank certificates of
deposit, finance paper, commercial paper, bankers' acceptances and all kinds of
repurchase agreements, of any corporation, company, trust, association, firm or
other business organization however established, and of any country, state,
municipality or other political subdivision, or any governmental or
quasi-governmental agency or instrumentality.
(c) To acquire (by purchase, subscription or otherwise), to
hold, to trade in and deal in, to acquire any rights or options to purchase or
sell, to sell or otherwise dispose of, to lend and to pledge any such
securities, to enter into repurchase agreements and forward foreign currency
exchange contracts, to purchase and sell options on securities or indices,
futures contracts and options on futures contracts of all descriptions and to
engage in all types of hedging and risk management transactions.
(d) To exercise all rights, powers and privileges of
ownership or interest in all securities and repurchase agreements
<PAGE>5
included in the Trust Property, including the right to vote thereon and
otherwise act with respect thereto and to do all acts for the preservation,
protection, improvement and enhancement in value of all such securities and
repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and to hold,
use, maintain, develop and dispose of (by sale or otherwise) any property, real
or personal, including cash, and any interest therein.
(f) To borrow money and in this connection issue notes or
other evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; and to endorse, guarantee,
or undertake the performance of any obligation or engagement of any other Person
and to lend Trust Property.
(g) To aid by further investment any corporation, company,
trust, association or firm, any obligation of or interest in which is included
in the Trust Property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest; and to guarantee or
become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust, association or
firm.
(h) To enter into a plan of distribution and any related
agreements whereby the Trust may finance directly or indirectly any activity
which is primarily intended to result in sale of Shares.
(i) To adopt on behalf of the Trust, any Series or
Class of any Series thereof.
(j) To determine the ranges in which the assets of the Trust
or a Series of the Trust will be allocated between equity-oriented and
fixed-income oriented Underlying Funds and the extent to which the Trust or a
Series of the Trust may invest in the Underlying Funds.
(k) In general to carry on any other business in connection
with or incidental to any of the foregoing powers, to do everything necessary,
suitable or proper for the accomplishment of any purpose or the attainment of
any object or the furtherance of any power hereinbefore set forth, either alone
or in association with others, and to do every other act or thing incidental or
appurtenant to or arising out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and
powers, and the foregoing enumeration of specific powers shall not be held to
limit or restrict in any manner the general powers of the Trustees.
<PAGE>6
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
Section 2.3. Legal Title. Legal title to all the Trust
Property shall be vested in the Trustees as joint tenants except that the
Trustees shall have power to cause legal title to any Trust Property to be held
by or in the name of one or more of the Trustees, or in the name of the Trust or
any Series of the Trust, or in the name of any other Person as nominee, on such
terms as the Trustees may determine, provided that the interest of the Trust
therein is deemed appropriately protected. The right, title and interest of the
Trustees in the Trust Property shall vest automatically in each Person who may
hereafter become a Trustee. Upon the termination of the term of office,
resignation, removal or death of a Trustee he shall automatically cease to have
any right, title or interest in any of the Trust Property, and the right, title
and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyance documents have been executed and delivered.
Section 2.4. Issuance and Repurchase of Shares. The Trustees
shall have the power to issue, sell, repurchase, redeem, retire, cancel,
acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in
Shares and, subject to the provisions set forth in Articles VI and VII and
Section 5.11 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the Trust,
whether capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of the Commonwealth of Massachusetts governing business
corporations.
Section 2.5. Delegation; Committees. The Trustees shall have
power to delegate from time to time to such of their number or to officers,
employees or agents of the Trust the doing of such things, and the execution of
such instruments either in the name of this Trust or any Series of the Trust or
the names of the Trustees, or otherwise as the Trustees may deem expedient, to
the same extent as such delegation is permitted by the 1940 Act.
Section 2.6. Collection and Payment. Subject to Section 5.11
hereof, the Trustees shall have power to collect all property due to the Trust;
to pay all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of which any
property is owed to the Trust; and to enter into releases, agreements and other
instruments.
Section 2.7. Expenses. Subject to Section 5.11 hereof, the
Trustees shall have the power to incur and pay any
<PAGE>7
expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, employees and Trustees.
Section 2.8. Manner of Acting; By-laws. Except as otherwise
provided herein or in the By-laws, any action to be taken by the Trustees may be
taken by a majority of the Trustees present at a meeting of Trustees (a quorum
being present), including any meeting held by means of a conference telephone
circuit or similar communications equipment by means of which all persons
participating in the meeting can hear each other, or by written consents of the
entire number of Trustees then in office. The Trustees may adopt By-laws not
inconsistent with this Declaration to provide for the conduct of the business of
the Trust and may amend or repeal such By-laws to the extent such power is not
reserved to the Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8
and in addition to such provisions or any other provision of this Declaration or
of the By-laws, the Trustees may by resolution appoint a committee consisting of
less than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
Section 2.9. Miscellaneous Powers. Subject to Section 5.11
hereof, the Trustees shall have the power to: (a) employ or contract with such
Persons as the Trustees may deem desirable for the transaction of the business
of the Trust or any Series thereof; (b) enter into joint ventures, partnerships
and any other combinations or associations; (c) remove Trustees or fill
vacancies in or add to their number, elect and remove such officers and appoint
and terminate such agents or employees as they consider appropriate, and appoint
from their own number, and terminate, any one or more committees which may
exercise some or all of the power and authority of the Trustees as the Trustees
may determine; (d) purchase, and pay for out of Trust Property or the Property
of the appropriate Series of the Trust, insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment advisers,
investment consultants, administrators, distributors, selected dealers or
independent contractors of the Trust against all claims arising by reason of
holding any such position or by reason of any action taken or omitted by any
such Person in such capacity, whether or not constituting negligence, or whether
or not the Trust would have the power to indemnify such Person against such
liability; (e) establish pension, profit-sharing, share purchase, and other
<PAGE>8
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Trust; (f) to the extent permitted by law, indemnify any
person with whom the Trust or any Series thereof has dealings, including the
Investment Adviser, Investment Consultant, Administrator, Distributor,
Transfer Agent and selected dealers, to such extent as the Trustees shall
determine; (g) guarantee indebtedness or contractual obligations of others;
(h) determine and change the fiscal year of the Trust or any Series thereof
and the method by which its accounts shall be kept; and (i) adopt a seal for
the Trust, but the absence of such seal shall not impair the validity of any
instrument executed on behalf of the Trust.
Section 2.10. Principal Transactions. Except in transactions
not permitted by the 1940 Act or rules and regulations adopted by the
Commission, the Trustees may, on behalf of the Trust, buy any securities from or
sell any securities to, or lend any assets of the Trust or any Series thereof
to, any Trustee or officer of the Trust or any firm of which any such Trustee or
officer is a member acting as principal, or have any such dealings with the
Investment Adviser, Investment Consultant, Distributor or Transfer Agent or with
any Interested Person of such Person, and the Trust or a Series thereof may
employ any such Person, or firm or company in which such Person is an Interested
Person, as broker, legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian upon customary terms.
Section 2.11. Number of Trustees. The number of Trustees shall
initially be three (3), and thereafter shall be such number as shall be fixed
from time to time by a resolution adopted by a majority of the Trustees,
provided, however, that the number of Trustees shall in no event be less than
one (1) nor more than fifteen (15).
Section 2.12. Election and Term. Except for the Trustees named
herein or appointed to fill vacancies pursuant to Section 2.14 hereof, the
Trustees shall be elected by the Shareholders owning of record a plurality of
the Shares voting at a meeting of Shareholders on a date fixed by the Trustees.
Except in the event of resignation or removals pursuant to Section 2.13 hereof,
each Trustee shall hold office until such time as less than a majority of the
Trustees holding office have been elected by Shareholders. In such event the
Trustees then in office will call a Shareholders' meeting for the election of
Trustees. Except for the foregoing circumstances, the Trustees shall continue to
hold office and may appoint successor Trustees.
Section 2.13. Resignation and Removal. Any Trustee may resign
his trust (without the need for any prior or subsequent accounting) by an
instrument in writing signed by him and delivered to the other Trustees and such
resignation shall be effective upon such delivery, or at a later date according
to the terms of the instrument. Any of the Trustees may be removed
<PAGE>9
(provided the aggregate number of Trustees after such removal shall not be
less than one) with cause, by the action of a majority of the remaining
Trustees or by action of a majority of the outstanding Shares of beneficial
interest of the Trust at a meeting duly called pursuant to Section 5.10 hereof
by the Shareholders for such purpose. Upon the resignation or removal of a
Trustee, or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Trust or the remaining Trustees any Trust Property held in
the name of the resigning or removed Trustee. Upon the incapacity or death of
any Trustee, his legal representative shall execute and deliver on his behalf
such documents as the remaining Trustees shall require as provided in the
preceding sentence.
Section 2.14. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of his death, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject (but only
after the Trust's initial registration statement under the Securities Act of
1933 shall have become effective) to the provisions of Section 16(a) of the 1940
Act, the remaining Trustees shall fill such vacancy by the appointment of such
other person as they in their discretion shall see fit, made by a written
instrument signed by a majority of the Trustees then in office. An appointment
of a Trustee may be made in anticipation of a vacancy to occur at a later date
by reason of retirement, resignation or increase in the number of Trustees,
provided that such appointment shall not become effective prior to such
retirement, resignation or increase in the number of Trustees. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.14, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by the Declaration. A written
instrument certifying the existence of such vacancy signed by a majority of the
Trustees in office shall be conclusive evidence of the existence of such
vacancy.
Section 2.15. Delegation of Power to Other Trustees. Any
Trustee may, by power of attorney, delegate his power for a period not exceeding
six (6) months at any one time to any other Trustee or Trustees; provided that
in no case shall fewer than two (2) Trustees personally exercise the powers
granted to the Trustees under this Declaration except as herein otherwise
expressly provided.
<PAGE>10
ARTICLE III
CONTRACTS
Section 3.1. Distribution Contract. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
distribution contract or contracts providing for the sale of the Shares to net
the Trust or the applicable Series of the Trust for not less than the amount
provided for in Section 7.1 of Article VII hereof, whereby the Trustees may
either agree to sell the Shares to the other party to the contract or appoint
such other party their sales agent for the Shares, and in either case on such
terms and conditions, if any, as may be prescribed in the By-laws, and such
further terms and conditions as the Trustees may in their discretion determine
not inconsistent with the provisions of this Article III or of the By-laws; and
such contract may also provide for the repurchase of the Shares by such other
party as agent of the Trustees.
Section 3.2. Advisory, Sub-Advisory or Management Contract.
The Trustees may in their discretion from time to time enter into an investment
advisory contract or, if the Trustees establish multiple Series, separate
investment advisory contracts with respect to each Series, whereby the other
party to such contract or contracts shall undertake to manage the investment
operations of one or more Series of the Trust and the compositions of the
portfolios of the Trust or such Series, including the purchase, retention and
disposition of securities and other assets, in accordance with the investment
objectives, policies and restrictions of the Trust or such Series and all upon
such terms and conditions as the Trustees may in their discretion determine,
including the grant of authority to such other party to determine what
securities shall be purchased or sold by the Trust or the applicable Series of
the Trust and what portion of its assets shall be uninvested, which authority
shall include the power to make changes in the investments of the Trust or any
Series.
Section 3.3 Administration and Service Agreements. The
Trustees may in their discretion from time to time enter into an administration
contract or, if the Trustees establish multiple Series or Classes, separate
administration contracts with respect to each Series or Class, whereby the other
party to such contract shall undertake to manage the business affairs of the
Trust or of a Series of the Trust and furnish the Trust or a Series or Class
thereof office facilities, and shall be responsible for the ordinary clerical,
bookkeeping and recordkeeping services at such office facilities, and other
facilities and services, if any, and all upon such terms and conditions as the
Trustees may in their discretion determine. The Trustees may in their discretion
also from time to time enter into service agreements with respect to one or more
Classes of Shares whereby the other parties to such service agreements will
provide distribution services and support services upon such terms and
conditions as the Trustees in their discretion may determine.
<PAGE>11
Section 3.4. Affiliations of Trustees or Officers, Etc.
The fact that:
(i) any of the Shareholders, Trustees or officers of
the Trust is a shareholder, director, officer, partner,
trustee, employee, manager, adviser or distributor of or for
any partnership, corporation, trust, association or other
organization or of or for any parent or affiliate of any
organization, with which a contract of the character described
in Sections 3.1, 3.2 or 3.3 above, Section 3.6 below, or for
services as Custodian, Transfer Agent or disbursing agent or
for related services may have been or may hereafter be made,
or that any such organization, or any parent or affiliate
thereof, is a Shareholder of or has an interest in the Trust,
or that
(ii) any partnership, corporation, trust, association
or other organization with which a contract of the character
described in Sections 3.1, 3.2 or 3.3 above, Section 3.6
below, or for services as Custodian, Transfer Agent or
disbursing agent or for related services may have been or may
hereafter be made, also has any one or more of such contracts
with one or more other partnerships, corporations, trusts,
associations or other organizations, or has other business or
interests, shall not affect the validity of any such contract
or disqualify any Shareholder, Trustee or officer of the Trust
from voting upon or executing the same or create any liability
or accountability to the Trust or its Shareholders.
Section 3.5. Compliance with 1940 Act. The continuance in
effect, termination and method of authorization and approval of any contract
entered into pursuant to Sections 3.1, 3.2 or 3.6 shall be consistent with and
subject to the requirements of Section 15 of the 1940 Act (including any other
applicable Act of Congress hereafter enacted) to the extent that counsel to the
Trust determines that any such contracts are subject to the provisions of that
Section.
Section 3.6. Investment Consulting Agreement. The Trustees may
in their discretion from time to time enter into an investment consulting
agreement, either alone or in conjunction with the Investment Adviser, or if the
Trustees establish multiple Series, separate investment consulting agreements
with respect to one or more Series of the Trust, whereby the other party to such
contract or contracts (other than the Investment Adviser) shall undertake to
review and analyze the Underlying Funds, including the asset allocation of the
Trust or a Series of the Trust among the Underlying Funds in accordance with the
investment objectives, policies and restrictions of the Trust or such Series and
upon such terms and conditions as the Trustees may in their discretion
determine, and, in conjunction with the
<PAGE>12
Investment Adviser, to make recommendations to the Trustees concerning changes
to (a) the Underlying Funds in which the Trust or such Series may invest, (b)
the ranges in which assets of the Trust or such Series will be allocated
between equity-oriented and fixed-income oriented funds, and (c) the extent to
which the Trust or such Series may invest in an Underlying Fund.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees,
Etc. No Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs of
the Trust. No Trustee, officer, employee or agent of the Trust shall be subject
to any personal liability whatsoever to any Person, other than to the Trust or
its Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person; and all such
Persons shall look solely to the Trust Property, or to the Property of one or
more specific Series of the Trust if the claim arises from the conduct of such
Trustee, officer, employee or agent with respect to only such Series, for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust. If any Shareholder, Trustee, officer, employee, or agent, as such, of
the Trust, is made a party to any suit or proceeding to enforce any such
liability of the Trust, he shall not, on account thereof, be held to any
personal liability. The Trust shall indemnify and hold each Shareholder harmless
from and against all claims and liabilities, to which such Shareholder may
become subject by reason of his being or having been a Shareholder, and shall
reimburse such Shareholder out of the Trust Property for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The indemnification and reimbursement required by the preceding
sentence shall be made only out of assets of the one or more Series whose Shares
were held by said Shareholder at the time the act or event occurred which gave
rise to the claim against or liability of said Shareholder. The rights accruing
to a Shareholder under this Section 4.1 shall not impair any other right to
which such Shareholder may be lawfully entitled, nor shall anything contained
herein restrict the right of the Trust to indemnify or reimburse a Shareholder
in any appropriate situation even though not specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee,
officer, employee or agent of the Trust shall be liable to the Trust, its
Shareholders, or to any Shareholder, Trustee, officer, employee, or agent
thereof for any action or failure to act (including without limitation the
failure to compel in any way any former or acting Trustee to redress any breach
of trust)
<PAGE>13
except for his own bad faith, willful misfeasance, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to
the exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or
officer of the Trust shall be indemnified by the Trust, or by
one or more Series thereof if the claim arises from his or her
conduct with respect to only such Series, to the fullest
extent permitted by law against all liability and against all
expenses reasonably incurred or paid by him in connection with
any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal, or other, including appeals),
actual or threatened; and the words "liability" and "expenses"
shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and
other liabilities.
(b) No indemnification shall be provided hereunder to a
Trustee or officer:
(i) against any liability to the Trust, a Series
thereof or the Shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good faith
in the reasonable belief that his action was in the best
interest of the Trust or a Series thereof;
(iii) in the event of a settlement or other disposition
not involving a final adjudication as provided in paragraph
(b)(ii) resulting in a payment by a Trustee or officer, unless
there has been a determination that such Trustee or officer
did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office:
<PAGE>14
(A) by the court or other body
approving the settlement or other disposition; or
(B) based upon a review of readily available
facts (as opposed to a full trial-type inquiry) by
(x) vote of a majority of the Non-interested Trustees
acting on the matter (provided that a majority of the
Non-interested Trustees then in office act on the
matter) or (y) written opinion of independent legal
counsel.
(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be severable, shall
not affect any other rights to which any Trustee or officer may now or hereafter
be entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors, administrators
and assigns of such a person. Nothing contained herein shall affect any rights
to indemnification to which personnel of the Trust other than Trustees and
officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to
any claim, action, suit or proceeding of the character described in paragraph
(a) of this Section 4.3 may be advanced by the Trust or a Series thereof prior
to final disposition thereof upon receipt of an undertaking by or on behalf of
the recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or
some other appropriate security provided by the recipient, or
the Trust or Series thereof shall be insured against losses
arising out of any such advances; or
(ii) a majority of the Non-interested Trustees acting
on the matter (provided that a majority of the Non-interested
Trustees act on the matter) or an independent legal counsel in
a written opinion shall determine, based upon a review of
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Non-interested Trustee" is one
who (i) is not an "Interested Person" of the Trust (including anyone who has
been exempted from being an "Interested Person" by any rule, regulation or order
of the Commission), and (ii) is not involved in the claim, action, suit or
proceeding.
<PAGE>15
Section 4.4. No Bond Required of Trustees. No Trustee
shall be obligated to give any bond or other security for the performance of
any of his duties hereunder.
Section 4.5. No Duty of Investigation; Notice in Trust
Instruments, Etc. No purchaser, lender, transfer agent or other Person dealing
with the Trustees or any officer, employee or agent of the Trust or a Series
thereof shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by said officer, employee
or agent or be liable for the application of money or property paid, loaned, or
delivered to or on the order of the Trustees or of said officer, employee or
agent. Every obligation, contract, instrument, certificate, Share, other
security of the Trust or a Series thereof or undertaking, and every other act or
thing whatsoever executed in connection with the Trust shall be conclusively
presumed to have been executed or done by the executors thereof only in their
capacity as Trustees under this Declaration or in their capacity as officers,
employees or agents of the Trust or a Series thereof. Every written obligation,
contract, instrument, certificate, Share, other security of the Trust or a
Series thereof or undertaking made or issued by the Trustees may recite that the
same is executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of the Trust or a Series thereof under any
such instrument are not binding upon any of the Trustees or Shareholders
individually, but bind only the Trust Property or the Trust Property of the
applicable Series, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to bind the
Trustees individually. The Trustees shall at all times maintain insurance for
the protection of the Trust Property or the Trust Property of the applicable
Series, its Shareholders, Trustees, officers, employees and agents in such
amount as the Trustees shall deem adequate to cover possible tort liability, and
such other insurance as the Trustees in their sole judgment shall deem
advisable.
Section 4.6. Reliance on Experts, Etc. Each Trustee, officer
or employee of the Trust or a Series thereof shall, in the performance of his
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon the books of
account or other records of the Trust or a Series thereof, upon an opinion of
counsel, or upon reports made to the Trust or a Series thereof by any of its
officers or employees or by the Investment Adviser, the Investment Consultant,
the Administrator, the Distributor, Transfer Agent, selected dealers,
accountants, appraisers or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
<PAGE>16
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the
beneficiaries hereunder shall be divided into transferable shares of beneficial
interest, all of one class, except as provided in Section 5.11 hereof, par value
$.001 per share. The number of shares of beneficial interest authorized
hereunder is unlimited. All Shares issued hereunder including, without
limitation, Shares issued in connection with a dividend in Shares or a split of
Shares, shall be fully paid and non-assessable.
Section 5.2. Rights of Shareholders. The ownership of the
Trust Property of every description and the right to conduct any business
hereinbefore described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the Trust
nor can they be called upon to share or assume any losses of the Trust or suffer
an assessment of any kind by virtue of their ownership of Shares. The Shares
shall be personal property giving only the rights specifically set forth in this
Declaration. The Shares shall not entitle the holder to preference, preemptive,
appraisal, conversion or exchange rights, except as the Trustees may determine
with respect to any Series of Shares.
Section 5.3. Trust Only. It is the intention of the Trustees
to create only the relationship of Trustee and beneficiary between the Trustees
and each Shareholder from time to time. It is not the intention of the Trustees
to create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their
discretion may, from time to time without vote of the Shareholders, issue
Shares, in addition to the then issued and outstanding Shares and Shares held in
the treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of, liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares of the
Trust or, if the Shares be divided into Series, of any Series of the Trust or of
any Class thereof, into a greater or lesser number without thereby changing the
<PAGE>17
proportionate beneficial interests in the Trust or in the Trust Property
allocated or belonging to such Series or Class. Contributions to the Trust or
Series thereof may be accepted for, and Shares shall be redeemed as, whole
Shares and/or 1/1,000ths of a Share or integral multiples thereof.
Section 5.5. Register of Shares. A register shall be kept at
the principal office of the Trust or an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or in
the By-laws provided, until he has given his address to the Transfer Agent or
such other officer or agent of the Trustees as shall keep the said register for
entry thereon. It is not contemplated that certificates will be issued for the
Shares; however, the Trustees, in their discretion, may authorize the issuance
of share certificates and promulgate appropriate rules and regulations as to
their use.
Section 5.6. Transfer of Shares. Shares shall be transferable
on the records of the Trust only by the record holder thereof or by his agent
thereunto duly authorized in writing, upon delivery to the Trustees or the
Transfer Agent of a duly executed instrument of transfer, together with such
evidence of the genuineness of each such execution and authorization and of
other matters as may reasonably be required. Upon such delivery the transfer
shall be recorded on the register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor any transfer agent or registrar
nor any officer, employee or agent of the Trust shall be affected by any notice
of the proposed transfer.
Any person becoming entitled to any Shares in consequence of
the death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, shall be recorded on the register of Shares as the holder of
such Shares upon production of the proper evidence thereof to the Trustees or
the Transfer Agent, but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
Section 5.7. Notices. Any and all notices to which any
Shareholder may be entitled and any and all communications shall be deemed
duly served or given if mailed, postage prepaid,
<PAGE>18
addressed to any Shareholder of record at his last known address as recorded
on the register of the Trust.
Section 5.8. Treasury Shares. Shares held in the treasury
shall, until resold pursuant to Section 5.4, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 5.9. Voting Powers. The Shareholders shall have power
to vote only (i) for the election of Trustees as provided in Section 2.12; (ii)
with respect to any investment advisory contract entered into pursuant to
Section 3.2 or any investment consulting agreement entered into pursuant to
Section 3.6 to the extent and as provided in Section 3.2 and 3.6, respectively;
(iii) with respect to termination of the Trust or a Series thereof to the extent
and as provided in Section 8.2; (iv) with respect to any amendment of this
Declaration to the extent and as provided in Section 8.3; (v) with respect to
any merger, consolidation or sale of assets to the extent and as provided in
Section 8.4; (vi) with respect to incorporation of the Trust to the extent and
as provided in Section 8.5; (vii) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or a Series or Class thereof or the
Shareholders of any of them (provided, however, that a Shareholder of a specific
Series or Class shall not be entitled to a derivative or class action on behalf
of any other Series or Class (or Shareholder of any other Series or Class) of
the Trust); (viii) with respect to any plan adopted pursuant to Rule 12b-1 (or
any successor rule) under the 1940 Act, and related matters; and (ix) with
respect to such additional matters relating to the Trust as may be required by
this Declaration, the By-laws or any registration of the Trust as an investment
company under the 1940 Act with the Commission (or any successor agency) or as
the Trustees may consider necessary or desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate fractional vote. If
separate Series of Shares are established, Shares shall not be voted by
individual Series on any matter submitted to a vote of the Shareholders of the
Trust except as provided in Section 5.11(f) hereof. There shall be no cumulative
voting in the election of Trustees. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required by law,
this Declaration or the By-laws to be taken by Shareholders. The By-laws may
include further provisions for Shareholders' votes and meetings and related
matters.
Section 5.10. Meetings of Shareholders. Meetings of the
Shareholders of the Trust may be called at any time by the President, and
shall be called by the President or the Secretary at the request, in writing
or by resolution, of a majority of the
<PAGE>19
Trustees, or at the written request of the holder or holders of ten percent
(10%) or more of the total number of Shares then issued and outstanding of the
Trust entitled to vote at such meeting. Meetings of the Shareholders of any
Series or Class of the Trust shall be called by the President or the Secretary
at the written request of the holder or holders of ten percent (10%) or more
of the total number of Shares then issued and outstanding of such Series or
Class of the Trust entitled to vote at such meeting. Any such request shall
state the purpose of the proposed meeting.
Section 5.11. Series Designation. The Trustees, in their
discretion, may authorize the division of Shares into two or more Series, and
may divide the Shares or the Shares of any Series into two or more Classes, and
the different Series or Classes shall be established and designated, and the
variations in the relative rights and preferences as between the different
Series (and Classes thereof) shall be fixed and determined, by the Trustees;
provided, that all Shares shall be identical except that there may be variations
so fixed and determined between different Series (and Classes thereof) as to
investment objective, purchase price, right of redemption or obligations to make
payments, special and relative rights as to dividends and on liquidation,
reinvestment, exchange conversion rights, and conditions under which the several
Series shall have separate voting rights, all of which are subject to the
limitations set forth below. All references to Shares in this Declaration shall
be deemed to be Shares of any or all Series as the context may require.
If the Trustees shall divide the Shares of the Trust into two
or more Series, or Shares of the Trust or of any Series into two or more
Classes, the following provisions shall be applicable:
(a) The number of authorized Shares and the number of Shares
of each Series or Class that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Series or Class thereof into one or more other Series (or
Classes within the same or one or more other Series) that may be established and
designated from time to time. The Trustees may hold as treasury shares (of the
same or some other Series or Class thereof), reissue for such consideration and
on such terms as they may determine, or cancel any Shares of any Series or Class
thereof reacquired by the Trust at their discretion from time to time.
(b) All consideration received by the Trust for the issue or
sale of Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment
<PAGE>20
of such proceeds in whatever form the same may be, shall irrevocably belong to
that Series for all purposes, subject only to the rights of creditors of such
Series and except as may otherwise be required by applicable tax laws, and
shall be so recorded upon the books of account of the Trust. In the event that
there are any assets, income, earnings, profits, and proceeds thereof, funds,
or payments which are not readily identifiable as belonging to any particular
Series, the Trustees shall allocate them among any one or more of the Series
established and designated from time to time in such manner and on such basis
as they, in their sole discretion, deem fair and equitable. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes. No holder of Shares of any Series
shall have any claim on or right to any assets allocated or belonging to any
other Series.
(c) The assets belonging to each particular Series shall be
charged with the liabilities of the Trust in respect of that Series or Class or
Classes thereof and all expenses, costs, charges and reserves attributable to
that Series or Class or Classes thereof, and any general liabilities, expenses,
costs, charges or reserves of the Trust which are not readily identifiable as
belonging to any particular Series or Class or Classes thereof shall be
allocated and charged by the Trustees to and among any one or more of the Series
or Class or Classes thereof established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and reserves
by the Trustees shall be conclusive and binding upon the Shareholders of all
Series or Classes for all purposes. The Trustees shall have full discretion, to
the extent not inconsistent with the 1940 Act, to determine which items are
capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders. The assets of a particular Series of the Trust
shall, under no circumstances, be charged with liabilities attributable to any
other Series or Class of the Trust. All persons extending credit to, or
contracting with or having any claim against a particular Series of the Trust
shall look only to the assets of that particular Series for payment of such
credit, contract or claim.
Shares of each Class of each Series shall bear the expenses of
payments under any agreements ("Special Class Agreements") entered into by or on
behalf of the Trust with organizations that provide for services to beneficial
owners of Shares of that Class. Expenses described in the preceding sentence are
sometimes referred to herein as "Special Class Expenses".
(d) The power of the Trustees to pay dividends and make
distributions shall be governed by Section 7.2 of this
<PAGE>21
Declaration with respect to any one or more Series or Classes which represents
the interests in the assets of the Trust immediately prior to the
establishment of two or more Series or Classes. With respect to any other
Series or Class, dividends and distributions on Shares of a particular Series
or Class may be paid with such frequency as the Trustees may determine, which
may be daily or otherwise, pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to the
holders of Shares of that Series or Class, from such of the income and capital
gains, accrued or realized, from the assets belonging to that Series or Class,
as the Trustees may determine, after providing for actual and accrued
liabilities belonging to that Series or Class (including, without limitation,
the allocation to a Class of Special Class expenses relating to that Class).
All dividends and distributions on Shares of a particular Series or Class
shall be distributed pro rata to the Shareholders of that Series or Class in
proportion to the number of Shares of that Series or Class held by such
Shareholders at the time of record established for the payment of such
dividends or distribution.
(e) Each Share of a Series of the Trust shall represent a
beneficial interest in the net assets of such Series. Each holder of Shares of a
Series or Class shall be entitled to receive his pro rata share of distributions
of income and capital gains made with respect to such Series or Class. Upon
redemption of his Shares or indemnification for liabilities incurred by reason
of his being or having been a Shareholder of a Series, such Shareholder shall be
paid solely out of the funds and property of such Series of the Trust. Upon
liquidation or termination of a Series or Class of the Trust, Shareholders of
such Series shall be entitled to receive a pro rata share of the net assets of
such Series or Class. A Shareholder of a particular Series of the Trust shall
not be entitled to participate in a derivative or class action on behalf of any
other Series or the Shareholders of any other Series of the Trust.
(f) On each matter submitted to a vote of Shareholders, all
Shares of all Series and Classes shall vote as a single class; provided,
however, that (a) as to any matter with respect to which a separate vote of any
Series or Class is required by the 1940 Act or is required by a separate
agreement applicable to such Series or Class, such requirements as to a separate
vote by that Series or Class shall apply; (b) to the extent that a matter
referred to in (a) above, affects more than one Class or Series and the
interests of each such Class or Series in the matter are identical, then,
subject to (c) below, the Shares of all such affected Classes or Series shall
vote as a single class; (c) as to any matter which does not affect the interests
of a particular Series or Class, only the holders of Shares of the one or more
affected Series or Classes shall be entitled to vote and (d) the provisions of
the following paragraph shall apply.
<PAGE>22
On any matter that pertains to any Special Class Agreement or
to any Special Class Expenses with respect to any Series, which matter is
submitted to a vote of Shareholders, only Shares of the Class of such Series
shall be entitled to vote except that to the extent said matter affects Shares
of another Class or Series, such other Shares shall also be entitled to vote.
Except as otherwise provided in this Article V, the Trustees
shall have the power to determine the designations, preferences, privileges,
payment obligations, limitations and rights, including voting and dividend
rights, of each Class and Series of Shares.
The establishment and designation of any Series of Shares
shall be effective (i) upon the execution by a majority of the then Trustees of
an instrument setting forth such establishment and designation and the relative
rights, payment obligations, if any, and preferences of such Series, (ii) upon
the execution of an instrument in writing by an officer of the Trust pursuant to
a vote of a majority of the Trustees, or (iii) as otherwise provided in such
instrument. Each instrument referred to in this section shall have the status of
an amendment to this Declaration.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. All Shares of the
Trust shall be redeemable, at the redemption price determined in the manner
set out in this Declaration. Redeemed or repurchased Shares may be resold by
the Trust.
The Trust shall redeem the Shares of the Trust or any Series
or Class thereof at the price determined as hereinafter set forth, upon the
appropriately verified application of the record holder thereof (or upon such
other form of request as the Trustees may determine) at such office or agency as
may be designated from time to time for that purpose by the Trustees. The
Trustees may from time to time specify additional conditions, not inconsistent
with the 1940 Act, regarding the redemption of Shares in the Trust's then
effective prospectus under the Securities Act of 1933.
Section 6.2. Price. Shares shall be redeemed at their net
asset value (less any applicable redemption fee or sales charge) determined as
set forth in Section 7.1 hereof as of such time as the Trustees shall have
theretofore prescribed by resolution. In the absence of such resolution, the
redemption price of Shares deposited shall be the net asset value of such Shares
next determined as set forth in Section 7.1 hereof after receipt of such
application.
<PAGE>23
Section 6.3. Payment. Payment of the redemption price of
Shares of the Trust or any Series or Class thereof shall be made in cash or in
property to the Shareholder at such time and in the manner, not inconsistent
with the 1940 Act or other applicable laws, as may be specified from time to
time in the Trust's then effective prospectus under the Securities Act of 1933,
subject to the provisions of Section 6.4 hereof.
Section 6.4. Effect of Suspension of Determination of Net
Asset Value. If, pursuant to Section 6.9 hereof, the Trustees shall declare a
suspension of the determination of net asset value with respect to Shares of the
Trust or of any Series thereof, the rights of Shareholders (including those who
shall have applied for redemption pursuant to Section 6.1 hereof but who shall
not yet have received payment) to have Shares redeemed and paid for by the Trust
or a Series or Class thereof shall be suspended until the termination of such
suspension is declared. Any record holder who shall have his redemption right so
suspended may, during the period of such suspension, by appropriate written
notice of revocation at the office or agency where application was made, revoke
any application for redemption not honored and withdraw any certificates on
deposit. The redemption price of Shares for which redemption applications have
not been revoked shall be the net asset value of such Shares next determined as
set forth in Section 7.1 after the termination of such suspension, and payment
shall be made within seven (7) days after the date upon which the application
was made plus the period after such application during which the determination
of net asset value was suspended.
Section 6.5. Repurchase by Agreement. The Trust may repurchase
Shares directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per share determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 7.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.
Section 6.6. Redemption of Shareholder's Interest. The
Trustees, in their sole discretion, may cause the Trust to redeem all of the
Shares of one or more Series held by any Shareholder if the value of such Shares
held by such Shareholder is less than the minimum amount established from time
to time by the Trustees.
Section 6.7. Redemption of Shares in Order to Qualify as
Regulated Investment Company; Disclosure of Holding. If the Trustees shall, at
any time and in good faith, be of the opinion that direct or indirect ownership
of Shares or other securities of the Trust has or may become concentrated in any
Person to an extent which would disqualify the Trust or any Series of the Trust
as a regulated investment company under the Internal
<PAGE>24
Revenue Code, then the Trustees shall have the power by lot or other means
deemed equitable by them (i) to call for redemption by any such Person a
number, or principal amount, of Shares or other securities of the Trust or any
Series of the Trust sufficient to maintain or bring the direct or indirect
ownership of Shares or other securities of the Trust or any Series of the
Trust into conformity with the requirements for such qualification and (ii) to
refuse to transfer or issue Shares or other securities of the Trust or any
Series of the Trust to any Person whose acquisition of the Shares or other
securities of the Trust or any Series of the Trust in question would result in
such disqualification. The redemption shall be effected at the redemption
price and in the manner provided in Section 6.1.
The holders of Shares or other securities of the Trust shall
upon demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Code, or to comply
with the requirements of any other taxing authority.
Section 6.8. Reductions in Number of Outstanding Shares
Pursuant to Net Asset Value Formula. The Trust may also reduce the number of
outstanding Shares of the Trust or of any Series of the Trust pursuant to the
provisions of Section 7.3.
Section 6.9. Suspension of Right of Redemption. The Trust may
declare a suspension of the right of redemption or postpone the date of payment
or redemption for the whole or any part of any period (i) during which the New
York Stock Exchange is closed other than customary weekend and holiday closings,
(ii) during which trading on the New York Stock Exchange is restricted, (iii)
during which an emergency exists as a result of which disposal by the Trust or a
Series thereof of securities owned by it is not reasonably practicable or it is
not reasonably practicable for the Trust or a Series thereof fairly to determine
the value of its net assets, or (iv) during any other period when the Commission
may for the protection of Shareholders of the Trust by order permit suspension
of the right of redemption or postponement of the date of payment or redemption;
provided that applicable rules and regulations of the Commission shall govern as
to whether the conditions prescribed in (ii), (iii), or (iv) exist. Such
suspension shall take effect at such time as the Trust shall specify but not
later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of redemption
or payment on redemption until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which in the absence of an official ruling by
the Commission, the determination of the Trust shall be conclusive). In the case
of a suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on
<PAGE>25
the net asset value existing after the termination of the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The value of the assets of the
Trust or of any Series or Class of the Trust may be determined on the basis of
the amortized cost of such securities, by appraisal of the securities owned by
the Trust or any Series of the Trust, or by such other method as shall be deemed
to reflect the fair value thereof, determined in good faith by or under the
direction of the Trustees. From the total value of said assets, there shall be
deducted all indebtedness, interest, taxes, payable or accrued, including
estimated taxes on unrealized book profits, expenses and management charges
accrued to the appraisal date, net income determined and declared as a
distribution and all other items in the nature of liabilities which shall be
deemed appropriate, as incurred by or allocated to any Series or Class of the
Trust, including any Special Class Expenses allocable to a Class. The resulting
amount which shall represent the total net assets of the Trust or Series or
Class thereof shall be divided by the number of Shares of the Trust or Series or
Class thereof outstanding at the time and the quotient so obtained shall be
deemed to be the net asset value of the Shares of the Trust or Series or Class
thereof. The net asset value of the Shares shall be determined at least once on
each business day, as of the close of trading on the New York Stock Exchange or
as of such other time or times as the Trustees shall determine. The power and
duty to make the daily calculations may be delegated by the Trustees to the
Investment Adviser, the Administrator, the Custodian, the Transfer Agent or such
other Person as the Trustees by resolution may determine. The Trustees may
suspend the daily determination of net asset value to the extent permitted by
the 1940 Act.
Section 7.2. Distributions to Shareholders. The Trustees shall
from time to time distribute ratably among the Shareholders of the Trust or of a
Series thereof such proportion of the net profits, surplus (including paid-in
surplus), capital, or assets of the Trust or such Series held by the Trustees as
they may deem proper. Such distributions may be made in cash or property
(including without limitation any type of obligations of the Trust or Series or
any assets thereof), and the Trustees may distribute ratably among the
Shareholders of the Trust or Series thereof additional Shares of the Trust or
Series thereof issuable hereunder in such manner, at such times, and on such
terms as the Trustees may deem proper. Such distributions may be among the
Shareholders of the Trust or Series thereof at the time of declaring a
distribution or among the Shareholders of the Trust or Series thereof at such
other date or time or dates or times as the Trustees shall determine. The
Trustees may in their
<PAGE>26
discretion determine that, solely for the purposes of such distributions,
Outstanding Shares shall exclude Shares for which orders have been placed
subsequent to a specified time on the date the distribution is necessary to
pay the debts or expenses of the Trust or a Series thereof or Class thereof or
to meet obligations of the Trust or a Series or Class thereof, or as they may
deem desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business. The Trustees may adopt and offer
to Shareholders such dividend reinvestment plans, cash dividend payout plans
or related plans as the Trustees shall deem appropriate. The Trustees may in
their discretion determine that an account administration fee or other similar
charge may be deducted directly from the income and other distributions paid
on Shares to a Shareholder's account in each Series.
Inasmuch as the computation of net income and gains for
Federal income tax purposes may vary from the computation thereof on the books,
the above provisions shall be interpreted to give the Trustees the power in
their discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or a Series or Class thereof to avoid or reduce liability for
taxes.
Section 7.3. Determination of Net Income; Constant Net Asset
Value; Reduction of Outstanding Shares. Subject to Section 5.11 hereof, the net
income of the Series of the Trust shall be determined in such manner as the
Trustees shall provide by resolution. Expenses of the Trust or of a Series
thereof, including the advisory or management fee, shall be accrued each day.
Each Class shall bear only expenses relating to its Shares and an allocable
share of Series expenses in accordance with such policies as may be established
by the Trustees from time to time and as are not inconsistent with the
provisions of this Declaration of Trust or of any applicable document filed by
the Trust with the Commission or of the Internal Revenue Code of 1986, as
amended. Such net income may be determined by or under the direction of the
Trustees as of the close of trading on the New York Stock Exchange on each day
on which such market is open or as of such other time or times as the Trustees
shall determine, and, except as provided herein, all the net income of any
Series or Class of the Trust, as so determined, may be declared as a dividend on
the Outstanding Shares of such Series. If, for any reason, the net income of any
Series of the Trust determined at any time is a negative amount, the Trustees
shall have the power with respect to such Series (i) to offset each
Shareholder's pro rata share of such negative amount from the accrued dividend
account of such Shareholder, or (ii) to reduce the number of Outstanding Shares
of such Series by reducing the number of Shares in the account of such
Shareholder by that number of full and fractional Shares which represents the
amount of such excess negative net income, or (iii) to cause to be recorded on
the books of the Trust an asset account in the amount
<PAGE>27
of such negative net income, which account may be reduced by the amount,
provided that the same shall thereupon become the property of the Trust with
respect to such Series and shall not be paid to any Shareholder, of dividends
declared thereafter upon the Outstanding Shares of such Series on the day such
negative net income is experienced, until such asset account is reduced to
zero; or (iv) to combine the methods described in clauses (i), (ii) and (iii)
of this sentence, in order to cause the net asset value per Share of such
Series to remain at a constant amount per Outstanding Share immediately after
each such determination and declaration. The Trustees shall also have the
power to fail to declare a dividend out of net income for the purpose of
causing the net asset value per Share to be increased to a constant amount.
The Trustees shall have full discretion to determine whether any cash or
property received shall be treated as income or as principal and whether any
item of expense shall be charged to the income or the principal account, and
their determination made in good faith shall be conclusive upon the
Shareholders. In the case of stock dividends received, the Trustees shall have
full discretion to determine, in the light of the particular circumstances,
how much if any of the value thereof shall be treated as income, the balance,
if any, to be treated as principal. The Trustees shall not be required to
adopt, but may at any time adopt, discontinue or amend the practice of
maintaining the net asset value per Share of a Series at a constant amount.
Section 7.4. Power to Modify Foregoing Procedures.
Notwithstanding any of the foregoing provisions of this Article VII, but subject
to Section 5.11 hereof, the Trustees may prescribe, in their absolute
discretion, such other bases and times for determining the per Share net asset
value of the Shares of the Trust or a Series thereof or net income of the Trust
or a Series thereof, or the declaration and payment of dividends and
distributions as they may deem necessary or desirable. Without limiting the
generality of the foregoing, the Trustees may establish several Series of Shares
in accordance with Section 5.11, and declare dividends thereon in accordance
with Section 5.11(d).
ARTICLE VIII
DURATION; TERMINATION OF TRUST OR A SERIES
OR A CLASS; AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust shall continue
without limitation of time but subject to the provisions of this Article VIII.
Section 8.2. Termination of the Trust, a Series or a Class.
The Trust or any Series or Class thereof may be terminated by (i) the
affirmative vote of the holders of not less than a majority of the Shares
outstanding and entitled to vote at any meeting of Shareholders of the Trust or
the appropriate
<PAGE>28
Series or Class thereof or (ii) an instrument in writing signed by a majority
of the Trustees, stating that a majority of the Trustees has determined that
the continuation of the Trust or a Series or Class thereof is not in the best
interest of such Series or Class, the Trust or their respective shareholders
as a result of such factors or events adversely affecting the ability of such
Series or the Trust to conduct its business and operations in an economically
viable manner. Such factors and events may include the inability of a Series
or Class or the Trust to maintain its assets at an appropriate size, changes
in laws or regulations governing the Series or Class or the Trust or affecting
assets of the type in which such Series or Class or the Trust invests or
economic developments or trends having a significant adverse impact on the
business or operations of such Series or the Trust. Upon the termination of
the Trust or the Series,
(i) The Trust or the Series shall carry on no
business except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the
affairs of the Trust or the Series and all of the powers of
the Trustees under this Declaration shall continue until the
affairs of the Trust shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust or
the Series, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part
of the remaining Trust Property or Trust Property allocated
or belonging to such Series to one or more persons at public
or private sale for consideration which may consist in whole
or in part of cash, securities or other property of any
kind, discharge or pay its liabilities, and do all other
acts appropriate to liquidate its business; provided that
any sale, conveyance, assessment, exchange, transfer or
other disposition of all or substantially all the Trust
Property or Trust Property allocated or belonging to such
Series shall require Shareholder approval in accordance with
Section 8.4 hereof.
(iii) After paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements as they deem necessary
for their protection, the Trustees may distribute the
remaining Trust Property or the remaining property of the
terminated Series, in cash or in kind or partly each, among
the Shareholders of the Trust or the Series according to their
respective rights.
(b) After termination of the Trust or the Series and
distribution to the Shareholders as herein provided, a majority
<PAGE>29
of the Trustees or the Secretary or Assistant Secretary shall execute and
lodge among the records of the Trust and file with the Office of the Secretary
of The Commonwealth of Massachusetts an instrument in writing setting forth
the fact of such termination, and the Trustees shall thereupon be discharged
from all further liabilities and duties with respect to the Trust or the
terminated Series, and the rights and interests of all Shareholders of the
Trust or the terminated Series shall thereupon cease.
Section 8.3. Amendment Procedure. Except as otherwise provided
in Section 5.11(f): (a) This Declaration may be amended by a vote of the holders
of a majority of the Shares outstanding and entitled to vote or by any
instrument in writing, without a meeting, signed by a majority of the Trustees
and consented to by the holders of a majority of the Shares outstanding and
entitled to vote. The Trustees may amend this Declaration without the vote or
consent of Shareholders if they deem it necessary to conform this Declaration to
the requirements of applicable federal or state laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code, but the Trustees shall not be liable for failing so to do. The
Trustees may also amend this Declaration without the vote or consent of
Shareholders if they deem it necessary or desirable (i) to change the name of
the Trust or any Series as class thereof, (ii) to supply any omission, cure any
ambiguity or cure, correct or supplement any defective or inconsistent provision
contained herein or (iii) to make any other changes in the Declaration which do
not materially affect the rights of Shareholders hereunder.
(b) No amendment may be made under this Section 8.3 which
would change any rights with respect to any Shares of the Trust or Series
thereof by reducing the amount payable thereon upon liquidation of the Trust or
Series thereof or by diminishing or eliminating any voting rights pertaining
thereto, except with the vote or consent of the holders of a majority of the
Shares of the Trust or such Series outstanding and entitled to vote. Nothing
contained in this Declaration shall permit the amendment of this Declaration to
impair the exemption from personal liability of the Shareholders, Trustees,
officers, employees and agents of the Trust or to permit assessments upon
Shareholders.
(c) A certificate signed by a majority of the Trustees or a
Secretary or Assistant Secretary setting forth an amendment and reciting that it
was duly adopted by the Shareholders or by the Trustees as aforesaid or a copy
of the Declaration, as amended, and executed by a majority of the Trustees,
shall be conclusive evidence of such amendment when lodged among the records of
Trust.
Section 8.4. Merger, Consolidation and Sale of Assets.
The Trust or any Series thereof may merge or consolidate with any other
corporation, association, trust or other
<PAGE>30
organization or may sell, lease or exchange all or substantially all of the
Trust Property or Trust Property allocated or belonging to such Series,
including its good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Shareholders called for
the purpose by the affirmative vote of the holders of a majority of the Shares
of the Trust or such Series outstanding and entitled to vote, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of a majority of the Shares of the Trust or such Series, provided,
however, that any such merger, consolidation, sale, lease or exchange shall be
deemed for all purposes to have been accomplished under and pursuant to
Massachusetts law. Nothing contained herein shall be construed as requiring
approval of Shareholders for any transaction, whether deemed a merger,
consolidation, reorganization or otherwise whereby the Trust issues Shares in
connection with the acquisition of assets (including those subject to
liabilities) from any other investment company or similar entity.
Section 8.5. Incorporation. With the approval of the holders
of a majority of the Shares of the Trust or a Series thereof outstanding and
entitled to vote, the Trustees may cause to be organized or assist in organizing
a corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or the Trust Property allocated or belonging to such Series or to
carry on any business in which the Trust shall directly or indirectly have any
interest, and to sell, convey and transfer the Trust Property or the Trust
Property allocated or belonging to such Series to any such corporation, trust,
association or organization in exchange for the shares or securities thereof or
otherwise, and to lend money to, subscribe for the shares or securities of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust or such Series holds or is about to acquire
shares or any other interest. The Trustees may also, subject to the provisions
of Section 8.4, cause a merger or consolidation between the Trust or any
successor thereto and any such corporation, trust, partnership, association or
other organization if and to the extent permitted by law, as provided under the
law then in effect. Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist in organizing
one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
Property to such organization or entities.
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the
Shareholders a written financial report of the transactions of
<PAGE>31
the Trust, including financial statements which shall at least annually be
certified by independent public accountants.
ARTICLE X
MISCELLANEOUS
Section 10.1. Execution and Filing. This Declaration and any
amendment hereto shall be filed in the office of the Secretary of the
Commonwealth of Massachusetts and in such other places as may be required under
the laws of Massachusetts and may also be filed or recorded in such other places
as the Trustees deem appropriate. Each amendment so filed shall be accompanied
by a certificate signed and acknowledged by a Trustee or a Secretary or
Assistant Secretary stating that such action was duly taken in a manner provided
herein, and unless such amendment or such certificate sets forth some later time
for the effectiveness of such amendment, such amendment shall be effective upon
its execution. A restated Declaration, integrating into a single instrument all
of the provisions of the Declaration which are then in effect and operative, may
be executed from time to time by a majority of the Trustees and filed with the
Secretary of the Commonwealth of Massachusetts. A restated Declaration shall,
upon execution, be conclusive evidence of all amendments contained therein and
may hereafter be referred to in lieu of the original Declaration and the various
amendments thereto.
Section 10.2. Governing Law. This Declaration is executed by
the Trustees and delivered in The Commonwealth of Massachusetts and with
reference to the laws thereof, and the rights of all parties and the validity
and construction of every provision hereof shall be subject to and construed
according to the laws of said State.
Section 10.3. Counterparts. This Declaration may be
simultaneously executed in several counterparts, each of which shall be deemed
to be an original, and such counterparts, together, shall constitute one and the
same instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 10.4. Reliance by Third Parties. Any certificate
executed by an individual who, according to the records of the Trust appears to
be a Trustee hereunder, certifying (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (e) the form of any By-laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the
<PAGE>32
matters so certified in favor of any Person dealing with the Trustees and
their successors.
Section 10.5. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Code or with other applicable laws and regulations, the conflicting provision
shall be deemed never to have constituted a part of this Declaration; provided,
however, that such determination shall not affect any of the remaining provision
of this Declaration or render invalid or improper any action taken or omitted
prior to such determination.
(b) If any provision of this Declaration shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provisions in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
Section 10.6. The Trustees shall maintain a resident agent in
The Commonwealth of Massachusetts which agent shall initially be CT Corporation
System, 2 Oliver Street, Boston, Massachusetts 02109. The Trustees may designate
from time to time a successor resident in The Commonwealth of Massachusetts.
<PAGE>33
IN WITNESS WHEREOF, the undersigned have hereunto signed this
instrument for themselves and their assigns as of the day and year first above
written.
/s/ Michael J. Cosgrove
Michael J. Cosgrove
/s/ Alan M. Lewis
Alan M. Lewis
/s/ Jeremiah J. Bresnahan, Jr.
Jeremiah J. Bresnahan, Jr.
<PAGE>1
BY-LAWS
OF
GE LIFESTYLE FUNDS
ARTICLE I
DEFINITIONS
The terms "By-laws", "Commission", "Custodian",
"Declaration", "1940 Act", "Series", "Shareholder", "Shares" "Transfer Agent",
"Trust", "Trust Property" and "Trustees" have the respective meanings given
them in the Declaration of Trust of GE LifeStyle Funds, dated June 21, 1996,
as amended from time to time.
ARTICLE II
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders of the
Trust or a Series thereof shall be held as provided in the Declaration at such
place within or without the Commonwealth of Massachusetts as the Trustees
shall designate.
Section 2. Notice of Meetings. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder at his address as recorded on
the register of the Trust mailed at least (10) days and not more than ninety
(90) days before the meeting; provided, however, that notice of a meeting need
not be given to a shareholder to whom such notice need not be given under the
proxy rules of the Commission under the 1940 Act and the Securities Exchange Act
of 1934. Only the business stated in the notice of the meeting shall be
considered at such meeting. No notice need be given to any Shareholder who shall
have failed to inform the Trust of his current address or if a written waiver of
notice is executed by the Shareholder, or his attorney thereunto authorized,
before or after the meeting and which waiver is filed with the records of the
meeting.
Section 3. Quorum and Adjournment of Meetings. The holders of
record of thirty percent (30%) of the outstanding Shares of the Trust or a
Series thereof present in person or by proxy shall constitute a quorum at any
meeting of the Shareholders of the Trust or a Series thereof, except as
otherwise provided in the Declaration. If, however, such quorum shall not be
present or represented at any meeting of Shareholders, the holders of a majority
of the Shares present in person or by proxy shall have the power to adjourn the
meeting from time to time, without notice
<PAGE>2
other than announcement at the meeting, until the requisite number of Shares
entitled to vote at such meeting shall be present. At such adjourned meeting,
any business may be transacted that might have been transacted at the meeting
as originally notified.
Section 4. Record Date for Meetings and Other Purposes. For
the purpose of determining the Shareholders who are entitled to notice of and to
vote at any meeting, or to participate in any distribution, or for the purpose
of any other action, the Trustees may fix in advance, as a record date, a date
not more than ninety (90) or less than ten (10) days prior to the date of any
meeting of Shareholders or distribution or other action, for the determination
of the persons to be treated as Shareholders of record for such purposes, except
for dividend payments, which shall be governed by the Trust's Prospectus(es) and
Statement(s) of Additional Information as in effect from time to time.
Section 5. Proxies. At any meeting of Shareholders, any holder
of Shares entitled to vote thereat may vote by proxy, including electronically
as long as there exists a reasonable means of determining the authenticity of
such proxy. Proxies may be solicited in the name of one or more Trustees or one
or more of the officers of the Trust. Only Shareholders of record shall be
entitled to vote. Each whole share shall be entitled to one vote as to any
matter on which it is entitled by the Declaration to vote and each fractional
Share shall be entitled to a proportionate fractional vote. A proxy purporting
to be executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger.
Section 6. Inspection of Records. The records of the Trust
shall be open to inspection by Shareholders to the same extent as is permitted
shareholders of a Massachusetts business corporation.
Section 7. Action without Meeting. Any action which may be
taken by Shareholders may be taken without a meeting if a majority of
Shareholders entitled to vote on the matter (or such larger proportion thereof
as shall be required by law, the Declaration or these By-laws for approval of
such matter) consent to the action in writing and the written consents are filed
with the records of the meetings of Shareholders. Such consents shall be treated
for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE III
TRUSTEES
Section 1. Meetings of the Trustees. Regular meetings of
the Trustees shall be held at such time and on such notice as the Trustees may
from time to time determine. Special meetings of
<PAGE>3
the Trustees shall be held whenever called by the Chairman, the Secretary, or
by two or more of the Trustees, at the time being in office.
Section 2. Notice of Special Meetings. Notice of the time and
place of each special meeting shall be given by the Secretary or an Assistant
Secretary or by the officer or Trustees calling the meeting and shall be mailed
to each Trustee at least one day before the meeting, or shall be telegraphed,
cabled, or wirelessed to each Trustee at his business address, or personally
delivered to him at least one day before the meeting. Such notice may, however,
be waived by any Trustee. Notice of a meeting need not be given to any Trustee
if a written waiver of notice, executed by him before or after the meeting, is
filed with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him. A notice or waiver of notice need not specify the purpose of any meeting.
Section 3. Quorum and Adjournment of Meetings. A majority of
the Trustees shall be present in person at any regular or special meeting of the
Trustees in order to constitute a quorum for the transaction of business at such
meeting and, except as otherwise required by law, the Declaration or these
By-laws, the act of a majority of the Trustees present at any such meeting at
which a quorum is present, shall be the act of the Trustees. In the absence of a
quorum, a majority of the Trustees present may adjourn the meeting from time to
time until a quorum shall have been obtained. Notice of an adjourned meeting
need not be given.
Section 4. Committees. The Trustees, by vote of a majority of
all the Trustees, may elect from their own number committees to consist of not
less than two (2) members to hold office at the pleasure of the Trustees, and
shall have such powers as the Trustees may, from time to time, delegate to them
by resolution, except those powers which by law, the Declaration or these
By-laws they are prohibited from delegating. A majority of all members of any
such committee may determine its action and fix the time and place of its
meetings, unless the Trustees shall otherwise provide. The Trustees shall have
the power at any time to change the members and powers of any such committee, to
fill vacancies and to discharge any such committee.
Section 5. Telephone Meetings. The Trustees or a committee of
the Trustees may meet by means of a telephone conference circuit or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall be deemed to have been held at a place designated by the Trustees at the
meeting. Participation in a telephone conference meeting shall constitute
presence in person at such meeting.
Section 6. Action Without Meeting. Any action required or
permitted to be taken at any meeting of the Trustees or any
<PAGE>4
committee thereof may be taken by the Trustees without a meeting if all the
Trustees consent to the action in writing and the written consents are filed
with the records of the Trustees' meetings. Such consents shall be treated as
a vote for all purposes.
ARTICLE IV
OFFICERS
Section 1. General Provisions. The executive officers of the
Trust shall be a Chairman (who shall be a Trustee), a President, a Treasurer,
one or more Vice Presidents and a Secretary, each of whom shall be elected by
the Trustees. The Trustees may elect or appoint such other officers, agents or
employees as the business of the Trust may require, including one or more
Assistant Secretaries and one or more Assistant Treasurers. The Trustees may
delegate to any officer or committee the power to appoint any subordinate
officers, agents or employees.
Section 2. Term of Office and Qualifications. Except as
otherwise provided by law, the Declaration or these By-laws, the Chairman, the
President, the Vice President(s), the Treasurer and the Secretary shall each
hold office until his successor shall have been duly elected and qualified, and
all other officers shall hold office at the pleasure of the Trustees. Any two
offices may be held by the same person, except that the Chairman or the
President may not be the same person as the Treasurer. Any officer may be but,
except for the Chairman, none need be, a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special
meeting of the Trustees, may remove any officer with or without cause, by a vote
of a majority of the Trustees then in office. Any officer or agent appointed by
an officer or committee may be removed with or without cause by such appointing
officer or committee.
Section 4. Powers and Duties. The officers of the Trust shall
have such powers and duties as generally pertain to their respective offices, as
well as such powers and duties as may from time to time be conferred by the
Trustees.
Section 5. Compensation of Officers and Trustees. Subject to
any applicable provisions of the Declaration, the compensation of the officers
and Trustees shall be fixed from time to time by the Trustees or, in the case of
officers, by any committee or officer upon whom such power may be conferred by
the Trustees. No officer shall be prevented from receiving such compensation as
such officer by reason of the fact that he is also a Trustee.
<PAGE>5
ARTICLE V
FISCAL YEAR
The fiscal year of the Trust shall be fixed by resolution of
the Trustees. The fiscal year of the Trust shall be the taxable year of each
Series of the Trust.
ARTICLE VI
SEAL
The Trustees may adopt a seal which shall be in such form and
shall have such inscription thereon as the Trustees may from time to time
prescribe.
ARTICLE VII
SUFFICIENCY AND WAIVERS OF NOTICE
Whenever any notice whatsoever is required to be given by law,
the Declaration or these By-laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Notice, if mailed for the
purposes of these By-laws, shall be deemed to have been given when deposited in
the U.S. mail. Notice, if telegraphed, cabled or wirelessed for the purposes of
these By-laws, shall be deemed to have been given when delivered to a
representative of any telegraph, cable or wireless company with instructions
that it be telegraphed, cabled or wirelessed.
ARTICLE VIII
CUSTODY OF SECURITIES
Section 1. Employment of a Custodian. The Trust shall place
and at all times maintain in the custody of one or more Custodians (including
any sub-custodian for the Custodian), to the extent required by and in a manner
consistent with the 1940 Act and the rules thereunder, all funds, securities and
similar investments included in the Trust Property or the Trust Property
allocated or belonging to a Series thereof.
Section 2. Action Upon Termination of Custodian Agreement.
Upon termination of a Custodian Agreement or inability of the Custodian to
continue to serve, the Trustees shall promptly appoint a successor custodian and
require that the cash and securities owned by the Trust be delivered directly to
the successor custodian.
<PAGE>6
ARTICLE IX
AMENDMENTS
These By-laws, or any of them, may be altered, amended or
repealed, or new By-laws may be adopted by (a) vote of a majority of the Shares
outstanding and entitled to vote or (b) by a majority of the Trustees, provided,
however, that no By-laws may be amended, adopted or repealed by the Trustees, if
such amendment, adoption or repeal requires, pursuant to laws, the Declaration
or these By-laws, a vote of the Shareholders.
Dated: June 21, 1996
