<PAGE>
As filed with the Securities and Exchange Commission
on October 31, 1997
Securities Act File No. 333-07905
Investment Company Act File No. 811-07701
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 1
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3
(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>
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
___ on ___________, 1997 pursuant to paragraph (b)
_X_ 60 days after filing pursuant to paragraph (a)
___ on ___________ pursuant to paragraph (a) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
___ on ___________ pursuant to paragraph (a)(2) of Rule 485.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended,
the Registrant has registered an indefinite amount of securities.
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GE LIFESTYLE FUNDS
FORM N-1A
CROSS REFERENCE SHEET
Part A
Item No. Prospectus Heading
- ------- ------------------
1. Cover Page......................... Cover Page
2. Synopsis........................... Expense Information
3. Condensed Financial
Information...................... Expense Information
4. General Description of
Registrant..................... Cover Page;
Investment
Objectives and
Management Policies;
Additional Matters
5. Management of the Fund............. Expense Information;
Investment Objectives and
Management Policies;
Management of the Trust
6. Capital Stock and Other
Securities....................... Dividends;
Distributions and
Taxes; Additional
Matters
7. Purchase of Securities
Being Offered.................... Purchase of Shares;
Net Asset Value;
Distributor
8. Redemption or Repurchase.......... Redemption of Shares
9. Legal Proceedings.................. Not applicable
10. Cover Page......................... Cover Page
11. Table of Contents.................. Table of Contents
<PAGE>
Part B Heading in Statement of
Item No. Additional Information
- -------- ----------------------
12. General Information and History.... The Funds' Performance
13. Investment Objectives and
Policies......................... Investment Objectives
and Management Policies
14. Management of the Fund............. Management of the Trust
15. Control Persons and Principal
Holders of Securities........... Management of the Trust
See Prospectus--
Additional Matters
16. Investment Advisory and
Other Services................... Management of the Trust
17. Brokerage Allocation
and Other Practices.............. Investment Objectives
and Management Policies --
Investment Restrictions;
Management of the Trust
18. Capital Stock and Other
Securities....................... Redemption of Shares
19. Purchase, Redemption and Pricing
of Securities Being Offered...... Purchase of Shares;
Redemption of Shares;
Net Asset Value
20. Tax Status......................... Dividends, Distributions
and Taxes
21. Underwriters....................... Distributor
22. Calculation of Performance
Data............................. The Funds' Performance
23. Financial Statements............... Independent Accountants;
Financial Statements
Part C
Information required to be included in Part C is set forth
after the appropriate item, so numbered, in Part C to this Registration
Statement.
<PAGE>
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 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. The Fund seeks to achieve its objective through
investment in a mix of equity-oriented funds and fixed income-oriented funds,
with a bias towards equity-oriented or fixed income-oriented funds to be
determined by then current market forces.
. GE Moderate Strategy Fund's investment objective is long-term growth of
capital with a moderate level of current income. The Fund seeks to achieve its
objective through investment in various 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. The Fund seeks to achieve its objective through investment in a
selection of equity-oriented funds and fixed income-oriented funds, typically
with a strong bias under normal market conditions toward equity-oriented funds
for substantial growth potential.
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 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 (the "SAI") dated the same date as this Prospectus,
has been filed with the Securities and Exchange Commission (the "SEC"). The SEC
maintains a Web site (http://www.sec.gov) that contains the SAI, material
<PAGE>
incorporated by reference and other information regarding the Funds and the
Trust. The SAI is also 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 SAI 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
December 30, 1997
2
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TABLE OF CONTENTS
EXPENSE INFORMATION..........................................................4
LIFESTYLE FUNDS..............................................................8
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES................................9
RISK FACTORS AND SPECIAL CONSIDERATIONS OF LIFESTYLE FUNDS..................12
PORTFOLIO TURNOVER..........................................................14
Description OF THE UNDERLYING GE FUNDS......................................15
MANAGEMENT OF THE TRUST.....................................................31
PURCHASE OF SHARES..........................................................36
RETIREMENT PLANS............................................................43
REDEMPTION OF SHARES........................................................44
EXCHANGE PRIVILEGE..........................................................48
NET ASSET VALUE.............................................................49
DIVIDENDS, DISTRIBUTIONS AND TAXES..........................................49
CUSTODIAN AND TRANSFER AGENT................................................52
DISTRIBUTOR.................................................................53
THE FUNDS' PERFORMANCE......................................................53
ADDITIONAL MATTERS..........................................................55
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
(800)242-0134
3
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EXPENSE INFORMATION
The purpose of the following table is to assist an investor in understanding the
expenses that an investor in the Funds offered by this Prospectus will bear
directly in connection with an investment in each Fund's shares ("Direct
Expenses"). In addition to these Direct Expenses, Fund shares will indirectly
bear their pro rata share of the expenses of the Underlying GE Funds ("Indirect
Expenses").
Fee Table
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): 5.75% 5.75% 5.75%
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
- ----------
*The Trust will impose a redemption fee in the form of a contingent deferred
sales charge ("CDSC"), equal to 1% of the net asset value of shares being
redeemed, if redeemed within one year of purchase and if the shares were subject
to no front-end sales load upon purchase by virtue of being part of a purchase
of $1 million or more.
4
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Annual Fund Operating
Expenses (as a percentage
of average net assets)
(Direct Expenses)
Advisory and
Administration fees: .20% .20% .20%
12b-1 fees: None None None
Other expenses (after
reimbursement): .00% .00% .00%
Total Operating Expenses
(after reimbursement):+ .20% .20% .20%
- -----------------
+ See the "+" footnote to "Example" on Page 7.
Total Combined Expense Ratios (as a percentage of average net assets)
(Including Indirect Expenses)
Based on the expense ratios of the Underlying GE Funds plus those of each
LifeStyle Fund, assuming each Fund's target investment in each Underlying GE
Fund is maintained, the total average weighted combined operating expenses for
shares of the Funds offered by this Prospectus are estimated to be as follows:
Total Combined
Expense Estimates
-----------------
GE Conservative Strategy Fund 1.40%
GE Moderate Strategy Fund 1.47%
GE Aggressive Strategy Fund 1.53%
Expenses are estimated based upon the target asset allocations for each
LifeStyle Fund as set forth below under "Investment Objectives and Management
Policies."
5
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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 advisory and administration services to be furnished to
the Funds by GE Investment Management Incorporated ("GEIM"), the Trust's
investment adviser, GEIM bears 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 fees and commissions,
interest, advisory and administration fees, fees and expenses of the Trust's
Board of Trustees who are not affiliated with GEIM or its affiliates (including
counsel fees), taxes payable by the Trust, transfer agency costs (some of which
may be borne by the Underlying GE Funds as sub-transfer agency expenses of those
Funds) 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 the 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 the fiscal year ended September 30, 1997.
Indirect Expenses
Underlying GE Fund Expense Ratio*
- ------------------ --------------
GE Premier Growth Equity Fund 1.40%
GE U.S. Equity Fund 1.10%
GE Mid-Cap Growth Fund 1.40%
GE Value Equity Fund 1.35%
GE International Equity Fund 1.60%
GE Fixed Income Fund 1.05%
GE Short-Term Government Fund .95%
GE Money Market Fund .50%
6
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*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, it is estimated that the expense ratios would
be as follows: GE Premier Growth Equity Fund - 7.95%, GE Mid-Cap Growth Fund -
1.56%, GE Value Equity Fund - 1.50%, GE U.S. Equity Fund - 1.12%, GE
International Equity Fund - 1.60%, GE Fixed Income Fund - 1.14%, GE Short-Term
Government Fund - 1.20% and GE Money Market Fund - .50%.
Example+
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over a one-year and three-year period
with respect to a hypothetical investment in each Fund. These amounts are based
upon (1) direct payment by the Fund of operating expenses at the levels set out
above; (2) indirect payment by the Fund of its pro rata share of the Class A
share expenses of the Underlying GE Funds (also set out above) in which a Fund
is expected to invest at the commencement of investment operations; and (3) the
specific assumptions stated below.
A shareholder would pay the following
expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2)
redemption at the end of the time
periods shown:
------------------------------------------
1 Year 3 Years
------------------------------------------
GE Conservative Strategy Fund: $71* $99
GE Moderate Strategy Fund: $72* $101
GE Aggressive Strategy Fund: $72* $103
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
7
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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.
+ The fee table and the example of expenses reflect a determination by the
Fund's investment adviser to voluntarily reduce or otherwise limit "Other
Expenses" on an annualized basis. In the absence of this determination, it
is estimated that each Fund's "Total Operating Expenses" would
be equal to .60% of the Fund's average net assets.
* Expenses shown above would be increased by the imposition of the 1% CDSC
for redemptions of shares which were not subject to a front-end sales
charge by virtue of being part of a purchase of $1 million or more.
LIFESTYLE FUNDS
Advantages of Investing in the Trust
The proliferation of mutual funds over the last several years has left many
investors in search of a simple means to manage their long-term investments.
With new investment categories emerging each year and with each mutual fund
reacting differently to political, economic and business events, many investors
are forced to make complex investment decisions in the face of limited
experience, time and personal resources. The Funds are designed to meet the
needs of investors who prefer to have their asset allocation decisions made by
professional money managers, are looking for an appropriate core investment
portfolio and appreciate the advantages of broad diversification.
Although an investor could achieve portfolio diversification by investing
directly in a variety of GE Funds, participating in the LifeStyle Funds offers
two significant advantages: (1) simplified investment decision making; and (2)
periodic portfolio rebalancing to ensure Fund allocations remain consistent with
original risk/return objectives.
Asset Allocation Process
The Funds are managed so that each Fund can serve as a complete investment
program or as a core part of a larger portfolio. Each of the Funds invests in a
select group of Underlying GE Funds suited to the Fund's particular
8
<PAGE>
investment objective. Subject to the supervision of the Trust's Board of
Trustees, GEIM, after receipt of recommendations from any investment consultant
retained by the Board (the "Investment Consultant"), will determine the extent
to which each Fund may invest in the Underlying GE Funds (the "Asset Allocation
Ranges") and target investment percentages ("Targets"). On an ongoing basis,
GEIM will monitor each Fund's assets allocated to the Underlying GE Funds within
the Asset Allocation Ranges approved by the Board of Trustees from time to time
and will reallocate assets as necessary to the extent a particular Fund deviates
significantly from its Target. The Asset Allocation Ranges and Targets are
described below under "Investment Objectives and Management Policies".
Before adding or eliminating any Underlying GE Funds in which a Fund may invest,
the Board of Trustees will consult with GEIM and the Investment Consultant and
disclose any such change to shareholders of the affected Funds. However, subject
to the supervision of the Board of Trustees, GEIM may, in conjunction with the
Investment Consultant, change the Asset Allocation Ranges or Targets without
prior notice to Fund shareholders. 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 under normal
conditions 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 conservative or strategic 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 following seven Underlying GE Funds: GE
Premier Growth Equity Fund (the "Premier Fund"), GE U.S. Equity Fund ("U.S.
Equity Fund"), GE Mid-Cap Growth Fund (the "Mid-Cap Fund"), GE Value Equity Fund
(the "Value Fund"), GE International Equity Fund (the "International Fund"), GE
Fixed Income Fund (the "Income Fund") and GE Short-Term Government Fund (the
"Government Fund"). The Funds will not invest in securities other than shares of
the Underlying GE Funds (or other affiliated funds that may be approved by the
Board of Trustees from time to time) and money market
9
<PAGE>
instruments of the types described under "Money Market Instruments" in the
Appendix to this Prospectus (including GE Money Market Fund (the "Money Market
Fund")).
GEIM, in conjunction with the Investment Consultant, will evaluate the
Underlying GE Funds for purposes of establishing Targets for each Fund's assets
within the Asset Allocation Ranges, which designate minimum and maximum limits
for investment in each of the Underlying GE Funds. These Targets will be
determined based on an evaluation of the following factors: outlook for the
economy; financial markets; and the relative performance, volatility and
covariance of the Underlying GE Funds.
On an ongoing basis, GEIM will conduct a Target variance analysis for each Fund
and will consider, in its discretion, whether to reallocate a Fund's assets
within the Asset Allocation Ranges to the extent that a Fund's investment in an
Underlying GE Fund deviates significantly from its Target as a result of
appreciation or depreciation. With respect to Targets that are 10% or more, GEIM
will generally consider a variance of five percentage points or more in either
direction to be significant. With respect to Targets that are less than 10%,
GEIM will generally consider a deviation to be significant if it varies by two
percentage points or more. In each case, after consideration of existing market
conditions and impact on the Fund, GEIM will typically attempt to rebalance each
Fund's investments in the Underlying GE Funds to meet its intended Targets.
However, if GEIM believes it to be in the best interests of a Fund, or if such
rebalancing would result in the Fund violating certain regulatory limitations,
it may limit the degree of rebalancing or may avoid rebalancing altogether
pending further analysis of market conditions and impact on the Fund.
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 securities as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"). There can be no assurance that
any Fund's investment objective will be achieved.
10
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In investing in Underlying GE Funds, the Funds seek to maintain different
allocations among the Underlying GE Funds depending on a Fund's investment
objective. Allocating investments among the Underlying GE Funds permits each
Fund to attempt to optimize performance consistent with its investment
objective. The tables below illustrate the Asset Allocation Ranges and Targets
as a percentage of each Fund's net assets:
Conservative Fund
Underlying GE Fund Target Range
- ------------------ ------ -----
Premier Fund 4% 1%- 7%
U.S. Equity Fund 10% 5%-15%
Mid-Cap Fund 3% 1%- 6%
Value Fund 9% 5%-15%
International Fund 18% 12%-24%
Income Fund 51% 45%-57%
Government Fund 5% 2%- 8%
Moderate Fund
Underlying GE Fund Target Range
- ------------------ ------ -----
Premier Fund 8% 5%-11%
U.S. Equity Fund 13% 8%-19%
Mid-Cap Fund 4% 1%- 7%
Value Fund 13% 8%-19%
International Fund 25% 19%-31%
Income Fund 32% 26%-38%
Government Fund 5% 2%- 8%
Aggressive Fund
Underlying GE Fund Target Range
- ------------------ ------ -----
Premier Fund 10% 4%-16%
U.S. Equity Fund 17% 10%-22%
Mid-Cap Fund 6% 3%- 9%
Value Fund 16% 10%-22%
International Fund 32% 26%-38%
Income Fund 14% 8%-20%
Government Fund 5% 2%- 8%
The Underlying GE Funds have been selected to represent a reasonable spectrum of
investment options for the Funds. The Asset Allocation Ranges 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. The particular
Underlying GE Funds in which each
11
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Fund may invest and the Asset Allocation Ranges and Targets applicable to each
Underlying GE Fund may be changed from time to time by GEIM, in consultation
with the Investment Consultant, subject to the supervision of the Trust's Board
of Trustees without the approval of the Fund's shareholders. The Trust will
provide prior notice to shareholders before adding or eliminating any Underlying
GE Funds, but not prior to changes in the Asset Allocation Ranges or Targets.
Each Fund can invest a certain portion of its cash reserves, if any, in the
Money Market Fund or directly in money market instruments. A reserve position
provides flexibility, for example, in meeting redemptions, expenses and the
timing of new investments, and serves as a short-term defense during periods of
unusual volatility.
For information about the investment objectives of each of the Underlying GE
Funds and the investment techniques and the risks involved in the Underlying GE
Funds, please refer to "Description of the Underlying GE Funds," the Appendix to
this Prospectus, the SAI 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 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 Internal Revenue Code of
1986, as amended (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 "Risk Factors and Special
12
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Considerations of LifeStyle Funds - Additional Expense Information Concerning
the Funds," "Management of the Trust" and "Dividends, Distributions and Taxes."
Under certain circumstances, an Underlying GE Fund may determine to make payment
of a redemption request by a Fund wholly or partly by a distribution in kind of
securities from its portfolio, instead of cash, in accordance with the rules of
the SEC. In such cases, the Funds may hold securities distributed by an
Underlying GE Fund until GEIM determines that it is appropriate to dispose of
such securities.
Affiliated Persons. GEIM, the investment adviser and administrator of the Funds,
and the officers and trustees of the Trust presently serve as investment adviser
and administrator, officers and trustees, respectively, of the Underlying GE
Funds. Therefore, conflicts may arise as these persons fulfill their fiduciary
responsibilities to the Funds and the Underlying GE Funds. See "Management of
the Trust" for a more detailed explanation of the potential conflicts of
interest that may arise because of the "fund of funds" structure of the Trust.
In addition, GEIM's principal officers, directors and portfolio managers serve
in similar capacities with respect to General Electric Investment Corporation
("GEIC"), which like GEIM is a wholly-owned subsidiary of General Electric
Company ("GE"). GEIM and GEIC collectively provide investment management
services to various institutional accounts with total assets, as of September
30, 1997, in excess of $69 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) and
foreign securities; enter into forward currency transactions; lend their
portfolio securities; enter into stock or bond 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 "Description 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
13
<PAGE>
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 limit such expenses), but will also
indirectly bear similar expenses of the Underlying GE Funds. In addition, as a
shareholder of an Underlying GE Funds' Class A shares, a Fund will bear a
proportionate share of expenses related to the distribution and shareholder
servicing of the Underlying GE Funds' shares.
Investment Restrictions of the Funds
The Trust has adopted certain fundamental investment restrictions with respect
to each Fund that may not be changed without approval of a majority of the
Fund's outstanding voting securities (as defined in the 1940 Act). Included
among those fundamental restrictions are those listed below.
1. No Fund may borrow money or issue senior securities, except that
each Fund may borrow from banks for temporary or emergency (not
leveraging) purposes, including the meeting of redemption requests
and cash payments of dividends and distributions that might
otherwise require the untimely disposition of securities, in an
amount not to exceed 33-1/3% of the value of the Fund's total
assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the
borrowing is made. Whenever borrowings of 5% or more of a Fund's
total assets are outstanding, the Fund will not make any
additional investments.
2. No Fund may lend its assets or money to other persons, except through (a)
purchasing debt obligations, (b) lending portfolio securities in an amount
not to exceed 30% of the Fund's assets taken at market value and (c)
entering into repurchase agreements.
Certain other investment restrictions adopted by the Trust with respect to the
Funds are described in the SAI. Investment restrictions of the Underlying GE
Funds in which
14
<PAGE>
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 among the Underlying GE Funds within the Asset
Allocation Ranges 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 30% for the Value Fund,
50% for each of the Premier Fund, U.S. Equity Fund and International Fund, 200%
for the Mid-Cap Fund and 300% for each of the Income Fund and Government Fund.
The portfolio turnover rate for the Money Market Fund is expected to be zero for
regulatory purposes. There can be no assurance that the turnover rates of these
Underlying GE Funds will not exceed these limits. Higher turnover rates (more
than 100%) may result in higher transaction expenses being incurred by certain
Underlying GE Funds and shareholders in the Funds that invest in those
Underlying GE Funds will indirectly bear their proportionate share of such
expenses. For the fiscal year ended September 30, 1997, the actual portfolio
turnover rates of the underlying GE Funds were: U.S. Equity Fund - 37.81%,
Mid-Cap Fund 139%, Value Fund 131%, International Fund - 50.90%, Income Fund -
257.71% and Government Fund - 254.58%. For the period from December 31, 1996 to
September 30, 1997 the actual portfolio turnover rate for the Premier Fund was
17.42%.
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 an Underlying GE 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.
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
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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 Premier Growth Equity Fund
The investment objective of the Premier Fund is long-term growth of capital and
future income rather than current income. The Fund seeks to achieve this
objective through investment primarily in growth-oriented equity securities
which, under normal market conditions, will represent at least 65% of the Fund's
assets. In pursuing its objectives, the Premier Fund, under normal conditions,
may invest in common stocks, preferred stocks, convertible bonds, convertible
debentures, convertible notes, convertible preferred stocks and warrants or
rights issued by U.S. and foreign companies.
In attempting to achieve its objective, the Premier Fund will seek to identify
and invest in companies it believes will offer potential for long-term growth of
capital. These companies typically would possess one or more of a variety of
characteristics, including high quality products and/or services, strong balance
sheets, sustainable internal growth, superior financial returns, competitive
position in the issuer's economic sector and shareholder-oriented management.
While the Premier Fund may invest in companies of varying sizes as measured by
assets, sales or capitalization, a majority of its assets will, under normal
market conditions, be comprised of companies with relatively large
capitalizations. In addition, the Premier Fund will normally be invested in
companies that have above-average growth prospects and which are typically
leaders in their fields. The Fund will generally be diversified over a cross
section of industries.
Up to 25% of the Premier Fund's total assets may be invested in foreign
securities, excluding, for purposes of this limitation American Depositary
Receipts (i.e., 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, "ADRs") and securities of a foreign issuer with
a class of securities registered with the SEC and listed on a U.S. national
securities exchange ("U.S. Listed Securities") or traded on the Nasdaq National
Market or the Nasdaq SmallCap Market (collectively "Nasdaq Traded Securities").
The Premier Fund's investments in debt securities are limited to those
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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. 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 Ratings Services, a Division
of The McGraw-Hill Companies, Inc. ("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.
GE U.S. Equity Fund
The investment objective of 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. Up to 15% of the U.S. Equity Fund's assets may be invested in foreign
securities. ADRs, U.S. Listed Securities and Nasdaq Traded Securities will be
included for purposes of the U.S. Equity Fund's 65% minimum described above, and
excluded for purposes of the Fund's 15% maximum in investments in foreign
securities.
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
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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.
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.
GE Mid-Cap Growth Fund
The investment objective of the Mid-Cap Fund is long-term growth of capital. The
Fund seeks to achieve this objective by investing primarily in the equity
securities of companies with medium-sized market capitalizations ("mid-cap")
that have the potential for above-average growth. The Fund, under normal market
conditions, invests at least 65% of its total assets in a portfolio of equity
securities of mid-cap companies traded on U.S. securities exchanges or in the
U.S. over-the-counter market, including common stocks, preferred stocks,
convertible preferred stocks, convertible bonds, convertible debentures,
convertible notes, ADRs and warrants or rights issued by U.S. and foreign
companies.
Mid-cap growth companies are often still in the early phase of their life cycle.
Accordingly, investing in mid-cap companies generally entails greater risk
exposure and volatility (meaning upward or downward price swings) than investing
in large, well-established companies. However, GEIM believes that mid-cap
companies may offer the potential for more rapid growth.
GEIM relies on its proprietary research to identify mid-cap companies with
potentially attractive growth prospects. These companies typically have one or
more of a variety of characteristics, including attractive products or services,
above average earnings growth potential, superior financial returns, strong
competitive position, shareholder focused management and sound balance sheets.
There is, of course, no guarantee that GEIM will be able to identify such
companies or that the Fund's investment in them will be successful.
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The Mid-Cap Fund may invest up to 35% of its assets in (i) securities of
companies outside the capitalization range of the S&P Mid-Cap 400 Index; (ii)
foreign securities, excluding, for purposes of this limitation, ADRs and U.S.
Listed Securities and Nasdaq Traded Securities; and (iii) bonds, notes and
debentures.
GE Value Equity Fund
The investment objective of the Value Equity Fund is long-term growth of capital
and future income. The Fund seeks to achieve its objective by investing
primarily in equity securities of companies with large sized market
capitalization that GEIM considers to be undervalued by the market. Undervalued
securities are those selling for low prices given the fundamental
characteristics of their issuers. During normal market conditions, the Value
Fund invests at least 65% of its assets in common stocks, preferred stocks,
convertible bonds, convertible debentures, convertible notes, convertible
preferred stocks and warrants or rights issued by U.S. and foreign companies.
The Value Fund's investment philosophy is that the market tends to overreact to
both good and bad news about issuers. Companies experiencing faster than
expected growth tend to be overvalued as the market extrapolates current good
news well beyond a sustainable time-frame and correspondingly overforecasts the
period and magnitude of decline of companies experiencing near term
difficulties. These difficulties can be driven by factors both internal and
external to the company. Internal factors may include operational mismanagement
or strategic mistakes. External factors may include a change in the economic
environment or a shift in the competitive dynamics of an industry. The Fund
attempts to identify firms that are out of favor for a variety of reasons and
select those which GEIM believes to be undervalued relative to their true
business prospects.
In accordance with this premise, GEIM will identify and select securities that
it believes are undervalued, using factors it considers indicative of
fundamental investment value including: (i) low price/earnings ratio relative to
a normalized growth rate and/or the S&P 500 Index; (ii) the potential for free
cash flow generation and prospects for dividend growth; (iii) a strong balance
sheet with low financial leverage; (iv) sustainable competitive advantages such
as a franchise brand name or dominant market position;
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(v) an experienced and capable management team; (vi) improving returns on
invested capital; and (vii) net asset values in a restructuring/breakup analysis
framework.
GEIM believes that such investments will position the Value Fund to benefit from
a positive change in business prospects from an issuing company that adopts a
turnaround strategy to increase/restore the earning power of the company.
The Value Fund may, under normal market conditions, invest (i) up to 35% of its
assets in bonds, notes and debentures and (ii) up to 25% of its assets in
foreign securities excluding, for purposes of this limitation, ADRs and U.S.
Listed Securities and Nasdaq Traded Securities.
GE International Equity Fund
The investment objective of 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 in no fewer than
three different countries other than the United States. 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. The
determination of where an issuer is located will be made by reference to the
country in which the issuer (a) is organized, (b) derives at least 50% of its
revenues or profits from goods produced or sold, investments made or services
performed, (c) has at least 50% of its assets situated or (d) has the principal
trading market for its securities.
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,
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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.
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 growth of
capital. 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.
GE Fixed Income Fund
The investment objective of 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 non-convertible 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 depositary receipts
and structured and indexed securities, the value of which is linked to
currencies, interest rates, commodities, indexes or other financial indicators.
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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 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; depositary receipts; 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 structured and 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
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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.
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
The investment objective of 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 and
reverse 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
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securities. "Requisite NRSROs" means (1) any two NRSROs that have issued ratings
with respect to a security or class of debt obligations of an issuer or (2) one
NRSRO, if only one NRSRO has issued such a rating at the time that the Money
Market Fund acquires the security. Currently, six organizations are NRSROs: S&P,
Moody's, Fitch Investors Service, Inc., Duff and Phelps, Inc., IBCA Limited and
its affiliate, IBCA, Inc., and Thomson BankWatch Inc. By limiting its
investments to Eligible Securities, the Money Market Fund may not achieve as
high a level of current income as a fund investing in lower-rated securities.
The Money Market Fund may not invest more than 5% of its total assets in the
securities of any one issuer, except for Government Securities and except to the
extent permitted under rules adopted by the SEC under the 1940 Act. In addition,
the Money Market Fund may not invest more than 5% of its total assets in
Eligible Securities that have not received the highest rating from the Requisite
NRSROs and comparable unrated securities ("Second Tier Securities"), and may not
invest more than the greater of $1,000,000 or 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. Determinations of comparable quality are 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 the Money Market Fund which invests
primarily in money market instruments as described above) may invest a portion
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of its total assets in cash and/or money market instruments of the types
described in the Appendix to this Prospectus for cash management purposes,
pending investment in accordance with the Underlying GE Fund's investment
objective and policies and to meet operating expenses. Under normal market
conditions, each of the Income Fund and the Government Fund may hold a
substantial portion of its assets in money market instruments, including in the
case of the Government Fund short-term instruments with remaining maturities of
one year or less, if such investment is deemed by GEIM to be consistent with the
Underlying GE Fund's investment objective. During periods in which GEIM believes
that economic, political, currency or market conditions domestically or abroad
warrant, GEIM may assume, on behalf of an Underlying GE Fund, a temporary
defensive posture and (i) without limitation hold cash and/or invest in money
market instruments of the types described in the Appendix to this Prospectus or
(ii) restrict the securities markets in which the Underlying GE Fund's assets
will be invested by investing those assets in securities markets deemed by GEIM
to be conservative in light of the Underlying GE Fund's investment objective and
policies and to meet operating expenses. 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, 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,
writing put and call options on securities indices, 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
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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 SAI and the prospectus and
statement of additional information for GE Funds.
Risk Factors and Special Considerations of the Underlying GE Funds
General. From time to time, the Underlying GE Funds may experience relatively
large purchases or redemptions due to asset allocation decisions made by GEIM
for its clients, including the Trust. These transactions may have a material
effect on the Underlying GE Funds, since Underlying GE Funds that experience
redemptions as a result of reallocations may have to sell portfolio securities
and because Underlying GE Funds that receive additional cash will have to invest
it. While it is impossible to predict the overall impact of these transactions
over time, there could be adverse effects on the Underlying GE Funds to the
extent that they 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 Funds' investment
objectives and will monitor the impact of the Funds' 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
the Funds 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
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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. 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 SAI.
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.
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
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securities generally are unsecured and frequently are subordinated to the prior
payment of senior indebtedness. An Underlying GE Fund may incur additional
expenses to the extent that it is required to seek recovery upon a default in
the payment of principal or interest on its portfolio holdings. The existence of
limited markets for low-rated securities may diminish GEIM's ability to obtain
accurate market quotations for purposes of valuing the securities held by an
Underlying GE Fund and calculating the Fund's net asset value.
Non-publicly Traded and Illiquid Securities. Non-publicly traded securities may
be less liquid than publicly traded securities. Although these securities may be
resold in privately negotiated transactions, the prices realized from these
sales could be less than those originally paid by an Underlying GE Fund. In
addition, companies whose securities are not publicly traded are not subject to
the disclosure and other investor protection requirements that may be applicable
if their securities were publicly traded. An Underlying GE Fund's investments in
illiquid securities are subject to the risk that should the Fund desire to sell
any of these securities when a ready buyer is not available at a price that GEIM
deems representative of their value, the value of the Fund's net assets could be
adversely affected.
Repurchase and Reverse Repurchase Agreements. A Fund or an Underlying GE Fund
entering into a repurchase agreement will bear a risk of loss in the event that
the other party to the transaction defaults on its obligations and the Fund or
the Underlying GE 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 Underlying GE 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 an Underlying GE 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, an Underlying GE 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 Underlying GE Fund's
obligation to repurchase the securities.
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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. Warrants acquired by an Underlying GE Fund in units or attached to
securities may be deemed to be without value.
Smaller Companies. Smaller companies in which the Premier Fund and Mid-Cap Fund
may invest may involve greater risks than large, established issuers. Such
smaller companies may have limited product lines, markets or financial resources
and their securities may trade less frequently and in more limited volume than
the securities of larger or more stablished companies. As a result, the prices
of smaller companies may fluctuate to a greater degree than the prices of
securities of other issuers.
Investment in Foreign Securities. Investing in securities issued by foreign
companies and governments, including securities issued in the form of depositary
receipts, involves considerations and potential risks not typically associated
with investing in obligations issued by the U.S. Government and U.S.
corporations. Less information may be available about foreign companies than
about U.S. companies, and foreign companies generally are not subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to U.S. companies. The
values of foreign investments are affected by changes in currency rates or
exchange control regulations, restrictions or prohibitions on the repatriation
of foreign currencies, application of foreign tax laws, including withholding
taxes, changes in governmental administration or economic or monetary policy (in
the United States or abroad) or changed circumstances in dealings between
nations. Costs are also incurred in connection with conversions between various
currencies. In addition, foreign brokerage commissions are generally higher than
those charged in the United States and foreign securities markets may be less
liquid, more volatile and less subject to governmental supervision than in the
United
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States. Investments in foreign countries could be affected by other factors not
present in the United States, including expropriation, confiscatory taxation,
lack of uniform accounting and auditing standards, limitations on the use or
removal of funds or other assets (including the withholding of dividends), and
potential difficulties in enforcing contractual obligations, and could be
subject to extended clearance and settlement periods.
Currency Exchange Rates. An Underlying GE Fund's share value may change
significantly when the currencies, other than the U.S. dollar, in which the
Fund's portfolio investments are denominated, strengthen or weaken against the
U.S. dollar. Currency exchange rates generally are determined by the forces of
supply and demand in the foreign exchange markets and the relative merits of
investments in different countries as seen from an international perspective.
Currency exchange rates can also be affected unpredictably by intervention by
U.S. or foreign governments or central banks or by currency controls or
political developments in the United States or abroad.
Investing in Developing Countries. Investing in securities issued by companies
located in developing countries involves not only the risks described above with
respect to investing in foreign securities, but also other risks, including
exposure to economic structures that are generally less diverse and mature than,
and to political systems that can be expected to have less stability than, those
of developed countries. Other characteristics of developing countries that may
affect investment in their markets include certain national policies that may
restrict investment by foreigners in issuers or industries deemed sensitive to
relevant national interests and the absence of developed legal structures
governing private and foreign investments and private property. The typically
small size of the markets for securities issued by companies located in
developing countries and the possibility of a low or nonexistent volume of
trading in those securities may also result in a lack of liquidity and in price
volatility of those securities.
Covered Option Writing. Upon the exercise of a put option written by an
Underlying GE Fund, the Fund may suffer a loss equal to the difference between
the price at which the Fund is required to purchase the underlying security and
its market value at the time of the option exercise, less the premium received
for writing the option. Upon the exercise of a call option written by an
Underlying GE Fund, the Fund may suffer a loss equal to the excess of the
security's market value at the time of the option's exercise over the
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Fund's acquisition cost of the security, less the premium received for writing
the option. In addition, no assurance can be given that an Underlying GE Fund
will be able to effect closing purchase transactions at a desired time. The
ability of an Underlying GE Fund to engage in closing transactions with respect
to options depends on the existence of a liquid secondary market. Although an
Underlying GE Fund will generally purchase or write securities options only if a
liquid secondary market appears to exist for the option purchased or sold, no
such secondary market may exist or the market may cease to exist.
An Underlying GE Fund will engage in hedging transactions only when deemed
advisable by GEIM. Successful use by an Underlying GE Fund of options will
depend on GEIM's ability to predict correctly movements in the direction of the
securities underlying the option used as a hedge. Losses incurred in hedging
transactions and the costs of these transactions will affect an Underlying GE
Fund's performance.
Securities Index Options. Securities index options are subject to position and
exercise limits and other regulations imposed by the exchange on which they are
traded. The ability of an Underlying GE Fund to engage in closing purchase
transactions with respect to securities index options depends on the existence
of a liquid secondary market. Although an Underlying GE Fund will generally
purchase or write securities index options only if a liquid secondary market for
the options purchased or sold appears to exist, no such secondary market may
exist, or the market may cease to exist at some future date, for some options.
No assurance can be given that a closing purchase transaction can be effected
when GEIM desires that an Underlying GE Fund engage in such a transaction.
Futures and Options on Futures. The use of futures contracts and options on
futures contracts as a hedging device involves several risks. No assurance can
be given that a correlation will exist between price movements in the underlying
securities or index and price movements in the securities that are the subject
of the hedge. Positions in futures contracts and options on futures contracts
may be closed out only on the exchange or board of trade on which they were
entered, and no assurance can be given that an active market will exist for a
particular contract or option at any particular time. Losses incurred in hedging
transactions and the costs of these transactions will affect an Underlying GE
Fund's performance.
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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 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.
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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, debt
obligations 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 review and approve the Asset
Allocation Ranges determined by GEIM and the Investment Consultant, which
designate the minimum and maximum percentages for investment among the
Underlying GE Funds and which define Target investment percentages applicable to
each 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 of the Trust 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
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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 take 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 and subject to the supervision of the
Trust's Board of Trustees, determines the Asset Allocation Ranges and Target
investment percentages applicable to each Underlying GE Fund. GEIM then
periodically allocates and reallocates according to market conditions and
outlook each Fund's assets to the Underlying GE Funds' Targets within the Asset
Allocation Ranges approved 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 GE Investments Funds, Inc., which are offered to insurance company
separate accounts that fund certain variable contracts, since May 1997, and the
U.S. Government Money Market Fund and U.S. Treasury Money Market Fund of
Financial Investors Trust since March 1997. GEIM has served as sub-investment
adviser to PaineWebber Global Equity Fund of PaineWebber Investment Trust since
its inception in 1991, the Global Growth Portfolio of PaineWebber Series Trust
and the Global Small Cap Fund Inc. since March 1995, the International Equity
and the U.S. Equity Portfolios of WRL Series Fund, Inc. since January 1997 and
the International Equity Portfolio of IDEX Series Fund since February 1997.
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
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"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 and other
GE benefit plans. 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 September 30, 1997, in excess of $69 billion, of which more than
$13 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 and, in conjunction with the
Investment Consultant, will make recommendations to the Board of Trustees
concerning changes to (a) the Underlying GE Funds in which the Funds may invest
and (b) the Asset Allocation Ranges and Targets. 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 advisory and administration services to be
furnished to the Funds, GEIM has agreed to bear all expenses of the LifeStyle
Funds other than brokerage fees and commissions, interest, advisory and
administration fees, fees and expenses of the Trust's Board of Trustees who are
not affiliated with GEIM or its affiliates (including counsel fees), taxes
payable by the Trust, transfer agency costs (some of which may be borne by
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the Underlying GE Funds as sub-transfer agency expenses of those Funds) 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 Premier Fund - .60%, the U.S. Equity Fund - .40%, the Mid-Cap
Fund - .60%, the Value Fund - .55%, the International Fund - .80%, the Income
Fund - .35%, the Government Fund - .30% and the Money Market Fund - .25%. 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 advisory and administration services furnished to
the Trust by GEIM provide that, if GEIM ceases to act as the investment adviser
to the Trust, at GEIM's request, the Trust's license to use the initials "GE"
will terminate and the Trust will change the name of the Trust and the Funds to
a name not including the initials "GE."
Investment Consultant
The Trust and GEIM have entered into an Investment Consulting Agreement with
DiMeo, Schneider & Associates, L.L.C. ("DS&A"), an Illinois limited liability
company and 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 determine,
subject to the supervision of the Board, changes to (1) the Underlying GE Funds
in which the Funds may invest and (2) the Asset Allocation Ranges and Targets.
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.
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If there is no Investment Consultant, GEIM will perform these services and incur
the related expenses directly.
DS&A, founded on May 1, 1995, is a mid-sized, independent consulting firm which
offers the Funds the capabilities of much larger consulting firms through
several strategic alliances with providers of research, technology and other
resources. The seven founding members of DS&A previously worked as a team at
Kidder, Peabody & Co., Inc. in Chicago.
Portfolio Management
Eugene K. Bolton is the Portfolio Manager of the Funds. Mr. Bolton is
responsible for the overall management of the domestic equity
investment process at GEIM and GEIC (GEIM, GEIC and their predecessors
are collectively referred to as "GE Investments"). In that capacity,
Mr. Bolton also leads a team of portfolio managers for the U.S. Equity
Fund. Mr. Bolton has more than 12 years of investment experience and
has held positions with GE Investments since 1984. He is currently a
Director and Executive Vice President of GE Investments.
GEIM investment personnel may engage in securities transactions for their own
accounts pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions.
Shareholder Servicing and Distribution Plans Adopted by the Underlying
GE Funds
GE Funds has adopted Shareholder Servicing and Distribution Plans (the "Plans")
pursuant to Rule 12b-1 under the 1940 Act with respect to each Underlying GE
Fund, other than the Money Market Fund. Under the Plans, GE Funds will pay GEIM,
with respect to the Class A shares of an Underlying GE Fund, an annual service
fee of .25% of the value of the Underlying GE Fund's average daily net assets
attributable to the Class and an annual distribution fee of .25% of the value of
the Underlying GE Fund's average daily net assets attributable to the Class. The
annual service fee is used by GEIM to compensate itself or others, including GE
Investment Services Inc., the distributor of the Underlying GE Funds' shares
("GEIS" or the "Distributor"), for providing ongoing servicing and/or
maintenance of the accounts of shareholders of the Class A shares ("Shareholder
Services"). 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
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Underlying GE Funds ("Selling Services"). 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. Payments made pursuant to the Plans that are attributable
to shares of the Funds are used to pay for providing Shareholder Services and
Selling Services to LifeStyle Fund shareholders as if they were direct
shareholders in the Underlying GE Funds. Because compensation is paid by the
Plans for the provision of 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 Funds' and the Underlying GE Funds'
investments; (ii) general information regarding investing in mutual funds; (iii)
periodic newsletters containing materials relating to the Fund or the Underlying
GE Funds or to investments in general in mutual funds; (iv) periodic financial
seminars designed to assist in the education of shareholders with respect to
mutual funds generally and the Funds or the Underlying GE Funds specifically;
(v) access to a telephone inquiry center relating to the Funds; 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 Funds of prospectuses
and statements of additional information that are used in connection with sales
of shares of the Funds; (b) the preparation, including printing, and
distribution of sales literature and media advertisements relating to shares of
the Funds; and (c) distributing shares of the Funds. Service providers who
assist GEIM in rendering Shareholder Services or Selling Services ("Service
Providers") 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
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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, including investments in individual
retirement accounts ("IRAs"), is $500 and the minimum for subsequent investments
is $100. The minimum for any purchase by payroll deduction, provided the
investor has made a minimum initial investment of $500, is $25 per month.
Purchase orders for shares of a Fund will be accepted by the Trust only on a day
on which the Fund's net asset value is calculated. See "Net Asset Value" below.
The Trust may in its discretion reject any order for the purchase of shares of a
Fund. For the convenience of shareholders and in the interest of economy, the
Trust will not issue physical certificates representing shares in any Fund.
Shares of the Funds may be purchased directly from the Distributor or through
authorized broker-dealers, financial institutions or investment advisers which
have entered into sales agreements with the Distributor ("Authorized Firms"), as
follows:
Through Authorized Firms. Initial purchases of shares through Authorized Firms
should be made with the assistance of a sales representative (a "Sales
Representative"). Subsequent investments may be made with a Sales Representative
or, depending on the type of account, 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.
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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:
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 419631
Kansas City, MO 64141-6631
For overnight package delivery:
GE LifeStyle Funds
c/o National Financial Data Services Inc.
1004 Baltimore
Kansas City, MO 64105
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. Third-party checks or endorsed checks are not accepted by the Trust
for payment for shares of a Fund. 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
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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 National Financial Data Services Inc.
1004 Baltimore
Kansas City, MO 64105
By Wire. Purchase orders for shares of a Fund may be transmitted by wire. Wire
orders will not be accepted until a completed account application in proper form
has been received by the Trust at the address set forth above. After the Trust
receives an application, an investor should then wire Federal funds (minimum
$1,000) to: State Street Bank and Trust Company (ABA #0110-0002-8; DDA No.
9904-641-9) For: [Name of Fund] Account of: [Investor's name, address and
account number].
If a wire is received by the close of regular trading on the NYSE (currently
4:00 p.m. New York time), the shares will be priced according to the net asset
value of the Fund on that day. If a wire is received after the close of regular
trading on the NYSE, the shares will be priced as of the time the Fund's net
asset value per share is next determined. Payment for orders that are not
accepted will be returned to the prospective investor promptly.
By Direct Deposit Privilege. The Trust offers a Direct Deposit Privilege (the
"Privilege"), which enables investors to purchase shares of a Fund (minimum of
$25) by having Federal salary, Social Security, or certain veterans', military
or other payments from the U.S. Government, or a GE employee's payroll check,
automatically deposited into their Fund account. An investor must also meet the
minimum initial investment criteria set forth above. An investor should consult
his or her employer for instructions. 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.
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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, provided the investor has met the minimum initial investment
criteria set forth above. 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 National Financial Data Services Inc.
1004 Baltimore
Kansas City, MO 64105
The necessary authorization form may be obtained from the Trust. Investors may
change the amount of purchase or cancel the authorization only by written
notification to the Trust. The Trust may modify or terminate the Payroll Savings
Plan at any time or charge a service fee. No such fee currently is contemplated.
By Automatic Investment Plan. Investors may arrange to make purchases of shares
automatically on a monthly basis by electronic funds transfer (minimum $25 per
transaction) from the checking, NOW, bank money market deposit account or credit
union account designated by the investor if their bank or credit union is a
member of an automated clearing house or by preauthorized checks drawn on their
bank or credit union account. Investors must also meet the minimum initial
investment criteria set forth above. 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.
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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:
Maximum
Total Dealers'
Front-End Sales Charge Reallowance*
---------------------- --------------
As a As a As a
Percentage Percentage Percentage
Amount of Purchase at of Offering of Net of Offering
Offering Price Price Amount Invested Price
- ---------------------------------- ----------- --------------- -----------
Less than $50,000................. 5.75% 6.10% 5.25%
$50,000 but less than $100,000.... 4.25 4.44 3.75
$100,000 but less than 250,000.... 3.25 3.36 2.75
$250,000 but less than $500,000... 2.50 2.56 2.00
$500,000 but less than $1,000,000. 2.00 2.04 1.55
$1,000,000 or more................ 0 0 **
- ---------------
* The staff of the SEC has indicated that dealers who receive more than 90% of
the sales charge may be considered underwriters.
** For purchases in excess of $1 million, the Distributor will pay a concession
of up to .70% to the selling dealer.
No sales charge is imposed on shares purchased through reinvestment of dividends
or capital gains distributions. In addition, shares are offered without any
sales charge with respect to: (1) purchases of $1 million or more by an
investor, including an investment by an employee retirement plan that seeks the
additional services provided to the Funds offered by this Prospectus ("Employee
Retirement Plans"), (2) all purchases by Employee Retirement Plans which have
250 or more eligible employees, (3) all purchases by Employee Retirement Plans,
including Plans that purchase less than $1 million of shares and which have less
than 250 eligible employees, if such Plans purchase the shares exclusively
through the Distributor and not through an Authorized Firm, (4) all purchases
directly by individuals who may invest in the Funds through Employee Retirement
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 made through certain broker-dealers,
financial institutions, recordkeepers and other financial intermediaries who
charge a management, consulting or other fee for their services (each, a
"Financial Intermediary," collectively, the "Financial Intermediaries") and who
have
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an agreement with or among the Trust, GEIM or the Distributor, requiring the
Trust, GEIM or the Distributor to compensate the Financial Intermediary for
administrative, subaccounting, transfer agency and/or other services, (7) all
purchases resulting from offerings made to selected customers of certain
subsidiaries and divisions of GE, including any subsequent purchases by persons
who invest through such offerings, provided that any such person maintains an
account with the Trust in its, his or her name at the time of the subsequent
purchase and the investment is made in that name, or as custodian for a minor or
in an individual retirement account for the customer, and (8) all purchases by
certain customers of GE who previously purchased shares during a special limited
offering of such shares of GE Funds by the Distributor, provided that the
customer maintains an account with the Trust in its, his or her name at the time
of the current purchase and the investment is made in that name, or as custodian
for a minor or in an individual retirement account for the 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 the 5.75% normally charged on a $15,000 purchase. In addition,
Employee Retirement Plans may include, as part of the calculation of
accumulation benefits, purchases of interests in other pooled investment
vehicles, which are made available to such investors and specified by the
Distributor as eligible for accumulation benefits in sales agreements with
Authorized Firms.
By signing a Letter of Intent form available from the Distributor, an investor
becomes eligible for the reduced sales load applicable to the total number of
shares purchased in a 13-month period (beginning up to 90 days prior to the date
of execution of the Letter of Intent), pursuant to the terms and under the
conditions set forth in the Letter of Intent. To compute the applicable sales
load, the shares an investor beneficially owns (on the date of submission of the
Letter of Intent) in any Fund that may be used toward "right of accumulation"
benefits described above
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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. A shareholder wishing to exercise this privilege must do so
in writing. 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 SAI for the
tax consequences when, within 90 days of a purchase of shares, the shares are
redeemed and reinvested in a Fund.
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Subsequent Purchase of Shares
Investors may purchase additional shares of a Fund at any time in the manner
outlined above. All payments should clearly indicate the investor's account
number.
Purchases Through Intermediaries
Shares of each of the Funds are available to clients and customers of Financial
Intermediaries as provided above. Certain features of each Fund, such as initial
and subsequent investment minimums, redemption fees and certain operational
procedures, may be modified or waived subject to agreement with or among the
Trust, GEIM or the Distributor and such Financial Intermediaries. Financial
Intermediaries may impose transaction or administrative charges or other direct
fees, which charges or fees would not be imposed if Fund shares are purchased or
redeemed directly from the Trust. Therefore, a client or customer should contact
their investment adviser and/or Financial Intermediary acting on his or her
behalf concerning the fees (if any) charged in connection with a purchase or
redemption of Fund shares and should read this Prospectus in light of the terms
governing his or her account with the Financial Intermediary. Financial
Intermediaries will be responsible for promptly reporting client or customer
purchase and redemption orders to the Trust in accordance with their agreements
with their clients or customers and their agreements with or among the Trust,
GEIM or the Distributor.
The Trust has authorized certain Financial Intermediaries and their authorized
designees to accept purchase and redemption orders on behalf of the Trust. The
Trust is deemed to have received a purchase or redemption order when a Financial
Intermediary or its authorized designee accepts the order from its client or
customer. Orders received in such a manner will be priced according to the net
asset value of the Fund next determined after the order is received by the
Financial Intermediary or its authorized designee.
RETIREMENT PLANS
Shares of each of the Funds are available for purchase by IRAs, including GE
IRAs, and retirement plans for self-employed individuals. Shares are also
available for purchase by certain Employee Retirement Plans (including defined
benefit plans and defined contribution plans meeting the requirements of
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Section 401(k) of the Code, eligible deferred compensation plans meeting the
requirements of Section 457(b) of the Code and plans qualified under Section
403(b)(7) of the Code) that seek the additional services provided to the Funds
offered by this Prospectus. Details about the procedure to be followed by the
foregoing retirement plans in investing in the Funds are available through the
Distributor. Investors interested in establishing a GE IRA should contact the
Distributor at the 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, except that a CDSC will be
imposed if the shares are redeemed within one year of purchase and if the shares
were subject to no front-end sales load upon purchase by virtue of being part of
a purchase of $1 million or more. No CDSC is imposed on redemptions of shares
derived from reinvestment of dividends or capital gains distributions or on an
amount that represents an increase in the value of the shareholder's account
resulting from capital appreciation. The amount of the CDSC will be calculated
by multiplying 1% by the lesser of (1) the net asset value of the shares at the
time of purchase or (2) the net asset value of the shares at the time of
redemption.
In determining the applicability of any CDSC to a redemption of shares of a
Fund, the Distributor will assume that a redemption is made first of shares
representing reinvestment of dividends and capital gain distributions and then
of other shares held by the shareholder for the longest period of time. The
Trust will waive the CDSC on redemptions of shares of the Funds upon the death
or disability of a shareholder. The CDSC would be waived when the decedent or
disabled person is either an individual shareholder or, in the case of death,
owns the shares with his or her spouse as a joint tenant with right of
survivorship. This waiver of the CDSC would apply to a total or partial
redemption but only to redemptions of shares held at the time of the death
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or initial determination of disability. The Trust will also waive the CDSC on
redemptions of shares of the Funds representing a minimum required distribution
from an IRA effected pursuant to a systematic withdrawal plan (see "Systematic
Withdrawal Plan" below).
A shareholder who pays for shares of a Fund by personal check will receive the
proceeds of a redemption of those shares when the purchase check has been
collected, which may take up to 15 days or more. Shareholders who anticipate the
need for more immediate access to their investment should purchase shares with
Federal funds or bank wire or by a certified or cashier's check. Shares of a
Fund may be redeemed in the following ways:
Redemptions through an Authorized Firm
An investor whose shares are purchased with the assistance of a Sales
Representative may redeem all or part of his or her shares in accordance with
instructions pertaining to such accounts. If such investor is also the
shareholder of record of those accounts on the books of State Street, he or she
may redeem shares pursuant to the methods described below. Such an investor
using the redemption by mail or wire methods, must arrange with the Authorized
Firm for delivery of the required forms to State Street. It is the
responsibility of the Authorized Firm to transmit the redemption order (and
credit its customers' account with the redemption proceeds, if applicable) on a
timely basis.
Redemption by Mail
Shares of a Fund may be redeemed by mail by making a written request for
redemption that (1) states the number of shares or the specific dollar amount to
be redeemed, (2) identifies the Fund or Funds from which the number or dollar
amount is to be redeemed, (3) identifies the shareholder's account number and
(4) is signed by each registered owner of the shares exactly as the shares are
registered and sending the request to the Trust, at:
GE LifeStyle Funds
P.O. Box 419631
Kansas City, MO 64141-6631
For overnight package delivery:
GE LifeStyle Funds
c/o National Financial Data Services Inc.
1004 Baltimore
Kansas City, MO 64105
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Signature guarantees are required for all redemptions over $50,000. In addition,
signature guarantees are required for requests to have redemption proceeds (1)
mailed to an address other than the address of record, (2) paid to other than
the shareholder, (3) wired to a bank other than the bank of record, or (4)
mailed to an address that has been changed within 30 days of the redemption
request. All signature guarantees must be guaranteed by a commercial bank, trust
company, broker, dealer, credit union, national securities exchange or
registered association, clearing agency or savings association. The Trust may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees, guardians or persons utilizing a power of
attorney. A request for redemption will not be deemed to have been submitted
until the Trust receives all documents in proper order typically required to
assure the safety of a particular account. The Trust may waive the signature
guarantee on a redemption of $50,000 or less if it is able to verify the
signatures of all registered owners from its accounts.
Redemption by Telephone
Shares of a Fund may be redeemed by telephone, unless the investor has declined
this option on the applicable section of the account application form. Proceeds
from a telephonic wire redemption request placed through a customer service
representative will be transferred by wire to the shareholder's bank account
(which has previously been identified in writing to the Trust). A fee of $10
will be charged for wire transfers of funds by the Trust. Wire transfers will be
made directly to the account specified by the shareholder if that bank is a
member of the Federal Reserve System or to a correspondent bank if the bank
holding the account is not a member. Fees on wire transfers may also be imposed
by the bank and will be the responsibility of the shareholder. Proceeds from a
telephonic check redemption request placed through the automated system will be
sent by check to the shareholder's address of record. The minimum telephonic
wire redemption request is $1,000; the minimum telephonic check redemption
request is $500 and the maximum telephonic check redemption request is $50,000.
If the account is registered jointly in the name of more than one shareholder,
only one shareholder will be required to authorize redemption of shares by
telephone, and the Trust will be entitled to act upon telephonic instructions of
any shareholder of a joint
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account. Redemptions of shares of a Fund by a Qualified Plan may not be effected
by telephone.
Telephonic redemption requests should be made by calling the applicable toll
free number listed on the back cover page of the Prospectus. Confirmation of
telephonic redemptions will be sent within seven days of the date of redemption
but will normally be sent in less time. Wire transfer of funds will be made
within two business days following the telephonic request. Dividends will be
earned through and including the date of receipt of the redemption request.
Telephone redemption requests may be difficult to implement in times of drastic
economic or market changes. In the event shareholders of the Funds are unable to
contact the Trust by telephone, shareholders should write to the Trust at:
GE LifeStyle Funds
P.O. Box 419631
Kansas City, MO 64141-6631
For overnight package delivery:
GE LifeStyle Funds
c/o National Financial Data Services Inc.
1004 Baltimore
Kansas City, MO 64105
By making a telephonic redemption request, a shareholder authorizes the Trust to
act on the telephonic redemption instructions by any person representing himself
or herself to be the shareholder and believed by the Trust to be genuine. The
Trust will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine and the Trust's records of such
instructions will be binding. If the procedures, which include the use of a
personal identification number ("PIN") system and the provision of written
confirmation of transactions effected by telephone, were not employed by the
Trust, the Trust could be subject to liability for any loss resulting from
unauthorized or fraudulent instructions. As a result of compliance with this
policy, if the Trust follows the procedures outlined above and has a good faith
belief that the instructions it received were genuine, the shareholder will bear
the risk of loss in the event of a fraudulent redemption transaction.
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Systematic Withdrawal Plan
The Trust's Systematic Withdrawal Plan permits investors in a Fund to request
withdrawal of a specified dollar amount (minimum of $50) on either a monthly or
quarterly basis if they have a $10,000 minimum account in a Fund. The maximum
amount which may be withdrawn under the Systematic Withdrawal Plan is 10% of the
value of a Shareholder's account on an annual basis. An application for the
Systematic Withdrawal Plan can be obtained from the Trust. The Systematic
Withdrawal Plan may be terminated at any time by the investor or the Trust.
Involuntary Redemptions
An account of a shareholder of a Fund that is reduced by redemptions, and not by
reason of market fluctuations or by payroll deductions, to a value of $500 or
less may be redeemed by the Trust, but only after the shareholder has been given
notice of at least 30 days in which to increase the balance in the account to
more than $500. Proceeds of such a redemption will be mailed to the shareholder.
Distributions in Kind
If the Trust's Board of Trustees determines that it would be detrimental to the
best interests of a Fund's shareholders to make a redemption payment wholly in
cash, the Trust may pay, in accordance with rules adopted by the SEC, any
portion of a redemption in excess of the lesser of $250,000 or 1% of the Trust's
net assets by a distribution in kind of portfolio securities in lieu of cash.
Redemptions failing to meet this threshold must be made in cash. Portfolio
securities issued in a distribution in kind will be deemed by GEIM to be readily
marketable. Shareholders receiving distributions in kind of portfolio securities
may incur brokerage commissions when subsequently disposing of those securities.
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 the Money Market Fund at their net asset values.
The privilege is available to shareholders residing in any state in which shares
of the applicable Fund or GE 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
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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 the Money Market Fund shares will be
subject to the CDSC applicable to such shares at the time the shareholder
redeems such Money Market Fund shares. Upon an exchange of shares for Class A
shares of a GE Fund, the new Class A shares will be deemed to have been
purchased on the same date as the shares of the LifeStyle Fund which have been
exchanged for CDSC calculation purposes.
Class A shares of the GE Funds are available without a sales charge through
exchanges between Class A shares and shares of Funds which were sold by
Authorized Firms and were subject to a sales charge. GEIM or its affiliates may
compensate selling dealers for their efforts in effecting these exchanges at no
additional cost to investors.
Shareholders exercising the exchange privilege should review the prospectus
disclosure for the Fund they are considering investing in carefully prior to
making an exchange. The Trust reserves the right to reject any exchange request.
NET ASSET VALUE
Each Fund's net asset value per share is calculated on each day, Monday through
Friday, except on days on which the NYSE is closed. The NYSE is currently
scheduled to be closed on New Year's Day, Dr. Martin Luther King, Jr. 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. Redemptions in
kind will be valued on the effective date of the exchange at the net asset value
of the Underlying GE Funds. In general, the Underlying GE
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Funds value their portfolio securities at market value or, in the absence of
market value, at fair value as determined by or under the direction of the GE
Funds' Board of Trustees.
Any short-term investments of the Funds that mature in 60 days or less, will be
valued on the basis of amortized cost (which involves valuing an investment at
its cost and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the effect of fluctuating interest rates on
the market value of the investment) when the Trust's Board of Trustees
determines that amortized cost is fair value.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions
Net investment income (that is, income other than long- and short-term capital
gains) and net realized long- and short-term capital gains will be determined
separately for each Fund. Dividends of a Fund which are derived from net
investment income and distributions of net realized long- and short-term capital
gains paid by a Fund to a shareholder will be automatically reinvested in
additional shares of the Fund and deposited in the shareholder's account, unless
the shareholder instructs the Trust, in writing, to pay all dividends and
distributions in cash. Shareholders may contact the Trust for details concerning
this election. However, if it is determined that the U.S. Postal Service cannot
properly deliver Fund mailings to a shareholder, the Fund may terminate the
shareholder's election to receive dividends and other distributions in cash.
Thereafter, the shareholder's subsequent dividends and other distributions will
be automatically reinvested in additional shares of the Fund until the
shareholder notifies the Fund in writing of his or her correct address and
requests in writing that the election to receive dividends and other
distributions in cash be reinstated. No interest will accrue on amounts
represented by uncashed dividend, distribution or redemption checks. 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.
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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 taxable to shareholders (other than Qualified Plans and other
tax exempt investors), and distributions of a Fund's net realized long-term
capital gains will be taxable to shareholders as long-term capital gains, in
each case regardless of how long shareholders have held their shares of the Fund
and whether the dividends or distributions are received in cash or are
reinvested in additional shares of the Fund. The Funds will provide information
relating to that portion of a "capital gain dividend" that may be treated by
investors as eligible for the reduced capital gains rate for capital assets held
for more than 18 months. 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. Further, any loss realized upon the
sale or redemption of any Fund shares within six months from the date of their
purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain during such six-month
period with respect to such shares.
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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 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 these
Underlying GE Funds' assets to be invested within various countries is not now
known. GE Funds intends that the Underlying GE Funds seek to operate so as to
qualify for treaty-reduced rates of tax when applicable.
If more than 50% in value of an Underlying GE Fund's assets at the close of any
taxable year consists of stocks or securities of foreign corporations, that
Underlying GE Fund may elect to treat certain foreign taxes paid by it as paid
by its shareholders. The shareholders would then be required to include their
proportionate portion of the electing fund's foreign income and related foreign
taxes in income even if the shareholder does not receive the amount representing
foreign taxes. Shareholders itemizing deductions could then deduct the foreign
taxes or, subject to certain limitations, claim a direct dollar for dollar tax
credit against their U.S. federal income tax liability attributable to foreign
income. In many cases, a foreign tax credit will be more advantageous than a
deduction for foreign taxes. Each Fund may invest in the International Fund,
which expects to be eligible to make the above-described election. While each
Fund will be able to deduct the foreign taxes that it will be treated as
receiving if the election is made, the Fund will not itself be able to elect to
treat its foreign taxes as paid by its shareholders. Accordingly, the
shareholders of the Funds will not have an option of claiming a foreign tax
credit for foreign taxes paid by the Underlying GE Funds, while persons who
invest directly in such Underlying GE Funds may have that option.
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The Funds may be required to withhold for U.S. federal income tax purposes 31%
of all distributions payable to shareholders who fail to provide the Funds with
their correct taxpayer identification number or to make required certifications,
or who have been notified by the U.S. Internal Revenue Service that they are
subject to backup withholding.
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, GE Investments Funds, Inc. 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.
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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
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.
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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 performance. The SAI 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.
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
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of shares of beneficial interest, par value $.001 per share. As of the date of
this Prospectus, the Trustees have established six such series, each offering a
single class of shares. The other three series of the Trust are currently being
offered by a separate prospectus.
When issued, shares of a Fund will be fully paid and non-assessable. Shares are
freely transferable and have no preemptive, subscription or conversion rights.
Certain aspects of the shares may be changed, upon notice to Fund shareholders,
to satisfy certain tax regulatory requirements, if the change is deemed
necessary by the Trust's Board of Trustees.
When matters are submitted for shareholder vote, each shareholder of each Fund
will have one vote for each full share held and proportionate, fractional votes
for fractional shares held. In general, shares of all Funds vote as a single
class on all matters except (1) a matter affecting the interests of one or more
of the Funds, in which case only shares of the affected Funds would be entitled
to vote or (2) when the 1940 Act or separate agreement applicable to a Fund
requires that shares of the Funds be voted by individual Fund. Normally, no
meetings of shareholders of the Funds will be held for the purpose of electing
Trustees of the Trust unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders of the Trust, at which
time the Trustees then in office will call a shareholders' meeting for the
election of Trustees. Shareholders of record of no less than a majority of the
outstanding shares of the Trust may remove a Trustee for cause through a
declaration in writing or by vote cast in person or by proxy at a meeting called
for that purpose. A meeting will be called for the purpose of voting on the
removal of a Trustee at the written request of holders of 10% of the Trust's
outstanding shares. Shareholders who satisfy certain criteria will be assisted
by the Trust in communicating with other shareholders in seeking the holding of
the meeting.
Each Fund will vote its Underlying GE Fund shares in proportion to the votes of
all other shareholders in each respective Underlying GE Fund.
The Trust will send to each shareholder of each Fund a semiannual report and an
audited annual report, each of which includes a list of the investment
securities held by each Fund. Only one report each will be mailed to a single
address at which more than one shareholder with the same last name had indicated
mail is to be delivered.
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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.
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APPENDIX
FURTHER INFORMATION: ADDITIONAL INVESTMENTS AND CERTAIN INVESTMENT
TECHNIQUES AND STRATEGIES USED BY THE UNDERLYING GE FUNDS
The Underlying GE Funds may engage in a number of investment techniques and
strategies, including those described below. No Underlying GE Fund is under any
obligation to use any of the techniques and strategies at any given time or
under any particular economic condition. In addition, no assurance can be given
that the use of any practice will have its intended result or that the use of
any practice is, or will be, available to any Underlying GE Fund.
Money Market Instruments. Each Fund and each Underlying GE Fund, other than the
Money Market Fund, may invest in the following types of money market
instruments: (i) securities issued or guaranteed by the U.S. Government or one
of its agencies or instrumentalities, (ii) debt obligations of banks, savings
and loan institutions, insurance companies and mortgage bankers, (iii)
commercial paper and notes, including those with variable and floating rates of
interest, (iv) debt obligations of foreign branches of U.S. banks, U.S. branches
of foreign banks and foreign branches of foreign banks, (v) debt obligations
issued or guaranteed by one or more foreign governments or any of their
political subdivisions, agencies or instrumentalities, including obligations of
supranational entities, (vi) debt securities issued by foreign issuers and (vii)
repurchase agreements. In addition to the foregoing money market instruments,
each Fund and each Underlying GE Fund, other than the U.S. Equity Fund and the
Money Market Fund, may invest in shares of money market mutual funds, including,
in the case of the Funds, the Money Market Fund. See "Investment in Other
Investment Funds" below.
Each Fund and each Underlying GE Fund, other than the Money Market Fund, may
also invest up to 25% of its assets in GEI Short-Term Investment Fund (the
"Investment Fund"), a fund created specifically to serve as a vehicle for the
collective investment of cash balances of the Funds and the Underlying GE Funds
(other than the Money Market Fund) and other accounts advised by GEIM and GEIC.
The Investment Fund invests exclusively in the money market instruments
described in (i) through (vii) above. The Investment Fund is advised by GEIM. No
advisory fee is charged by the Investment Fund, nor will the Funds or the
Underlying GE Funds incur any sales charge, redemption fee, distribution fee or
service fee in connection with their investments in the Investment Fund.
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Repurchase and Reverse Repurchase Agreements. Each Fund and each Underlying GE
Fund may engage in repurchase agreement transactions with respect to instruments
in which the Fund is authorized to invest. The Funds and 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, a
Fund or 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 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 the Funds or Underlying GE Funds enter
into repurchase agreements.
The Money Market Fund and the Value Fund may engage in reverse repurchase
agreements, subject to their investment restrictions. A reverse repurchase
agreement, which is considered a borrowing by a Fund, involves a sale by the
Fund of securities that it holds concurrently with an agreement by the Fund to
repurchase the same securities at an agreed upon price and date. The Fund uses
the proceeds of reverse repurchase agreements to provide liquidity to meet
redemption requests and to make cash payments of dividends and distributions
when the sale of the Fund's securities is considered to be disadvantageous. Cash
or other liquid assets equal in value to a 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, other than
the Money Market Fund, may invest up to 10% of its assets in non-publicly traded
securities. Non-publicly traded securities are securities that are subject to
contractual or legal restrictions on
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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 may take
the form of options traded over-the-counter, repurchase agreements maturing in
more than seven days, certain mortgage related securities and securities subject
to restrictions on resale that GEIM has determined are not liquid under
guidelines established by the GE Funds' Board of Trustees.
Structured and Indexed Securities. The Income Fund and the Government Fund may
also invest in structured and indexed securities, the value of which is linked
to currencies, interest rates, commodities, indexes or other financial
indicators ("reference instruments"). The interest rate or the principal amount
payable at maturity or redemption may be increased or decreased, depending on
changes in the value of the reference instrument. Structured and 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
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transaction costs. A Fund may utilize up to 10% of its assets to purchase call
options on portfolio securities. Call options may be purchased by an Underlying
GE Fund in order to acquire the underlying securities for a price that avoids
any additional cost that would result from a substantial increase in the market
value of a security. An Underlying GE Fund may also purchase call options to
increase its return at a time when the call is expected to increase in value due
to anticipated appreciation of the underlying security. Prior to their
expirations, put and call options may be sold by an Underlying GE Fund in
closing sale transactions, which are sales by the Fund, prior to the exercise of
options that it has purchased, of options of the same series. Profit or loss
from the sale will depend on whether the amount received is more or less than
the premium paid for the option plus the related transaction costs. The
aggregate value of the securities underlying the calls or obligations underlying
the puts, determined as of the date the options are sold, shall not exceed 25%
of the net assets of an Underlying GE Fund. In addition, the premiums paid by an
Underlying GE Fund in purchasing options on securities, options on securities
indexes, options on foreign currencies and options on futures contracts will not
exceed 20% of the Fund's net assets.
Covered Option Writing. Each Underlying GE Fund, other than the Money Market
Fund, may write covered put and call options on securities. An Underlying GE
Fund will realize fees (referred to as "premiums") for granting the rights
evidenced by the options. A put option embodies the right of its purchaser to
compel the writer of the option to purchase from the option holder an underlying
security at a specified price at any time during the option period. In contrast,
a call option embodies the right of its purchaser to compel the writer of the
option to sell to the 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 SAI 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
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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. 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.
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.
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
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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 SAI 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, to gain market exposure for accumulating and residual
cash positions, for duration management, or when the transactions are
economically appropriate to the reduction of risks inherent in the management of
the Fund involved. No Underlying GE Fund will enter into a transaction involving
futures and options on futures for speculative purposes.
An Underlying GE Fund may not enter into futures and options contracts for which
aggregate initial margin deposits and premiums paid for unexpired options exceed
5% of the fair market value of the Fund's total assets, after taking into
account unrealized losses or profits on futures contracts or options on futures
contracts into which it has entered. The current view of the SEC staff is that a
Fund's long and short positions in futures contracts as well as put and call
options on futures written by it must be collateralized with cash or other
liquid assets and segregated with the Trust's custodian, or a designated
sub-custodian, or "covered" in a manner similar to that for covered options on
securities
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(see "Strategies Available to Some But Not All Underlying GE Funds - Covered
Option Writing" in the SAI) 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 each Underlying GE Fund, other than the Premier Fund and the
Money Market Fund, may engage in currency exchange transactions to protect
against uncertainty in the level of future exchange rates between a particular
foreign currency and the U.S. dollar or between foreign currencies in which the
Fund's securities are or may be denominated. No 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
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financial institutions) and their customers, (2) generally have no deposit
requirements and (3) are typically consummated without payment of any
commissions. An Underlying GE Fund, however, may enter into forward currency
contracts requiring deposits or involving the payment of commissions. To assure
that an Underlying GE Fund's forward currency contracts are not used to achieve
investment leverage, cash or other liquid assets will be segregated with GE
Funds' custodian, or a designated sub-custodian, in an amount at all times equal
to or exceeding the Fund's commitment with respect to the contracts.
Upon maturity of a forward currency contract, an Underlying GE Fund may (1) pay
for and receive the underlying currency, (2) negotiate with the dealer to roll
over the contract into a new forward currency contract with a new future
settlement date or (3) negotiate with the dealer to terminate the forward
contract into an offset with the currency trader providing for the Fund's paying
or receiving the difference between the exchange rate fixed in the contract and
the then current exchange rate. GE Funds may also be able to negotiate such an
offset on behalf of an Underlying GE Fund prior to maturity of the original
forward contract. No assurance can be given that new forward contracts or
offsets will always be available to an Underlying GE Fund.
In hedging a specific portfolio position, an Underlying GE Fund may enter into a
forward contract with respect to either the currency in which the position is
denominated or another currency deemed appropriate by GEIM. An Underlying GE
Fund's exposure with respect to forward currency contracts is limited to the
amount of the Fund's aggregate investments in instruments denominated in foreign
currencies.
Options on Foreign Currencies. Each Underlying GE Fund, other than the Premier
Fund and the Money Market Fund, may purchase and write put and call options on
foreign currencies for the purpose of hedging against declines in the U.S.
dollar value of foreign currency denominated securities and against increases in
the U.S. dollar cost of securities to be acquired by the Fund. The 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
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options on foreign currencies to 5% of the value of the Underlying GE Fund's
total assets.
When-Issued and Delayed-Delivery Securities. To secure prices or yields deemed
advantageous at a particular time, an Underlying GE Fund may purchase securities
on a when-issued or delayed-delivery basis, in which case, delivery of the
securities occurs beyond the normal settlement period; no payment for or
delivery of the securities is made by, and no income accrues to, the Underlying
GE Fund, however, prior to the actual delivery or payment by the other party to
the transaction. Each Underlying GE Fund will enter into when-issued or
delayed-delivery transactions for the purpose of acquiring securities and not
for the purpose of leverage. When-issued securities purchased by an Underlying
GE Fund may include securities purchased on a "when, as and if issued" basis
under which the issuance of the securities depends on the occurrence of a
subsequent event, such as approval of a merger, corporate reorganization or debt
restructuring. Cash or other liquid assets in an amount equal to the amount of
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
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GE Fund will be subject to risks, which, like those associated with other
extensions of credit, include possible loss of rights in the collateral should
the borrower fail financially.
Rule 144A Securities. Each of the Underlying GE Funds may purchase Rule 144A
Securities. Certain Rule 144A Securities may be considered illiquid and
therefore subject to an Underlying GE Fund's limitation on the purchase of
illiquid securities, unless the GE Funds' Board of Trustees determines on an
ongoing basis that an adequate trading market exists for the Rule 144A
Securities. An Underlying GE Fund's purchase of Rule 144A Securities could have
the effect of increasing the level of illiquidity in the Fund to the extent that
qualified institutional buyers become uninterested for a time in purchasing Rule
144A Securities held by the Fund. The GE Funds' Board of Trustees has
established standards and procedures for determining the liquidity of a Rule
144A Security and monitors GEIM's implementation of the standards and
procedures. The ability to sell to qualified institutional buyers under Rule
144A is a recent development and GEIM cannot predict how this market will
develop.
Depositary Receipts. Each Underlying GE Fund, other than the Money Market Fund,
may each invest in securities of foreign issuers in the form of ADRs and
European Depositary Receipts ("EDRs"), which are sometimes referred to as
Continental Depositary Receipts ("CDRs"). ADRs are publicly traded on exchanges
or over-the-counter in the United States and are issued through "sponsored" or
"unsponsored" arrangements. In a sponsored ADR arrangement, the foreign issuer
assumes the obligation to pay some or all of the depositary's transaction fees,
whereas under an unsponsored arrangement, the foreign issuer assumes no
obligations and the depositary's transaction fees are paid directly by the ADR
holders. In addition, less information is available in the United States about
an unsponsored ADR than about a sponsored ADR. Each Underlying GE Fund, other
than the Money Market Fund, may invest in ADRs through both sponsored and
unsponsored arrangements. EDRs and CDRs are generally issued by foreign banks
and evidence ownership of either foreign or domestic securities.
Supranational Agencies. Each Underlying GE Fund may invest up to 10% of its
assets in debt obligations 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
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Community, which is a twelve-nation organization engaged in cooperative economic
activities; the European Coal and Steel Community, which is an economic union of
various European nations' steel and coal industries; and the Asian Development
Bank, which is an international development bank established to lend funds,
promote investment and provide technical assistance to member nations in the
Asian and Pacific regions. Debt Obligations of supranational agencies are not
considered Government Securities and are not supported, directly or indirectly,
by the U.S. Government.
Investments in Other Investment Funds. Each Underlying GE Fund, other than the
U.S. Equity Fund and Money Market Fund, may each invest in investment funds that
invest principally in securities in which the Fund is authorized to invest. In
addition, each Fund and each Underlying GE Fund, other than the U.S. Equity Fund
and the Money Market Fund, may invest in shares of money market mutual funds,
which in the case of the Fund may include shares of GE Money Market Fund. 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. Investments by the Funds or the Underlying
GE Funds (other than the Money Market Fund) in the GEI Short-Term Investment
Fund, a fund advised by GEIM and created specifically to serve as a vehicle for
the collective investment of cash balances of the Funds and the Underlying GE
Funds (other than the Money Market Fund) and other accounts advised by either
GEIM or GEIC, is not considered an investment in another investment company for
purposes of these restrictions. 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
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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 U.S. Equity Fund, 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 U.S. Equity Fund, 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 U.S. Equity Fund, 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 U.S. Equity Fund, 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
A-12
<PAGE>
Obligations are generally divided into two categories: "Pure Zero Obligations,"
which are those that pay no interest for their entire life and "Zero/Fixed
Obligations," which pay no interest for some initial period and thereafter pay
interest currently. In the case of a Pure Zero Obligation, the failure to pay
interest currently may result from the obligation's having no stated interest
rate, in which case the obligation pays only principal at maturity and is sold
at a discount from its stated principal. A Pure Zero Obligation may, in the
alternative, provide for a stated interest rate, but provide that no interest is
payable until maturity, in which case accrued, unpaid interest on the obligation
may be capitalized as incremental principal. The value to the investor of a zero
coupon Municipal Obligation consists of the economic accretion either of the
difference between the purchase price and the nominal principal amount (if no
interest is stated to accrue) or of accrued, unpaid interest during the
Municipal Obligation's life or payment deferral period.
Mortgage Related Securities. The mortgage related securities in which the Income
Fund and the Government Fund will invest represent pools of mortgage loans
assembled for sale to investors by various governmental agencies, such as GNMA,
by government related organizations, such as FNMA and FHLMC, as well as by
private issuers, such as commercial banks, savings and loan institutions,
mortgage bankers and private mortgage insurance companies. Several risks are
associated with mortgage related securities generally. The monthly cash inflow
from the underlying loans, for example, may not be sufficient to meet the
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
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are declining, the Income Fund and the Government Fund will likely have to
reinvest the proceeds of prepayments at lower interest rates than those at which
its assets were previously invested, resulting in a corresponding decline in the
Fund's yield. Thus, mortgage related securities may have less potential for
capital appreciation in periods of falling interest rates than other fixed
income securities of comparable maturity, although those other fixed income
securities may have a comparable risk of decline in market value in periods of
rising interest rates. To the extent that the Income Fund or the Government Fund
purchases mortgage related securities at a premium, unscheduled prepayments,
which are made at par, will result in a loss equal to any unamortized premium.
ARMs have interest rates that reset at periodic intervals, thereby allowing the
Income Fund and the Government Fund to participate in increases in interest
rates through periodic adjustments in the coupons of the underlying mortgages,
resulting in both higher current yields and lower price fluctuation than would
be the case with more traditional long-term debt securities. Furthermore, if
prepayments of principal are made on the underlying mortgages during periods of
rising interest rates, the Income Fund or the Government Fund generally will be
able to reinvest these amounts in securities with a higher current rate of
return. Neither the Income Fund nor the Government Fund, however, will benefit
from increases in interest rates to the extent that interest rates rise to the
point at which they cause the current yield of ARMs to exceed the maximum
allowable annual or lifetime reset limits (or "caps") for a particular mortgage.
In addition, fluctuations in interest rates above these caps 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
A-14
<PAGE>
received, although certain classes of CMOs have priority over others with
respect to the receipt of prepayments on the mortgages. Therefore, depending on
the type of CMOs in which the Income Fund and the Government Fund invest, the
investment may be subject to a greater or lesser risk of prepayment than other
types of mortgage related securities.
Mortgage related securities may not be readily marketable. To the extent any of
these securities are not readily marketable in the judgment of GEIM, each of the
Income Fund and the Government Fund limit their investments in these securities,
together with other illiquid instruments, to not more than 15% of the value of
its net assets.
Government Stripped Mortgage Related Securities. The Income Fund and the
Government Fund may invest in government stripped mortgage related securities
issued and guaranteed by GNMA, FNMA or FHLMC. These securities represent
beneficial ownership interests in either periodic principal distributions
("principal-only") or interest distributions ("interest-only") on mortgage
related certificates issued by GNMA, FNMA or FHLMC. The certificates underlying
the government stripped mortgage related securities represent all or part of the
beneficial interest in pools of mortgage loans. The Income Fund and the
Government Fund will invest in government stripped mortgage related securities
in order to enhance yield or to benefit from anticipated appreciation in value
of the securities at times when GEIM believes that interest rates will remain
stable or increase. In periods of rising interest rates, the expected increase
in the value of government stripped mortgage related securities may offset all
or a portion of any decline in value of the securities held by the Income Fund
or the Government Fund.
Investing in government stripped mortgage related securities involves risks
normally associated with investing in mortgage 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
A-15
<PAGE>
recovering its initial investment in an interest-only government stripped
mortgage related security. Under current market conditions, the Income Fund and
the Government Fund expect that investments in government stripped mortgage
related securities will consist primarily of interest-only securities. The
sensitivity of an interest-only security that represents the interest portion of
a particular class, as opposed to the interest portion of an entire pool, to
interest rate fluctuations, may be increased because of the characteristics of
the principal portion to which they relate. Government stripped mortgage related
securities are currently traded in an over-the-counter market maintained by
several large investment banking firms. No assurance can be given that the
Income Fund or the Government Fund will be able to effect a trade of a
government stripped mortgage related security at a desired time. The Income Fund
and the Government Fund will acquire government stripped mortgage related
securities only if a secondary market for the securities exists at the time of
acquisition. Except for government stripped mortgage related securities based on
fixed rate FNMA and FHLMC mortgage certificates that meet certain liquidity
criteria established by the GE Funds' Board of Trustees, the GE Funds treat
government stripped mortgage related securities as illiquid and will limit each
of the Income Fund's and the Government Fund's investments in these securities,
together with other illiquid investments, to not more than 15% of its net
assets.
Asset-Backed and Receivable-Backed Securities. The Income Fund and the
Government Fund may invest in asset-backed and receivable-backed securities. To
date, several types of asset-backed and receivable-backed securities have been
offered to investors including "Certificates for Automobile Receivables"
("CARssm") and interests in pools of credit card receivables. CARssm represent
undivided fractional interests in a trust, the assets of which consist of a pool
of motor vehicle retail installment sales contracts and security interests in
the vehicles securing the contracts. Payments of principal and interest on
CARssm are passed through monthly to certificate 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
A-16
<PAGE>
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 25% of their total assets each of
the Income Fund and the Government Fund may, enter into mortgage "dollar rolls"
in which the Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterpart to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Underlying GE Fund loses the right to receive principal and interest
paid on the securities sold. However, the Underlying GE Fund would benefit to
the extent of any price received for the securities sold and the lower forward
price for the future purchase (often referred to as the "drop") or fee income
plus the interest earned on the cash proceeds of the securities sold until the
settlement date of the forward purchase. Unless such benefits exceed the income,
capital appreciation and gain or loss due to mortgage repayments that would have
been realized on the securities sold as part of the mortgage dollar roll, the
use of this technique will diminish the investment performance of the Underlying
GE Fund compared with what such performance would have been without the use of
mortgage dollar rolls. The Underlying GE Fund will hold and maintain in a
segregated account until the settlement date cash or other liquid assets in an
amount equal to the forward purchase price. The benefits derived from the use of
mortgage dollar rolls may depend upon GEIM's ability to predict correctly
mortgage prepayments and interest rates. There is no assurance that mortgage
dollar rolls can be successfully employed.
For financial reporting and tax purposes, each of the Income Fund and the
Government Fund propose to treat mortgage dollar rolls as 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.
A-17
<PAGE>
Short Sales Against the Box. The Mid-Cap Fund, the Value Fund, and 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.
A-18
<PAGE>
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: 1-800-242-0134
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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>
STATEMENT OF ADDITIONAL INFORMATION
December 30, 1997
GE LIFESTYLE FUNDS
3003 Summer Street, Stamford, Connecticut 06905
For information, call (800) 242-0134
* 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
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INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES............................... 2
INVESTMENT RESTRICTIONS OF THE FUNDS........................................14
INVESTMENT RESTRICTIONS OF THE UNDERLYING GE FUNDS..........................17
MANAGEMENT OF THE LIFESTYLE FUNDS...........................................22
REDEMPTION OF SHARES........................................................25
EXCHANGE PRIVILEGE..........................................................26
NET ASSET VALUE.............................................................26
DIVIDENDS, DISTRIBUTIONS AND TAXES..........................................26
THE FUNDS' PERFORMANCE......................................................29
ADDITIONAL INFORMATION......................................................31
COUNSEL.....................................................................31
INDEPENDENT ACCOUNTANTS.....................................................32
FINANCIAL STATEMENTS........................................................32
APPENDIX...................................................................A-1
This Statement of Additional Information supplements the
information contained in the current Prospectuses of GE LifeStyle Funds (the
"Trust") dated December 30, 1997 (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 1-800-242-0134 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>
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 seven portfolios of GE Funds: GE Premier Growth Equity Fund, GE U.S.
Equity Fund, GE Mid-Cap Growth Fund, GE Value Equity Fund, GE International
Equity Fund, GE Fixed Income Fund and GE Short-Term Government Fund
(collectively, the "Underlying GE Funds"). The Funds may also invest directly in
money market instruments, including shares of GE Money Market Fund. 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 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 Objectives and Certain Policies of the Underlying GE Funds
GE Premier Growth Equity Fund. GE Premier Growth Equity Fund
(the "Premier Fund") pursues its investment objective of long term growth of
capital and future income rather than current income by investing primarily in
growth-oriented equity securities. The Premier Fund, under normal conditions,
may invest in common stocks, preferred stocks, convertible bonds, convertible
debentures, convertible notes, convertible preferred stocks and warrants or
rights issued by U.S. and foreign companies. The Premier 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
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<PAGE>
lower than investment grade. 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 Ratings Services, a Division of The
McGraw-Hill Companies, Inc. ("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 GE Investment Management Incorporated ("GEIM") to be of comparable quality.
GE Mid-Cap Growth Fund. GE Mid-Cap Growth Fund (the "Mid-Cap
Fund") pursues its investment objective of long-term growth of capital by
investing primarily in the equity securities of companies with medium-sized
market capitalizations ("mid-cap") of the types described in the Prospectuses.
The Mid-Cap Fund may invest up to 35% of the Fund's total assets in debt
instruments rated within the six highest categories by S&P, Moody's or another
NRSRO, or if unrated deemed by GEIM to be comparable quality. The Mid-Cap Fund
will not purchase a debt security, if as a result of the purchase, more than 25%
of the Fund's total assets would be invested in securities rated BBB by S&P or
Baa by Moody's or, if unrated, deemed by GEIM to be of comparable quality. In
addition, the Mid-Cap Fund will not purchase any obligation rated BB or B by S&P
or Ba or B by Moody's if, as a result of the purchase, more than 10% of the
Fund's total assets would be invested in obligations rated in those categories
or, if unrated, in obligations deemed by GEIM to be of comparable quality.
GE Value Equity Fund. GE Value Equity Fund (the "Value Fund")
pursues its investment objective of long-term growth of capital and future
income through investing primarily in equity securities of companies with
large-sized market capitalizations that GEIM considers to be undervalued by the
market. Under normal market conditions, the Value Fund invests at least 65% of
its assets in common stocks, preferred stocks, convertible bonds, convertible
debentures, convertible notes, convertible preferred stocks and warrants or
rights issued by U.S. and foreign companies. The Value 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.
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 equity securities of U.S. companies as described in the
Prospectuses. The equity securities issued by U.S. companies in which the
U.S. Equity Fund invests typically are traded on U.S. securities exchanges;
those U.S. equity securities held by the U.S. Equity Fund that are not
exchange traded are non-publicly traded or traded in the U.S. over-the-counter
market. In addition, under normal market conditions, the U.S. Equity Fund
3
<PAGE>
may invest a certain percentage of its assets in debt securities of the types
described in the Prospectuses when GEIM determines that investing in these
kinds of debt securities is consistent with the Fund's investment objective.
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 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.
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 when GEIM determines that
investing in these kinds of debt securities is consistent with the Fund's
investment objective. 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.
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
foreign securities, excluding, for purposes of this limitation, ADRs and
securities of a foreign issuer with a class of securities registered with the
SEC and listed on a U.S. national securities exchange or traded on the Nasdaq
National Market or the Nasdaq SmallCap Market. 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
4
<PAGE>
income consistent with prudent investment management and the preservation of
capital by investing at least 65% of its assets 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 of liquidity by investing
primarily in U.S. dollar-denominated 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 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
5
<PAGE>
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 NRSROs such as
S&P or Moody's represent the opinions of those organizations as to the quality
of securities that they rate. Although these ratings, which are relative and
subjective and are not absolute standards of quality, are used by 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 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
6
<PAGE>
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. Each Underlying GE
Fund, other than the U.S. Equity Fund and the Money Market 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. Investments by an Underlying GE Fund
(other than the Money Market Fund) in the GEI Short-Term Investment Fund, an
investment fund advised by GEIM, created specifically to serve as a vehicle for
the collective investment of cash balances of the underlying GE Funds (other
than the Money Market Fund) and other accounts advised by either GEIM or General
Electric Investment Corporation ("GEIC"), is not considered an investment in
another investment company for purposes of this restriction.
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.
7
<PAGE>
government corporation within the Department of Housing and Urban
Development. Government-related mortgage related securities are not backed by
the full faith and credit of the United States. Issuers include FNMA and FHLMC.
FNMA is a government-sponsored corporation owned entirely by private
stockholders, which is subject to general regulation by the Secretary of Housing
and Urban Development. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA. FHLMC is a corporate
instrumentality of the United States, the stock of which is owned by the Federal
Home Loan Banks. Participation certificates representing interests in mortgages
from FHLMC's national portfolio are guaranteed as to the timely payment of
interest and ultimate collection of principal by FHLMC.
Private, governmental or government-related entities may
create mortgage loan pools offering pass-through investments in addition to
those described above. The mortgages underlying these securities may be
alternative mortgage instruments, that is, mortgage instruments whose principal
or interest payments may vary or whose terms to maturity may be shorter than
previously customary. GEIM assesses new types of mortgage related securities as
they are developed and offered to determine their appropriateness for investment
by the relevant Underlying GE Fund.
Covered Option Writing. The Underlying GE Funds with
option-writing authority will write only options that are covered. A call option
written by an Underlying GE Fund will be deemed covered (1) if the Fund owns the
securities underlying the call or has an absolute and immediate right to acquire
those securities without additional cash consideration upon conversion, or
exchange of other securities held in its portfolio, (2) if the Fund holds a call
at the same exercise price for the same exercise period and on the same
securities as the call written, (3) in the case of a call option on a stock
index, if the Fund owns a portfolio of securities substantially replicating the
movement of the index underlying the call option, or (4) if at the time the call
is written, an amount of cash or other liquid assets, equal to the fluctuating
market value of the optioned securities, is segregated with GE Funds' custodian
or with a designated sub-custodian. A put option will be deemed covered (1) if,
at the time the put is written, an amount of cash, Government Securities or
other liquid assets having a value at least equal to the exercise price of the
underlying securities is segregated with the GE Funds' custodian or with a
designated sub-custodian, or (2) if the Underlying GE Fund continues to own an
equivalent number of puts of the same "series" (that is, puts on the same
underlying securities having the same exercise prices and expiration dates as
those written by the Fund), or an equivalent number of puts of the same "class"
(that is, puts on the same underlying securities) with exercise prices greater
than those that it has written (or if the exercise prices of the puts
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it holds are less than the exercise prices of those it has
written, the difference is segregated with GE Funds' custodian or designated
sub-custodian).
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.
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GEIM expects that the Underlying GE Funds will write options,
other 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
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entering into a closing transaction on an exchange or it may allow the option
to expire unexercised.
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.
OTC Options. The Underlying GE Funds may purchase OTC or
dealer options or sell covered OTC options. Unlike exchange-listed options where
an intermediary or clearing corporation, such as the Clearing Corporation,
assures that all transactions in such options are properly executed, the
responsibility for performing all transactions with respect to OTC options rests
solely with the writer and the holder of those options. A listed call option
writer, for example, is obligated to deliver the underlying stock to the
clearing organization if the option is exercised, and the clearing organization
is then obligated to pay the writer the exercise price of the option. If an
Underlying GE Fund were to purchase a dealer option, however, it would rely on
the dealer from whom it purchased the option to perform if the option were
exercised. If the dealer fails to honor the exercise of the option by the
Underlying GE Fund, the Underlying GE Fund would lose the premium it paid for
the option and the expected benefit of the transaction.
Listed options generally have a continuous liquid market while
dealer options have none. Consequently, an Underlying GE Fund will generally be
able to realize the value of a dealer option it has purchased only by exercising
it or reselling it to the dealer who issued it. Similarly, when an Underlying GE
Fund writes a dealer option, it generally will be able to close out the option
prior to its expiration only by entering into a closing purchase transaction
with the dealer to which the Underlying GE Fund originally wrote the option.
Although the Underlying GE Funds will seek to enter into dealer options only
with dealers who will agree to and that are expected to be capable of entering
into closing transactions with the Underlying GE Funds, there can be no
assurance that a Fund will be able to liquidate a dealer option at a favorable
price at any time prior to expiration. The inability to enter into a closing
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transaction may result in material losses to an Underlying GE
Fund. Until a Fund, as a covered OTC call option writer, is able to effect a
closing purchase transaction, it will not be able to liquidate securities (or
other assets) used to cover the written option until the option expires or is
exercised. This requirement may impair an Underlying GE Fund's ability to sell
portfolio securities or, with respect to currency options, currencies at a time
when such sale might be advantageous. In the event of insolvency of the other
party, the Underlying GE Fund may be unable to liquidate a dealer option.
Futures Contracts. No consideration is paid or received by an
Underlying GE Fund upon trading a futures contract. Upon entering into a futures
contract, cash or other liquid assets acceptable to the broker equal to
approximately 1% to 10% of the contract amount will be segregated with GE Fund's
custodian, or a designated sub-custodian. This amount, which is subject to
change by the exchange on which the contract is traded, is known as "initial
margin" and is in the nature of a performance bond or good faith deposit on the
contract that is returned to the Underlying GE Fund upon termination of the
futures contract, so long as all contractual obligations have been satisfied;
the broker will have access to amounts in the margin account if the Underlying
GE Fund fails to meet its contractual obligations. Subsequent payments, known as
"variation margin," to and from the broker, will be made daily as the price of
the securities underlying the futures contract fluctuates, making the long and
short positions in the contract more or less valuable, a process known as
"marking-to-market." At any time prior to the expiration of a futures contract,
a Fund may elect to close a position by taking an opposite position, which will
operate to terminate the Underlying GE Fund's existing position in the contract.
Although GE Funds intends that the Underlying GE Funds enter
into futures contracts only if an active market exists for the contracts, no
assurance can be given that an active market will exist for the contracts at any
particular time. Most U.S. futures exchanges and boards of trade limit the
amount of fluctuation permitted in futures contract prices during a single
trading day. Once the daily limit has been reached in a particular contract, no
trades may be made on that day at a price beyond that limit. Futures contract
prices may move to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting some futures traders to substantial losses. In such a case, and
in the event of adverse price 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.
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>
If an Underlying GE Fund has hedged against the possibility of
an increase in interest rates adversely affecting the value of securities held
in its portfolio and rates decrease instead, the Underlying GE Fund will lose
part or all of the benefit of the increased value of securities that it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Underlying GE Fund had insufficient cash,
it may have to sell securities to meet daily variation margins requirements at a
time when it may be disadvantageous to do so. These sales of securities may, but
will not necessarily, be at increased prices that reflect the decline in
interest rates.
Options on Futures Contracts. An option on a futures contract,
unlike a direct investment in such a contract, gives the purchaser the right, in
return for the premium paid, to assume a position in the futures contract at a
specified exercise price at any time prior to the expiration date of the option.
Upon exercise of an option, the delivery of the futures position by the writer
of the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the option
on the futures contract. The potential loss related to the purchase of an option
on futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the price of the option to the purchaser is fixed at
the point of sale, no daily cash payments are made to reflect changes in the
value of the underlying contract. The value of the option, however, does change
daily and that change would be reflected in the net asset value of the Fund
holding the options.
Forward Currency Transactions. The cost to an Underlying GE
Fund of engaging in currency transactions varies with factors such as the
currency involved, the length of the contract period and the market conditions
then prevailing. Because transactions in currency exchange are usually conducted
on a principal basis, no fees or commissions are involved. The use of forward
currency contracts does not eliminate fluctuations in the underlying prices of
the securities, but it does establish a rate of exchange that can be achieved in
the future. In addition, although forward currency contracts limit the risk of
loss due to a decline in the value of the hedged currency, at the same time,
they limit any potential gain that might result should the value of the currency
increase. If a devaluation is generally anticipated, an Underlying GE Fund may
not be able to sell 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.
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Options on Foreign Currencies. Certain transactions involving
options on foreign currencies are undertaken on contract markets that are not
regulated by the CFTC. Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the SEC, as are other
securities traded on those exchanges. As a result, many of the protections
provided to traders on organized exchanges will be available with respect to
those transactions. In particular, all foreign currency option positions entered
into on a national securities exchange are cleared and guaranteed by the
Clearing Corporation, thereby reducing the risk of counterparty default. In
addition, a liquid secondary market in options traded on a national securities
exchange may exist, potentially permitting an Underlying GE Fund to liquidate
open positions at a profit prior to exercise or expiration, or to limit losses
in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency
options are subject to the risks of the availability of a liquid secondary
market as described above, as well as the risks regarding adverse market
movements, margining of options written, the nature of the foreign currency
market, possible intervention by governmental authorities and the effects of
other political and economic events. In addition, exercise and settlement of
exchange-traded foreign currency options must be made exclusively through the
Clearing Corporation, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the Clearing Corporation may,
if it determines that foreign governmental restrictions or taxes would prevent
the orderly settlement of foreign currency option exercises, or would result in
undue burdens on the Clearing Corporation or its clearing members, impose
special procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
Options on foreign currencies may be traded on foreign
exchanges, to the extent permitted by the CFTC. These transactions are subject
to the risk of governmental actions affecting trading in or the prices of
foreign currencies or securities. The value of these positions could also be
adversely affected by (1) other complex foreign political and economic factors,
(2) lesser availability of data on which to make trading decisions than in the
United States, (3) delays in an Underlying GE Fund's ability to act upon
economic events occurring in foreign markets during non-business hours in the
United States, (4) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States and (5) lesser
trading volume.
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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 12 may be changed by a vote of the
Board of Trustees at any time.
1. No Fund may borrow money or issue senior securities, except
that each Fund may borrow from banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests and cash payments of
dividends and distributions that might otherwise require the untimely
disposition of securities, in an amount not to exceed 33-1/3% of the value of
the Fund's total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the borrowing is
made. Whenever borrowings of 5% or more of a Fund's total assets are
outstanding, the Fund will not make any additional investments.
2. No Fund may lend its assets or money to other persons,
except through (a) purchasing debt obligations, (b) lending portfolio securities
in an amount not to exceed 30% of the Fund's assets taken at market value, and
(c) entering into repurchase agreements.
3. No Fund may underwrite any issue of securities, except to
the extent that the sale of portfolio securities in accordance with the Fund's
investment objective, policies and limitations may be deemed to be an
underwriting, and except that the Fund may acquire securities under
circumstances in which, if the securities were sold, the Fund might be deemed to
be an underwriter for purposes of the Securities Act of 1933, as amended (the
"1933 Act").
4. No Fund may purchase or sell real estate or real estate
limited partnership interests, or invest in oil, gas or mineral leases, or
mineral exploration or development programs, except that a Fund may (a) invest
in securities secured by real estate, mortgages or interests in real estate or
mortgages or (b) purchase securities issued by companies that invest or deal in
real estate, mortgages or interests in real estate or mortgages.
5. No Fund may make short sales of securities or maintain a
short position, unless at all times when a short position is open, the Fund owns
an equal amount of the securities 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.
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7. No Fund may invest in commodities, except that each Fund
may engage in transactions involving futures and options on futures, and forward
contracts.
8. No Fund may purchase or sell put options, call options,
spreads or combinations of put options, call options and spreads, except that
each Fund may purchase and sell covered put and call options on securities and
stock indexes and futures contracts and options on futures contracts.
9. No Fund may purchase securities of other investment
companies, except (a) a security acquired in connection with a merger,
consolidation, acquisition, reorganization or offer of exchange; (b) as
permitted by an exemptive order issued by the SEC (Investment Company Release
No. IC-22207, September 10, 1996) (the "Exemptive Order"); and (c) as otherwise
permitted under the 1940 Act.
10. No Fund may invest in a company for the purpose of
exercising control or management.
11. No Fund may purchase 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.
12. 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.
With respect to investment restriction No. 9, investments by
the Funds in the GEI Short-Term Investment Fund are not considered an investment
in another investment company for purposes of this restriction.
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."
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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 (excluding securities held by GE Money Market Fund that are issued by
domestic banks).
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 17 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 and the Value 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
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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 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,
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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
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, other than a security acquired in connection with a
merger, consolidation, acquisition, reorganization or offer of exchange and
except as otherwise permitted under the 1940 Act.
13. No Underlying GE Fund may invest in companies for the
purpose of exercising control or management.
14. 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. 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.
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15. 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.
16. 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.
17. No Fund may issue senior securities except as otherwise
permitted by the 1940 Act and as otherwise permitted herein.
With respect to investment restriction No. 12, investments by
the Underlying GE Funds (other than GE Money Market Fund) in the GEI Short-Term
Investment Fund are not considered an investment in another investment company
for purposes of this restriction.
The percentage limitations in the restrictions listed above
apply at the time of purchases of securities. For purposes of investment
restriction 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.
Portfolio Transactions and Turnover
Decisions to buy and sell securities for each Fund and each
Underlying GE 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.
20
<PAGE>
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.
21
<PAGE>
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.
Name and Address Positions Held Age and Principal
---------------- with Trust Occupation(s)
-------------- During Past Five Years
----------------------
*Michael J. Cosgrove Chairman of the Age 48. President, GE Mutual
3003 Summer Street Board and President Funds; Executive Vice President
Stamford, CT 06905 - Mutual Funds of GEIM and
General Electric Investment
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 51. Executive Vice
3003 Summer Street Executive Vice President, General Counsel and
Stamford, CT 06905 President Secretary of GEIM since 1988 and
of GEIC since October 1987.
22
<PAGE>
John R. Costantino Trustee Age 51. Managing Director,
150 East 58th Street Walden Partners, Ltd.,
New York, NY 10055 consultants and investors, since
August 1992; President, CMG
Acquisition Corp., Inc., a
holding company, since 1988;
Vice Chairman, Acoustiguide
Holdings, Inc., a holding
company, since 1989; President
CMG/IKH, Inc., a holding company,
since 1991; Director, Crossland
Federal Savings Bank, a
financial institution; Director,
Brooklyn Bankcorp, Inc., a
financial institution; Director,
IK Holdings, Inc., a holding
company since 1991; Director,
I. Kleinfeld & Son, Inc., a
retailer, since 1991; Director,
High Performance Appliances,
Inc., a distributor of kitchen
appliances ("HPA"), since 1991;
Director, HPA Hong King, Ltd.,
a service subsidiary of HPA,
since 1991; Director, Lancit
Media Productions, Ltd., a
children's and family television
film and videotape production
company, since 1995; Partner,
Costantino Melamede-Greenberg
Investment Partners, a general
investment partnership, from
September 1987 through August
1992.
William J. Lucas Trustee Age 50. Vice President and
Fairfield University Treasurer of Fairfield
North Benson Road University since 1983.
Fairfield, CT 06430
Robert P. Quinn Trustee Age 61. Retired since 1983 from
45 Shinnecock Road Salomon Brothers, Inc.; Director,
Quogue, NY 11959 GP Financial Corp., a holding
company, since 1994; Director,
The Greenpoint Savings Bank, a
financial institution, since
1987.
Jeffrey A. Groh Treasurer Age 35. Vice President-
3003 Summer Street Operations of GEIM and GEIC
Stamford, CT 06905 since January 1997 and Treasurer
and Controller of GEIM and GEIC
since August 1994; prior to
August 1994, was a Senior
Manager in Investment Company
Services Group and certified
public accountant with Price
Waterhouse LLP.
Matthew J. Simpson Secretary Age 36. Vice President,
3003 Summer Street Associate General Counsel and
Stamford, CT 06905 Assistant Secretary of GEIM and
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.
No employee of GE or any of its affiliates receives any compensation from the
Trust for acting as a Trustee or officer of the Trust. Each Trustee of the Trust
who is not a director, officer or employee of GEIM, GE Investment Services Inc.
(the "Distributor"), GE, or any affiliate of those companies, receives an annual
fee of $2,000 for services as Trustee.
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<PAGE>
Trustees' Compensation*
- ----------------------
(for the fiscal year ended September 30, 1997)
--------------------------------------------------------------------------
Total Compensation from all
Total Compensation from Investment Companies Managed by
Name of Trustee the Trust GEIC or GEIM
------------------- ----------------------- -------------------------------
Michael J. Cosgrove None None+
Alan M. Lewis None None+
John R. Costantino None $21,750++
William J. Lucas None $21,750++
Robert P. Quinn None $21,750++
-----------------------
* The Trustees are also reimbursed for expenses incurred in connection
with attendance at Board meetings.
+ Mr. Cosgrove serves as Trustee or Director of four investment
companies advised by GEIM and of eight investment companies advised
by GEIC. Mr. Lewis serves as Trustee ofthree investment companies
advised by GEIM and of eight investment companies advised by GEIC.
They are considered to be interested persons of each investment
company advised by GEIM or GEIC, as defined under Section 2(a)(19)
of the 1940 Act, and accordingly, serve as Trustees thereof without
compensation.
++ Messrs. Costantino, Lucas and Quinn serve as Trustees or Directors of
four investment companies advised by GEIM.
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 expenses incurred in the operation of each Fund other than brokerage,
interest, advisory and administration fees, fees and expenses of the Trust's
Board of Trustees who are not affiliated with GEIM or its affiliates (including
counsel fees), taxes payable by the Trust, transfer agency costs (some of which
may be borne by the Underlying GE Funds as sub-transfer agency expenses of those
Funds) and any extraordinary expenses. Such expenses include SEC fees and state
Blue Sky qualification fees; charges of custodians; certain insurance premiums;
24
<PAGE>
investor premiums; and costs of preparation and printing of the
prospectus for regulatory purposes and for distribution to existing
shareholders; cost of shareholders' reports and shareholder meetings and
meetings of the officers or Board of Trustees.
Investment Consultant
DiMeo, Schneider & Associates, L.L.C. (the "Investment
Consultant") is located at 120 North LaSalle Street, Suite 1140, Chicago,
Illinois 60602, and serves as investment consultant to the Trust's Board of
Trustees and GEIM. Out of its advisory and administration fee, GEIM will pay the
Investment Consultant fees for investment consulting services provided by the
Investment Consultant to the Board of Trustees and GEIM.
Custodian and Transfer Agent
State Street Bank and Trust Company ("State Street") is
located at 225 Franklin Street, Boston, Massachusetts 02101 and serves as
custodian and transfer agent of the Funds' investments. Under its custodian
contract with the Trust, State Street is authorized to appoint one or more
banking institutions as subcustodians of assets owned by each Fund. For its
custody services, State Street receives monthly fees charged to the Funds based
upon the month-end, aggregate net asset value of the Funds, plus certain charges
for securities transactions. The assets of the Trust are held under bank
custodianship in accordance with the 1940 Act. As transfer agent, State Street
is responsible for processing redemption requests and crediting dividends to the
accounts of shareholders of the Funds.
Distributor
GE Investment Services Inc. serves as the distributor of shares of the
Funds on a best efforts basis.
REDEMPTION OF SHARES
Detailed information on how to redeem shares of a Fund is
included in the Prospectuses. The right of redemption of shares of a Fund may be
suspended or the date of payment postponed (1) for any periods during which the
NYSE is closed (other than for customary weekend and holiday closings), (2) when
trading in the markets the Fund normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the SEC, exists, making
disposal of a Fund's investments or determination of its net asset value not
reasonably practicable or (3) for such other periods as the SEC by order may
permit for the protection of the Fund's shareholders. A shareholder who pays for
Fund shares by personal check will receive the proceeds 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
25
<PAGE>
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 an Underlying GE Fund may
nevertheless be actively traded, and the value of the Fund's shares could be
indirectly affected.
The value of each Underlying GE Fund will be its net asset
value at the time of computation. Debt securities of U.S. issuers (other than
Government Securities and short-term investments) are valued by GEIM after
consultation with one or more independent pricing services ("Pricing Service")
retained by the Trust. The procedures of the Pricing Service are reviewed
periodically by GEIM under the general supervision and responsibility of the
Board of Trustees of the Trust.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Set forth below is a summary of certain Federal income tax
considerations generally affecting the Funds and their shareholders. The summary
is not intended as a substitute for individual tax planning, and shareholders
are urged to consult their tax advisors regarding the application of Federal,
state, local and foreign tax laws to their specific tax situations.
Tax Status of the Funds and their Shareholders
Each Fund is treated as a separate entity for Federal income
tax purposes. Each Fund's net investment income and capital gain distributions
are determined separately from any other series that the Trust may designate.
The Trust intends for each Fund 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
26
<PAGE>
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 a significant rule as to investment results. 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) or other 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").
An Underlying GE 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 Underlying
GE Fund (that is, may affect whether gains or losses are ordinary or capital),
accelerate recognition of income to the Underlying GE Fund and defer losses of
the Underlying GE Fund. These rules (1) could affect the character, amount and
timing of distributions to shareholders of an Underlying GE Fund, (2) will
require the Underlying GE 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 Underlying GE 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. GE Funds seeks to monitor transactions of each Fund,
27
<PAGE>
will seek to make the appropriate tax elections on behalf of each Underlying
GE Fund and seeks to make the appropriate entries in an Underlying GE Fund's
books and records when an Underlying GE Fund acquires any option, futures
contract or hedged investment, to mitigate the effect of these rules and prevent
disqualification of an Underlying GE Fund as a regulated investment company.
The investment by an Underlying GE Fund in zero coupon
securities may create special tax consequences. Zero coupon securities do not
make interest payments; however, a portion of the difference between a zero
coupon security's maturity value and its purchase price is imputed as income to
the Underlying GE Fund each year even though the Underlying GE Fund receives no
cash distribution until maturity. Under the U.S. federal tax laws applicable to
mutual funds, the Underlying GE Fund will not be subject to tax on this income
if it pays dividends to its shareholders substantially equal to all of the
income received from, or imputed with respect to, their investments during the
year, including zero coupon securities. These dividends will ordinarily
constitute taxable income to the shareholders of the Underlying GE Funds,
including the Funds.
To the extent that an Underlying GE Fund fails to qualify as a
regulated investment company, a Fund's ability to qualify as such may be
significantly impacted. Although each Underlying GE Fund expects to continue to
qualify as a regulated investment company in each fiscal year, no assurance can
be given that such status will be achieved.
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 as a capital asset 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 as a capital asset for one year or less. Shares held by a
shareholder for more than 18 months prior to the sale or redemption may be
eligible for the reduced 20% long-term capital gains rate.
The Fund's net realized long-term capital gains are
distributed as described in the Prospectus. The distributions ("capital gain
dividends"), if any, are taxable to a shareholder of a Fund as long-term capital
gains, regardless of how long a shareholder has held the shares, and will be
designated as capital gain dividends in a written notice mailed by the Trust to
the shareholders of the Fund after the close of the Fund's prior taxable year.
If a shareholder receives a capital gain dividend with respect to any share of a
Fund, and if the share is sold before it has been held by the shareholder for
six months or less, then any loss on the sale or exchange of the share, to the
extent of the capital gain dividend, will be treated as a long-term capital
loss. Investors considering buying shares of a Fund on or just prior to the
28
<PAGE>
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.
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)6*-1]
---
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
- --------------------
* - As used here, "6" is an exponent.
29
<PAGE>
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.
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)n** = ERV
Where P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = Ending Redeemable Value of a hypothetical $1,000
investment made at the beginning of a 1-, 5- or
10-year period at the end of a 1-, 5- or 10-year
period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
The ERV assumes complete redemption of the hypothetical investment at
the end of the measuring period.
- --------------------
** - As used here, "n" is an exponent.
30
<PAGE>
Aggregate Total Return
The "aggregate total return" figures described in the Prospectuses
represent the cumulative change in the value of an investment in a Fund for
the specified period are computed by the following formula:
Aggregate Total Return = ERV - P
--------
P
Where P = a hypothetical initial payment of $1,000; and
ERV = Ending Redeemable Value of a hypothetical $1,000
investment made at the beginning of a 1-, 5- or
10-year period at the end of the 1-, 5- or 10-year
period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
ADDITIONAL INFORMATION
The Trust was organized as an unincorporated business trust
under the laws of The Commonwealth of Massachusetts pursuant to a Declaration of
Trust dated June 21, 1996, as amended from time to time (the "Declaration"). In
the interest of economy and convenience, certificates representing shares of a
Fund are not physically issued. State Street maintains a record of each
shareholder's ownership of shares of a Fund.
Massachusetts law provides that shareholders of the Funds
could, under certain circumstances be held personally liable for the obligations
of the Trust. The Declaration disclaims shareholder liability for acts or
obligations of the Trust, however, and provides that notice of the disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or a Trustee of the Trust. The Declaration 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.
31
<PAGE>
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
November 7, 1996 that accompanies this Statement of Additional Information
has been included in reliance upon the Report of Independent Accountants dated
December 2, 1996 prepared by Price Waterhouse LLP, given upon their authority
as experts in accounting and auditing.
32
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS
Commercial Paper Ratings
The rating A-1+ is the highest, and A-1 the second highest
commercial paper rating assigned by S&P. Paper rated A-1+ must have either the
direct credit support of an issuer or guarantor that possesses excellent
long-term operating and financial strength combined with strong liquidity
characteristics (typically, such issuers or guarantors would display credit
quality characteristics that would warrant a senior bond rating of AA or higher)
or the direct credit support of an issuer or guarantor that possesses above
average long-term fundamental operating and financing capabilities combined with
ongoing excellent liquidity characteristics. Paper rated A-1 must have the
following characteristics: liquidity ratios are adequate to meet cash
requirements; long-term senior debt is rated A or better; the issuer has access
to at least two additional channels of borrowing; basic earnings and cash flow
have an upward trend with allowance made for unusual circumstances; typically,
the issuer's industry is well established and the issuer has a strong position
within the industry; and the reliability and quality of management are
unquestioned. Capacity for timely payment on issues rated A-2 is satisfactory.
However, the relative degree of safety is not as high as issues designated
"A-1."
The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (a) evaluation of the management of the issuer; (b)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks that may be inherent in certain areas; (c) evaluation of
the issuer's products in relation to competition and customer acceptance; (d)
liquidity; (e) amount and quality of long-term debt; (f) trend of earnings over
a period of ten years; (g) financial strength of parent company and the
relationships that exist with the issue; and (h) recognition by the management
of obligations that may be present or may arise as a result of public interest
questions and preparations to meet the obligations.
Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term debt obligations. This
normally will be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
A-1
<PAGE>
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.
A-2
<PAGE>
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.
A-3
<PAGE>
Baa -- Bonds that are rated Baa are considered as medium-grade
obligations, that is, they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds that are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future. Uncertainty
of position 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.
A-4
<PAGE>
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.
A-5
<PAGE>
BB includes the lowest degree of speculation and CC the highest degree of
speculation. While these bonds will likely have some quality and protective
characteristics, these characteristics are outweighed by large uncertainties
or major risk exposures to adverse conditions.
C -- The rating C is reserved for income bonds on which no
interest is being paid.
D -- Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus
or a minus sign, which is used to show relative standing within the major rating
categories, except in the AAA-Prime Grade category.
Description of S&P Municipal Note Ratings
Municipal notes with maturities of three years or less are
usually given note ratings (designated SP-1, -2 or -3) to distinguish more
clearly the credit quality of notes as compared to bonds. Notes rated SP-1 have
a very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given the
designation of SP-1+. Notes rated SP-2 have satisfactory capacity to pay
principal and interest.
Description of Moody's Municipal Bond Ratings
Aaa -- Bonds that are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds that are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities, or fluctuation
of protective elements may be of greater amplitude, or there may be other
elements present that make the long-term risks appear somewhat larger than in
Aaa securities.
A -- Bonds that are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present that suggest a susceptibility to impairment sometime in the
future.
A-6
<PAGE>
Baa -- Bonds that are rated Baa are considered as medium grade
obligations, that is, they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds that are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterize bonds in this class.
B -- Bonds that are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds that are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger with respect
to principal or interest.
Ca -- Bonds that are rated Ca represent obligations that are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds that are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 in each
generic rating classification from Aa through B. The modifier 1 indicates that
the security ranks in the higher end of its generic ratings category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic ratings category.
Description of Moody's Municipal Note Ratings
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade (MIG) and for variable
rate demand obligations are designated Variable Moody's Investment Grade (VMIG).
This distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG 1/VMIG 1 are the best quality,
enjoying strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both. Loans bearing the designation MIG 2/VMIG 2 are of high
quality, with margins of protection ample, although not as large as the
preceding group. Loans bearing the designation MIG 3/VMIG3 are of favorable
A-7
<PAGE>
quality, with all security elements accounted for but lacking
the undeniable strength of the higher grades. Market access for refinancing, in
particular, is likely to be less well established. Loans bearing the designation
MIG 4/VMIG 4 are of adequate quality. Protection commonly regarded as required
of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk.
A-8
<PAGE>
Report of Independent Accountants
In our opinion, the accompanying statements of assets and liabilities present
fairly, in all material respects, the financial position of GE Conservative
Strategy Fund, GE Moderate Strategy Fund, GE Aggressive Strategy Fund, GE
Conservative Allocation Fund, GE Moderate Allocation Fund, and GE Aggressive
Allocation Fund, each a series of GE LifeStyle Funds (the "LifeStyle Trust"), at
November 7, 1996, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the LifeStyle Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 2, 1996
<PAGE>
GE Lifestyle Funds
Statement of Assets and Liabilities
November 7, 1996
<TABLE>
<CAPTION>
GE GE Moderate GE Aggressive GE GE Moderate GE Aggressive
Conservative Strategy Strategy Fund Conservative Allocation Fund Allocation
Strategy Fund Fund Allocation Fund Fund
------------- ----------- ------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $ 16,667 $ 16,667 $ 16,667 $ 16,667 $ 16,667 $ 16,667
Deferred Organizational 25,000 25,000 25,000 25,000 25,000 25,000
------ ------ ------ ------ ------ ------
Expenses
Total Assets 41,667 41,667 41,667 41,667 41,667 41,667
------ ------ ------ ------ ------ ------
LIABILITIES
Payable to Advisor 25,000 25,000 25,000 25,000 25,000 25,000
------ ------ ------ ------ ------ ------
NET ASSETS
Net Assets $ 16,667 $ 16,667 $ 16,667 $ 16,667 $ 16,667 $ 16,667
-------- -------- -------- -------- -------- --------
Units of Beneficial Interest 1,667 1,667 1,667 1,667 1,667 1,667
Net Asset Value and
Offering Price Per Share $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
</TABLE>
Note 1: GE Lifestyle Funds (the "Trust"), an open-end series
management investment company, was formed under the laws of
Massachusetts by an Agreement and Declaration of Trust dated
June 21, 1996. The Trust has been inactive since that date
except for matters relating to its organization and
registration as an investment company under the Investment
Company Act of 1940 and the sale of shares to GE Investment
Management Incorporated, the Trust's Investment Advisor.
Investment advisory and portfolio management services are
described in the prospectus under the sections "Management of
the Trust" and "Investment Objectives and Management
Policies."
Note 2: Estimated organizational expenses will be deferred and
amortized over a period not to exceed five years commencing
with operations. In the event that any of the initial shares
are redeemed by any holder thereof during the amortization
period, the proceeds of such redemption will be reduced by an
amount equal to the pro-rata portion of unamortized deferred
organizational expense in the same proportion as the number of
shares being redeemed bears to the number of initial shares of
the respective portfolio outstanding at the time of such
redemption. To the extent that the proceeds of the redemption
are less that such pro-rata portion of any unamortized
organizational expenses, GE Investment Management Incorporated
has agreed to reimburse the Portfolio promptly.
Note 3: Each fund of the Trust has entered into an Investment
Advisory and Administrative Agreement with GE Investment
Management ("GEIM"), as described under "Management of the
Trust" in the Prospectus. As compensation for the services
rendered, facilities furnished, and expenses borne by GEIM,
the Funds will pay GEIM a fee accrued daily and paid monthly
at the annual rate of .20% of the Funds average daily net
assets. Under this agreement, GEIM has agreed to bear all
expenses of the Funds other than brokerage, interest, trustee
fees and expenses, taxes, transfer agency fees and
extraordinary expenses.
<PAGE>
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 November 7,
1996 and Report of Independent Accountants thereon
dated December 2, 1996.
Statements, schedules and historical information other than
those listed above have been omitted since they are either not
applicable or are not required.
(b) Exhibits:
Exhibit No. Description of Exhibit
1 Declaration of Trust*
2 By-Laws*
3 Inapplicable
4 Inapplicable
5(a) Form of Investment Advisory and Administration Agreement**
5(b) Form of Investment Consulting Agreement**
6 Form of Distribution Agreement**
7 Inapplicable
8 Form of Custodian Contract**
- --------------
* Incorporated by reference to Registrant's Registration Statement
on Form N-1A, filed on July 10, 1996.
** Incorporated by reference to Registrant's Pre-Effective Amendment
No. 1 to its Registration Statement, filed on September 18, 1996.
<PAGE>
9 Form of Transfer Agency and Service Agreement**
10(a) Consent of Willkie Farr & Gallagher
10(b) Opinion of Bingham, Dana & Gould LLP, including consent***
11 Consent of Price Waterhouse LLP
12 Inapplicable
13 Purchase Agreement***
14 Inapplicable
15 Inapplicable
16 Inapplicable
17 Financial Data Schedule****
- -------------
** Incorporated by reference to Registrant's Pre-Effective Amendment
No. 1 to its Registration Statement, filed on September 18, 1996.
*** Incorporated by reference to Registrant's Pre-Effective Amendment
No. 2 to its Registration Statement, filed on February 7, 1997.
**** To be filed by amendment.
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant
All of the outstanding shares of common stock of Registrant on
the date Registrant's Registration Statement becomes effective will be owned by
GE Investment Management Incorporated ("GEIM").
Item 26. Number of Holders of Securities
GEIM holds all of the shares par value $.001 per share of the
Registrant.
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 LifeStyle Funds" 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>
The list required by this Item 28 of officers and directors of
DiMeo Schneider & Associates, L.L.C. ("DSA"), together with information as to
any other business, profession, vocation or employment of a substantial nature
engaged in by those officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by DSA pursuant
to the Investment Advisers Act of 1940, as amended (SEC File No. 801-48820).
Item 29. Principal Underwriters
(a) GE Investment Services Inc. ("GEIS") also serves as
distributor for GE Funds, GE Investments Funds, Inc., 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
National Financial Data Services, Inc., an indirect subsidiary of State Street,
located at P.O. Box 419631, Kansas City, MO 64141-6631
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
<PAGE>
to six months from the effective date of Registrant's 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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, Registrant has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Stamford, State of
Connecticut, on the 30th day of October, 1997.
By: /s/ Michael J. Cosgrove
---------------------------
Michael J. Cosgrove
President and Chairman
of the Board
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registration Statement on Form N-1A has been
signed below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
/s/ Michael J. Cosgrove President and October 30, 1997
- ----------------------- Chairman of the Board
Michael J. Cosgrove (Chief Executive Officer)
/s/ John R. Costantino Trustee October 30, 1997
- ----------------------
John R. Costantino
/s/ Alan M. Lewis Executive Vice President October 30, 1997
- ----------------- and Trustee
Alan M. Lewis
/s/ William J. Lucas Trustee October 30, 1997
- --------------------
William J. Lucas
/s/ Robert P. Quinn Trustee October 30, 1997
- -------------------
Robert P. Quinn
/s/ Jeffrey A. Groh Treasurer (Chief Financial October 30, 1997
- ------------------- and Accounting Officer)
Jeffrey A. Groh
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Sequence
- ------------ ----------------------- -----------
10(a) Consent of Willkie Farr & Gallagher
11 Consent of Price Waterhouse LLP
<PAGE>
CONSENT OF COUNSEL
GE LIFESTYLE FUNDS
We hereby consent to being named in the Statement of
Additional Information included in Post-Effective Amendment No. 1 (the
"Amendment") to the Registration Statement on Form N-1A (Securities Act File No.
333-07905, Investment Company Act File No. 811-07701) of GE LifeStyle Funds (the
"Trust") under the caption "Counsel" and to the Trust's filing a copy of this
Consent as an exhibit to the Amendment.
/s/ Willkie Farr & Gallagher
Willkie Farr & Gallagher
October 31, 1997
New York, New York
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated
December 2, 1996, relating to the Statement of Assets and Liabilities of the GE
Lifestyle Funds, which accompany such Statement of Additional Information. We
also consent to the references to us under the headings "Independent
Accountants" and "Financial Statements" in the Statement of Additional
Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
October 29, 1997
