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GE LifeStyle Funds
Annual Report
September 30, 1998
GE Conservative Strategy Fund
GE Moderate Strategy Fund
GE Aggressive Strategy Fund
<PAGE>
GE LifeStyle Funds
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Understanding Your Report
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A Letter from the President 1
Performance Summary
Conservative Strategy Fund 3
Moderate Strategy Fund 4
Aggressive Strategy Fund 5
Portfolio Manager's Performance Summaries
and Biography 6
Notes to Performance 6
Financial Statements
Financial Highlights 7
Statements of Net Assets, Operations,
and Changes in Net Assets 8
Notes
Notes to Financial Statements 13
Report of Independent Accountants 16
GE LifeStyle Funds'
Investment Team Inside back cover
This report has been prepared for the shareholders of the GE LifeStyle Funds. It
is not authorized for use as an offer of sale or a solicitation of an offer to
buy the GE LifeStyle Funds unless accompanied or preceded by the current
prospectus of the GE LifeStyle Funds and the current prospectus of the
underlying GE Funds.
<PAGE>
A LETTER FROM THE PRESIDENT
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DEAR SHAREHOLDER:
Since our last report, the stock market has experienced a long-predicted
correction. The S&P 500 Index's year-long gain of nearly 15% was erased in
August. By the end of September the S&P 500 had made a partial recovery,
managing a 6% return for the nine-month period.
PERFORMANCE HIGHLIGHTS
The Conservative Strategy Fund, which invests primarily in fixed income
securities, produced the best results during this period of volatility, followed
by the Moderate Strategy Fund and the Aggressive Strategy Fund. Results were the
reverse of what was reported in the Semi-annual Report in March when the
Aggressive Strategy Fund outperformed the others in a strong and rising equity
market. The performance section of the report has full details on each fund.
The funds' reversal of fortunes reemphasizes how important it is to follow your
investment plan. As prices rise and fall, it may be in your best interest to
focus on long-term investment objectives rather than on short-term market
fluctuations.
MARKET OVERVIEW
Early in 1998, the stock market seemed to be setting the pace for its fourth
year of more than 20% annual gains. The economy was steady, the ongoing crisis
in Asia had lessened and the controversies surrounding the White House abated.
In mid-July, the Dow reached 9337.97, its highest historic level.
The surprise collapse of the Russian stock market in August triggered a stock
market slide. As uncertainty continued in Asia, the turbulence in Russia spread
to Latin America and other emerging markets where U.S. companies have much
larger exposure then they do in Russia. U.S. corporate earnings came under
pressure. Exports were at their lowest levels in a decade.
Continental Europe was a bright spot for much of the period, with markets
posting double-digit gains through August. Barring unforeseen events, they
should quickly snap back from blows delivered by their investments in Russia and
other emerging markets. European economies and corporate profits continue to
grow as companies ready themselves for a single currency in 1999.
Three events fueled market jitters in September. In Washington, the U.S.
Congress began deliberating whether to impeach the President. The U.S. Federal
Reserve Bank helped organize the rescue of a large American investment fund
whose collapse could have threatened world financial markets. And in hopes of
cushioning the U.S. economy, the Federal Reserve cut the short-term interest
rate by a quarter-percentage point, the first reduction in nearly three years.
At the end of September, the yield on the benchmark 30-year Treasury Bond fell
below 5% for the first time in 30 years. U.S. Treasuries and other government
securities were major beneficiaries of the Federal Reserve's actions and world
market volatility. For two quarters now, investors have moved into Treasuries
because of their size, liquidity and safety. Corporate bonds and bonds with
credit risk did not perform as well as Treasuries during the period.
1
<PAGE>
A LETTER FROM THE PRESIDENT (CONTINUED)
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OUTLOOK
This is a time for caution. Volatility should continue at least through early
1999 and the market could again test the August lows. We expect earnings
disappointments when companies report third and fourth quarter results. However,
the U.S. economy's underlying fundamentals have not changed. Interest rates and
inflation are low, companies are productive and unemployment numbers, while
beginning to rise, are still good.
Fixed income funds should continue to perform well in the next quarter as
investors trade risk for safety. The global correction also presents
opportunities for bargain-hunting in the U.S. and Europe as well as
emerging-market countries such as Mexico, Israel and Eastern Europe.
On a final note, many shareholders have inquired about the year 2000. GE Mutual
Funds has incorporated Year 2000 analysis into its investment decision making
process. GE Investment Management has also been working to identify and address
Year 2000 date-related issues in a broad range of areas including applications,
process-enabling systems and facilities. With respect to third-party systems, GE
Investment Management like many other similarly situated companies, must largely
rely on the efforts and affirmations of others. Although the interaction of
various software and hardware elements is highly complex - and the possibility
of Year 2000 related problems cannot be totally eliminated - GE Investment
Management believes it is taking appropriate steps.
Sincerely,
/s/ Michael J. Cosgrove
Mike Cosgrove is the President of the Investment Services Group of GE Financial
Assurance Holdings, Inc. and GE Investment Distributors, Inc., the funds'
distributor. In this role, he is responsible for the marketing, product
development and sales of the funds. Mike is also a Trustee of the GE Pension
Trust and GE's employee savings program.
In Mike's previous position as Chief Financial Officer of GE Investments and
Assistant Treasurer-GE Company, he had financial responsibility for all assets
under GE Investments' management. Mike joined GE in 1970. After completing the
GE Financial Management Program he held a number of managerial positions in
finance and sales in the International Operation, including serving as Vice
President and Treasurer and later as the Vice President - Countertrade and
Barter for GE Trading Company.
Mike graduated from Fordham University in 1970 with a B.S. degree in Economics
and received his M.B.A. degree from St. John's University in 1973.
2
<PAGE>
CONSERVATIVE STRATEGY FUND PERFORMANCE SUMMARY (UNAUDITED)
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================================================================================
COMPARISON OF CHANGE IN
VALUE OF A $10,000 INVESTMENT
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[Chart]
Inception Date: 1/5/98
GE Conservative Strategy Fund Composite
----------------------------- ---------
1/5/98 $ 10,000.00 $ 10,000.00
1/98 10,000.00 10,185.11
2/98 10,350.00 10,468.51
3/98 10,629.97 10,705.33
4/98 10,759.97 10,779.40
5/98 10,769.98 10,765.37
6/98 10,829.97 10,932.35
7/98 10,839.93 10,943.57
8/98 10,120.16 10,385.01
9/98 10,320.16 10,647.64
PORTFOLIO ALLOCATION TO FUNDS AT 9/30/98*
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TARGET ACTUAL
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GE Premier Growth Equity Fund 4.0% 4.1%
GE U.S. Equity Fund 10.0% 9.8%
GE Mid-Cap Growth Fund 3.0% 2.6%
GE Value Equity Fund 9.0% 8.9%
GE International Equity Fund 18.0% 16.4%
GE Fixed Income Fund 51.0% 52.9%
GE Short-Term Government Fund 5.0% 5.1%
Other -- 0.2%
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Total 100.0% 100.0%
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* As a percentage of net assets
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AGGREGATE TOTAL RETURNS:
FROM JANUARY 5, 1998 (INCEPTION) THROUGH SEPTEMBER 30, 1998
================================================================================
CONSERVATIVE STRATEGY FUND 3.20%
Composite Index** 6.48%
S&P 500 Index 6.10%
MSCI EAFE Index -0.55%
LB Int. Gov't/Corp. Index 8.10%
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** The Composite Index is derived by applying each underlying fund's target
allocations to the results of the benchmarks for the domestic equity,
international equity, and fixed income markets.
The Conservative Strategy Fund targets 26% to domestic equity markets, 18% to
international equity markets and 56% to fixed income markets. The fund is most
heavily weighted in fixed income securities, which was an advantage over the
past few months. These securities performed better than equities as long-term
interest rates fell below 5% for the first time in 30 years. With economic
uncertainty spreading around the globe, investors fled to the quality of U.S.
Treasury bonds. Because of this flight-to-quality, corporate bonds and
mortgage-backed bonds did not fare as well as treasuries. The underlying GE
Fixed Income Fund, which underperformed its benchmark, held some of these
corporate and mortgage-backed bonds.
The underlying GE Premier Growth Equity and GE Value Equity Funds did better
than their benchmarks. Both held stocks in healthcare and technology, sectors
that did well despite the volatile market. In general, growth stocks
outperformed value stocks. The Conservative Strategy Fund holds a higher portion
of the GE Value Equity Fund. This weighting hurt overall returns.
The underlying GE U.S. Equity Fund lagged behind its benchmark in a narrow
market where a few strong-performing large-cap stocks sold at higher valuations
than their fundamentals seemed to justify. The portfolio's underlying GE Mid-Cap
Growth Fund, which performed below its benchmark, was underweighted in
healthcare and consumer goods stocks and overweighted in capital goods holdings.
International equities did not do as well as U.S. equities because of poor
performance in emerging markets.
The good performance of fixed income assets in a turbulent investment climate is
an example of how diversification of risk across different market segments can
reduce overall fund volatility.
See Notes to Performance.
Past performance is no guarantee of future results.
3
<PAGE>
MODERATE STRATEGY FUND PERFORMANCE SUMMARY (UNAUDITED)
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COMPARISON OF CHANGE IN
VALUE OF A $10,000 INVESTMENT
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[Chart]
Inception Date: 1/5/98
GE Moderate Strategy Fund Composite
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1/5/98 $ 10,000 $ 10,000
1/98 10,010 10,205.81
2/98 10,489.98 10,645.24
3/98 10,880 10,947.31
4/98 11,040.04 11,032.33
5/98 11,000.08 10,975.93
6/98 11,080.05 11,192.14
7/98 11,100.1 11,189.9
8/98 9,990.09 10,294.51
9/98 10,220.06 10,563.25
PORTFOLIO ALLOCATION TO FUNDS AT 9/30/98*
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TARGET ACTUAL
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GE Premier Growth Equity Fund 8.0% 8.6%
GE U.S. Equity Fund 13.0% 13.1%
GE Mid-Cap Growth Fund 4.0% 3.4%
GE Value Equity Fund 13.0% 13.2%
GE International Equity Fund 25.0% 23.8%
GE Fixed Income Fund 32.0% 33.1%
GE Short-Term Government Fund 5.0% 5.1%
Other -- (0.3)%
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Total 100.0% 100.0%
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* As a percentage of net assets
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AGGREGATE TOTAL RETURNS:
FROM JANUARY 5, 1998 (INCEPTION) THROUGH SEPTEMBER 30, 1998
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MODERATE STRATEGY FUND 2.20%
Composite Index** 5.63%
S&P 500 Index 6.10%
MSCI EAFE Index -0.55%
LB Int. Gov't/Corp. Index 8.10%
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** The Composite Index is derived by applying each underlying fund's target
allocations to the results of the benchmarks for the domestic equity,
international equity, and fixed income markets.
The Moderate Strategy Fund targets 38% to domestic equity markets, 25% to
international equity markets and 37% to fixed income markets. The Moderate
Strategy Fund is nearly equally weighted in domestic equity and fixed income
securities which caused the total return to be slightly lower than the
Conservative Strategy Fund which has a higher fixed income weight.
The underlying GE Premier Growth Equity and GE Value Equity Funds did better
than their benchmarks. Both held stocks in healthcare and technology, sectors
that did well despite the volatile market. In general, growth stocks
outperformed value stocks. The Moderate Strategy Fund holds a higher portion of
the GE Value Equity Fund. This weighting hurt overall returns.
The underlying GE U.S. Equity Fund lagged behind its benchmark in a narrow
market where a few strong-performing large-cap stocks sold at higher valuations
than their fundamentals seemed to justify. The underlying GE Mid-Cap Growth
Fund, which performed below its benchmark, was underweighted in healthcare and
consumer goods stocks and overweighted in capital goods holdings. International
equities did not do as well as U.S. equities because of poor performance in
emerging markets.
Fixed income securities performed better than equities as long-term interest
rates fell below 5% for the first time in 30 years. With economic uncertainty
spreading around the globe, investors fled to the quality of U.S. Treasury
bonds. Because of this flight-to-quality, corporate bonds and mortgage-backed
bonds did not fare as well as treasuries. The GE Fixed Income Fund, which
underperformed its benchmark, held some of these corporate and mortgage-backed
bonds.
Fixed income performed well compared to equity investments, which is why a
diversified portfolio is a good idea during this volatile market period.
See Notes to Performance.
Past performance is no guarantee of future results.
4
<PAGE>
AGGRESSIVE STRATEGY FUND PERFORMANCE SUMMARY (UNAUDITED)
================================================================================
COMPARISON OF CHANGE IN
VALUE OF A $10,000 INVESTMENT
================================================================================
[Chart]
Inception Date: 1/5/98
GE Aggressive Strategy Fund Composite
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1/5/98 $ 10,000 $ 10,000
1/98 10,010 1,0226.69
2/98 10,630.02 10,795.28
3/98 11,110.07 11,179.57
4/98 11,310.05 11,275.28
5/98 11,240.04 11,177.45
6/98 11,330.08 11,440.65
7/98 11,330.08 11,425.9
8/98 9,910.08 10,198.82
9/98 10,150.1 10,469.37
PORTFOLIO ALLOCATION TO FUNDS AT 9/30/98*
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TARGET ACTUAL
------ ------
GE Premier Growth Equity Fund 10.0% 10.8%
GE U.S. Equity Fund 17.0% 17.3%
GE Mid-Cap Growth Fund 6.0% 5.3%
GE Value Equity Fund 16.0% 16.3%
GE International Equity Fund 32.0% 29.8%
GE Fixed Income Fund 14.0% 15.2%
GE Short-Term Government Fund 5.0% 5.4%
Other -- (0.1)%
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Total 100.0% 100.0%
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* As a percentage of net assets
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AGGREGATE TOTAL RETURNS:
FROM JANUARY 5, 1998 (INCEPTION) THROUGH SEPTEMBER 30, 1998
================================================================================
AGGRESSIVE STRATEGY FUND 1.50%
Composite Index** 4.69%
S&P 500 Index 6.10%
MSCI EAFE Index -0.55%
LB Int. Gov't/Corp. Index 8.10%
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** The Composite Index is derived by applying each underlying fund's target
allocations to the results of the benchmarks for the domestic equity,
international equity, and fixed income markets.
The Aggressive Strategy Fund targets 49% to domestic equity markets, 32% to
international equity markets and 19% to fixed income markets. Of the three
LifeStyle funds, the Aggressive Strategy Fund is most heavily weighted in
domestic equities and has the least in fixed income which caused the total
return to be lower than either the Conservative or Moderate Strategy Funds.
The underlying GE Premier Growth Equity and GE Value Equity Funds did better
than their benchmarks. Both held stocks in healthcare and technology, sectors
that did well despite the volatile market. In general, growth stocks
outperformed value stocks. The Aggressive Strategy Fund holds a higher portion
of the GE Value Equity Fund. This weighting hurt overall returns.
The underlying GE U.S. Equity Fund lagged behind its benchmark in a narrow
market where a few strong-performing large-cap stocks sold at higher valuations
than their fundamentals seemed to justify. The underlying GE Mid-Cap Growth
Fund, which performed below its benchmark, was underweighted in healthcare and
consumer goods stocks and overweighted in capital goods holdings. International
equities did not do as well as U.S. equities because of poor performance in
emerging markets.
Fixed income securities performed better than equities as long-term interest
rates fell below 5% for the first time in 30 years. With economic uncertainty
spreading around the globe, investors fled to the quality of U.S. Treasury
bonds. Because of this flight-to-quality, corporate bonds and mortgage-backed
bonds did not fare as well as treasuries. The GE Fixed Income Fund, which
underperformed its benchmark, held some of these corporate and mortgage-backed
bonds.
In this period of high market volatility, the good performance of fixed income
funds compared to equity investments shows why even aggressive investors should
have a diversified portfolio.
See Notes to Performance.
Past performance is no guarantee of future results.
5
<PAGE>
GE LIFESTYLE FUNDS PORTFOLIO MANAGER'S PERFORMANCE SUMMARIES
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Performance Summaries on the preceeding pages are presented by Eugene K. Bolton,
Executive Vice President, GE Investments.
Gene Bolton is responsible for the management of the GE LifeStyle Funds. As the
Chairman of the Asset Allocation Committee at GE Investments, Gene works closely
with the portfolio managers of the underlying GE Funds. He also has overall
management responsibility of the U.S. equity investment process at GE
Investments and manages total assets of over $30 billion, including
responsibility for overseeing the portfolio management of the GE U.S. Equity
Fund. Gene joined GE in 1964. After completing GE's Financial Management
Program, he held a number of financial and strategic planning positions in the
U.S. and Europe. Joining GE Investments in 1984 as Chief Financial Officer, he
moved to equities as a Portfolio Manager in 1986 and was named to his present
position in 1991. Gene is a Trustee of the GE Pension Trust and GE's employee
savings program. He also serves as a Trustee of the Investment Management
Workshop, sponsored by the Association for Investment Management and Research.
Gene is a graduate of Mundelein College with a B.A. in Business Management.
NOTES TO PERFORMANCE (unaudited)
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Total returns are historical and assume changes in share price, reinvestment of
dividends and capital gains, if any. Past performance is not indicative of
future results of the fund. Investment returns and net asset value on an
investment will fluctuate and you may have a gain or loss when you sell your
shares.
Total returns for the Composite Index are derived by applying the fund's target
allocations to the results of the benchmarks for the domestic equity market, the
S&P 500 Index; for the international equity market, the MSCI EAFE Index; and for
the fixed income bond market, the LB Int. Gov't/Corp Index.
A number of the broad market index returns are not available for the funds'
commencement of investment operations through September 30, 1998. In instances
where the inception date was not at the begining of the month, broad market
index returns are calculated from the month-end nearest to the funds' inception
dates.
The Adviser has voluntarily agreed to waive and/or bear certain fees and fund
expenses. Without these provisions, the performance returns would have been
lower. These provisions may be terminated in the future.
The Standard & Poor's ("S&P") 500 Composite Stock Price Index (S&P 500 Index),
Morgan Stanley Capital International EAFE Index (MSCI EAFE Index) and the Lehman
Brothers Intermediate Government/Corporate Bond Index (LB Int. Gov't/Corp Index)
are unmanaged indices and do not reflect the actual cost of investing in the
instruments that comprise each index. The S&P 500 Index is a composite of the
prices of 500 widely held stocks recognized by investors to be representative of
the stock market in general. The MSCI EAFE Index is a composite of 1,100 stocks
of companies from 21 countries representing stock markets of Europe,
Australasia, New Zealand and the Far East. The LB Int. Gov't/Corp Index is
comprised of the Government bonds and Corporate bonds portion of the Lehman
Brothers Aggregate Bond Index (LB Aggregate). The LB Aggregate is a composite
index of short-, medium-, and long-term bond performance and is widely
recognized as a barometer of the bond market in general. The results shown for
the foregoing indices assume reinvestment of net dividends or interest.
6
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data based on a share outstanding throughout the period indicated
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<TABLE>
<CAPTION>
CONSERVATIVE MODERATE AGGRESSIVE
STRATEGY STRATEGY STRATEGY
FUND FUND FUND
9/30/98(a) 9/30/98(a) 9/30/98(a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCEPTION DATE 1/5/98 1/5/98 1/5/98
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.31 0.61 0.34
Net realized and unrealized
gains (losses) on investments 0.01(c) (0.39) (0.19)(c)
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Total income from investment operations 0.32 0.22 0.15
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LESS DISTRIBUTIONS FROM:
Net investment income 0.00 0.00 0.00
Net realized gains 0.00 0.00 0.00
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TOTAL DISTRIBUTIONS 0.00 0.00 0.00
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Net asset value, end of period $ 10.32 $ 10.22 $ 10.15
=====================================================================================================
TOTAL RETURN (B) 3.20% 2.20% 1.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 979 $ 25,148 $ 2,939
Ratios to average net assets:
Net investment income* 5.85% 7.39% 5.79%
Net expenses* 0.20% 0.20% 0.20%
Gross expenses* 5.65% 0.33% 1.80%
Portfolio turnover rate 67% 22% 28%
=====================================================================================================
</TABLE>
NOTES TO FINANCIAL HIGHLIGHTS
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(a) Information is for the period January 5, 1998, inception of investment
operations, through September 30, 1998.
(b) Total returns are historical and assume changes in share price,
reinvestment of dividends and capital gains, and assume no sales charge.
Had the Adviser not absorbed a portion of expenses, total returns would
have been lower. Total returns are not annualized.
(c) As a result of the timing of purchases and sales of fund shares, per share
amounts do not accord with aggregate amounts appearing in the Statement of
Operations.
* Annualized for periods less than one year.
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See Notes to Financial Statements.
7
<PAGE>
STATEMENT OF NET ASSETS
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CONSERVATIVE STRATEGY FUND
September 30, 1998
- --------------------------------------------------------------------------------
Number
of Shares Value
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INVESTMENTS -- 100.0%
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GE Premier Growth Equity Fund 1,988 $ 40,514
GE U.S. Equity Fund 3,409 96,270
GE Mid-Cap Growth Fund 3,087 25,526
GE Value Equity Fund 8,767 87,058
GE International Equity Fund 10,726 160,681
GE Fixed Income Fund 41,377 518,457
GE Short-Term Government Fund 4,188 50,299
GEI Short Term Investment Fund 62 62
Total Investments
(Cost $1,004,456) 978,867
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OTHER ASSETS AND LIABILITIES -- 0.0%
- ----------------------------------------------------------------------------
Other Assets 1,165
Liabilities (865)
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Other Assets and Liabilities 300
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NET ASSETS-- 100% $ 979,167
============================================================================
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------
Capital paid in $ 970,960
Undistributed net investment income 28,991
Accumulated net realized gain 4,805
Net unrealized depreciation on investments (25,589)
- ----------------------------------------------------------------------------
NET ASSETS $ 979,167
============================================================================
Shares outstanding (par value $.001) 94,901
Net asset value per share $ 10.32
Maximum offering price per share $ 10.95
- ----------
See Notes to Financial Statements.
8
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
MODERATE STRATEGY FUND
September 30, 1998
- --------------------------------------------------------------------------------
Number
of Shares Value
- ----------------------------------------------------------------------------
INVESTMENTS -- 100.2%
- ----------------------------------------------------------------------------
GE Premier Growth Equity Fund 106,694 $ 2,174,426
GE U.S. Equity Fund 116,450 3,288,539
GE Mid-Cap Growth Fund 103,354 854,739
GE Value Equity Fund 334,171 3,318,317
GE International Equity Fund 398,695 5,972,446
GE Fixed Income Fund 663,311 8,311,284
GE Short-Term Government Fund 107,039 1,285,535
GEI Short Term Investment Fund 95 95
Total Investments
(Cost $26,092,695) 25,205,381
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OTHER ASSETS AND LIABILITIES -- (0.2%)
- ----------------------------------------------------------------------------
Other Assets 8,552
Liabilities (66,312)
- ----------------------------------------------------------------------------
Other Assets and Liabilities (57,760)
- ----------------------------------------------------------------------------
NET ASSETS -- 100% $ 25,147,621
============================================================================
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------
Capital paid in $ 24,422,956
Undistributed net investment income 1,496,553
Accumulated net realized gain 115,426
Net unrealized depreciation on investments (887,314)
- ----------------------------------------------------------------------------
NET ASSETS $ 25,147,621
============================================================================
Shares outstanding (par value $.001) 2,461,654
Net asset value per share $ 10.22
Maximum offering price per share $ 10.84
- ----------
See Notes to Financial Statements.
9
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
AGGRESSIVE STRATEGY FUND
September 30, 1998
- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------
INVESTMENTS -- 100.1%
- --------------------------------------------------------------------------------
GE Premier Growth Equity Fund 15,569 $ 317,288
GE U.S. Equity Fund 17,976 507,646
GE Mid-Cap Growth Fund 18,935 156,595
GE Value Equity Fund 48,318 479,802
GE International Equity Fund 58,409 874,965
GE Fixed Income Fund 35,753 447,983
GE Short-Term Government Fund 13,192 158,441
GEI Short Term Investment Fund 96 96
Total Investments
(Cost $3,158,694) 2,942,816
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OTHER ASSETS AND LIABILITIES -- (0.1%)
- --------------------------------------------------------------------------------
Other Assets 1,520
Liabilities (4,996)
- --------------------------------------------------------------------------------
Other Assets and Liabilities (3,476)
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $ 2,939,340
================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Capital paid in $ 3,047,461
Undistributed net investment income 97,572
Accumulated net realized gain 10,185
Net unrealized depreciation on investments (215,878)
- --------------------------------------------------------------------------------
NET ASSETS $ 2,939,340
================================================================================
Shares outstanding (par value $.001) 289,718
Net asset value per share $ 10.15
Maximum offering price per share $ 10.77
- ----------
See Notes to Financial Statements.
10
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1998*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONSERVATIVE MODERATE AGGRESSIVE
STRATEGY STRATEGY STRATEGY
FUND FUND FUND
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME:
Dividends $ 29,847 $ 1,533,286 $ 100,471
Interest 135 3,776 473
- ------------------------------------------------------------------------------------------------
TOTAL INCOME 29,982 1,537,062 100,944
- ------------------------------------------------------------------------------------------------
EXPENSES:
Transfer agent fees 25,001 25,001 25,001
Trustees' fees 2,000 2,000 2,000
Advisory fees 991 40,509 3,372
- ------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE REIMBURSEMENT 27,992 67,510 30,373
Less: Expenses reimbursed by
the Adviser (27,001) (27,001) (27,001)
- ------------------------------------------------------------------------------------------------
Net expenses 991 40,509 3,372
- ------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 28,991 1,496,553 97,572
================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain on investments 4,805 115,426 10,185
Increase in unrealized
depreciation on investments (25,589) (887,314) (215,878)
- ------------------------------------------------------------------------------------------------
Net realized and unrealized loss
on investments (20,784) (771,888) (205,693)
- ------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 8,207 $ 724,665 $(108,121)
================================================================================================
</TABLE>
* For the period January 5, 1998 (inception) through September 30, 1998.
- ----------
See Notes to Financial Statements.
11
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED SEPTEMBER 30, 1998*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONSERVATIVE MODERATE AGGRESSIVE
STRATEGY STRATEGY STRATEGY
FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 28,991 $ 1,496,553 $ 97,572
Net realized gain on investments 4,805 115,426 10,185
Net increase in unrealized depreciation (25,589) (887,314) (215,878)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations 8,207 724,665 (108,121)
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- --
Net realized gains -- -- --
- -------------------------------------------------------------------------------------------------------------
Total distributions -- -- --
- -------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
operations and distributions 8,207 724,665 (108,121)
- -------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares 1,407,890 30,007,903 3,969,684
Value of distributions reinvested -- -- --
Cost of shares redeemed (436,930) (5,584,947) (922,223)
- -------------------------------------------------------------------------------------------------------------
Net increase from share transactions 970,960 24,422,956 3,047,461
- -------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 979,167 25,147,621 2,939,340
NET ASSETS
Beginning of period -- -- --
- -------------------------------------------------------------------------------------------------------------
End of period $ 979,167 $ 25,147,621 $ 2,939,340
=============================================================================================================
UNDISTRIBUTED NET INVESTMENT INCOME,
END OF PERIOD $ 28,991 $ 1,496,553 $ 97,572
=============================================================================================================
CHANGES IN FUND SHARES
Shares sold by subscription 136,768 2,984,135 377,801
Issued for distributions reinvested -- -- --
Shares redeemed (41,867) (522,481) (88,083)
- -------------------------------------------------------------------------------------------------------------
Net increase in fund shares 94,901 2,461,654 289,718
=============================================================================================================
</TABLE>
* For the period January 5, 1998 (inception) through September 30, 1998.
- ----------
See Notes to Financial Statements.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
1. Organization of the Funds
GE LifeStyle Funds ("LifeStyle Funds" or the "Trust") is registered under the
Investment Company Act of 1940 (as amended) (the "1940 Act") as an open-end
management investment company. The Trust was organized as a Massachusetts
business trust on June 21, 1996, and is authorized to issue an unlimited number
of shares. The Trust is comprised of six investment funds (each a "Fund" and
collectively the "Funds"), only three of which are currently being offered, as
follows: GE Conservative Strategy Fund, GE Moderate Strategy Fund, and GE
Aggressive Strategy Fund. Each Fund operates as a "fund-of-funds" in that it
makes investments in a select group of underlying GE Funds ("Underlying Funds")
suited to the Fund's particular investment objective. The objectives of the
Funds are as follows:
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
toward 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.
The maximum sales load imposed on purchases of shares (as a percentage of
offering price) for the Funds is 5.75%. The maximum contingent deferred sales
load (as a percentage of redemption proceeds) is 1.00% and is imposed for shares
redeemed within one year of purchase that were not subject to a front-end sales
load upon purchase by virtue of being part of a purchase of $1 million or more.
2. Summary of Significant Accounting Policies
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results may differ from those estimates.
The following summarizes the significant accounting policies of the Trust:
SECURITY VALUATION AND TRANSACTIONS
Investments in the Underlying Funds are valued at the closing net asset value
per share of each Underlying Fund as reported on each business day. Short-term
investments maturing within 60 days are valued at amortized cost.
Transactions are accounted for as of the trade date. Realized gains and losses
on investments sold are recorded on the basis of specific identified cost for
both financial statement and federal tax purposes.
INCOME TAXES
The Funds intend to comply with all sections of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income and gains to its shareholders and, therefore, no provision for
federal income tax has been made. Each Fund is treated as a separate taxpayer
for federal income tax purposes.
Any net capital and currency losses incurred after October 31, within each
Fund's tax year, are deemed to arise on the first day of the Fund's next tax
year if the Fund so elects to defer such losses. No such net capital and
currency losses were incurred during the Funds' tax year.
INVESTMENT INCOME
Income and capital gain distributions, if any, are recorded on the ex-dividend
date. Interest income is recorded on the accrual basis.
EXPENSES
The Funds pay a fee to GE Investment Management, Incorporated ("GEIM")
equivalent to the Funds' advisory and administration fee. This fee includes any
normal operating expenses payable by the Funds, except for fees paid to the
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
Trust's independent Trustees and transfer agent. Until further notice, GEIM has
agreed to reimburse the funds for Trustee and transfer agency costs.
DISTRIBUTIONS TO SHAREHOLDERS
The Funds declare and pay dividends of net investment income and net capital
gains annually. The character of income and gains to be distributed is
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. The calculation of net investment
income per share in the Financial Highlights table excludes these adjustments.
During any particular year, net realized gains from investment transactions in
excess of any applicable capital loss carryforwards would be taxable to the
Funds if not distributed and, therefore, will be declared and paid to their
shareholders annually.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements. The Funds' custodian
takes possession of the collateral pledged for investments in repurchase
agreements on behalf of the Funds. The Funds value the underlying collateral
daily on a mark-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price. In the event of default of
the obligation to repurchase, the Funds have the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. There is
the risk that the collateral may be insufficient to meet the obligation in the
event of default.
3. Fees and Compensation Paid to Affiliates
ADVISORY AND ADMINISTRATION FEES
GE Investment Management, Incorporated ("GEIM"), a registered investment
adviser, was retained by the Trust's Board of Trustees effective September 11,
1996 to act as investment adviser and administrator of the Funds.
Compensation of GEIM, a wholly-owned subsidiary of General Electric Company, for
investment advisory and administrative services, is paid monthly based on the
average daily net assets of each Fund. The advisory and administration fees
payable to GEIM for each Fund are calculated at the annual rate of 0.20%.
TRUSTEES COMPENSATION
The Funds pay no compensation to their Trustees who are employees of GEIM.
Trustees who are not such officers or employees receive an annual fee of $2,000
and an additional fee of $500 per Trustees' meeting attended in person. These
fees are allocated equally among the funds.
OTHER
For the period ended September 30, 1998, the Trust was informed that GE
Investment Distributors, Inc., acting as underwriter, did not receive
commissions from the sale of shares.
4. Aggregate Unrealized Appreciation and Depreciation
Aggregate gross unrealized appreciation/(depreciation) of investments for each
Fund at September 30, 1998, were as follows:
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION (DEPRECIATION)
- --------------------------------------------------------------------------------
GE Conservative
Strategy Fund $ 11,936 $ 37,525 $ (25,589)
GE Moderate
Strategy Fund 496,700 1,384,014 (887,314)
GE Aggressive
Strategy Fund 18,902 234,780 (215,878)
The aggregate cost of each Fund's investments was substantially the same for
book and federal income tax purposes at September 30, 1998.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
5. Investment Transactions
The cost of purchases and the proceeds from sales of the Underlying Funds,
excluding short-term securities, for the period ended September 30, 1998, were
as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
GE Conservative
Strategy Fund $ 1,418,428 $ 418,777
GE Moderate
Strategy Fund 31,278,127 5,300,858
GE Aggressive
Strategy Fund 3,755,748 607,239
6. Beneficial Interest
The schedule below shows the number of shareholders each owning 5% or more of a
fund and the total percentage of the fund held by such shareholders at September
30, 1998.
5% OR GREATER SHAREHOLDERS
- --------------------------------------------------------------------------------
% OF
NUMBER FUND HELD
- --------------------------------------------------------------------------------
GE Conservative Strategy Fund 4 98%
GE Moderate Strategy Fund 2 99%
GE Aggressive Strategy Fund 4 99%
Investment activities of these shareholders could have a material impact on
these Funds.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of GE LifeStyle Funds
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
each of the funds constituting GE LifeStyle Funds (the "Trust") at September 30,
1998, and the results of their operations, the changes in their net assets and
the financial highlights for the periods from January 5, 1998 (inception date)
to September 30, 1998, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the 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, which included
confirmation of investments owned at September 30, 1998 by correspondence with
the custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 9, 1998
16
<PAGE>
GE LIFESTYLE FUNDS' INVESTMENT TEAM
- --------------------------------------------------------------------------------
Portfolio Manager
GE LIFESTYLE FUNDS
Eugene K. Bolton
Portfolio Managers of the
Underlying Funds
GE INTERNATIONAL EQUITY FUND
Team led by
Ralph R. Layman
GE PREMIER GROWTH EQUITY FUND
David B. Carlson
GE MID-CAP GROWTH FUND
Elaine G. Harris
GE VALUE EQUITY FUND
Peter J. Hathaway
GE U.S. EQUITY FUND
Team led by
Eugene K. Bolton
GE FIXED INCOME FUND
GE SHORT-TERM GOVERNMENT FUND
GE MONEY MARKET FUND
Team led by
Robert A. MacDougall
Investment Adviser
and Administrator
GE Investment Management Incorporated
Trustees
Michael J. Cosgrove
John R. Costantino
Alan M. Lewis
William J. Lucas
Robert P. Quinn
Secretary
Matthew J. Simpson
Treasurer
Jeffrey A. Groh
Assistant Treasurers
Michael M. D'Ambrosio
Sandra J. O'Keefe
Michael J. Tansley
Distributor
GE Investment Distributors, Inc.
Member NASD and SIPC
Counsel
Willkie Farr & Gallagher
Custodian
State Street Bank & Trust Company
Independent Accountants
PricewaterhouseCoopers LLP
Officers of the Investment Adviser
John H. Myers, Chairman of the Board and President
Eugene K. Bolton, EVP, Domestic Equities
Michael J. Cosgrove, EVP, Mutual Funds
Ralph R. Layman, EVP, International Equities
Alan M. Lewis, EVP, General Counsel and Secretary
Robert A. MacDougall, EVP, Fixed Income
Geoffrey R. Norman, EVP, Institutional Marketing
Thomas J. Szkutak, EVP, Chief Financial Officer
Don W. Torey, EVP, Alternative Investments and Real Estate
<PAGE>
Investment Adviser
GE Investment Management Incorporated
3003 Summer Street
Stamford, CT 06905
Distributor
GE Investment Distributors, Inc.
Member NASD and SIPC
777 Long Ridge Road - Building B
Stamford, CT 06927
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