<PAGE>
As filed with the Securities and Exchange Commission
on January 26, 2000
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. 5
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 7
(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 Asset Management Incorporated
3003 Summer Street, P.O. Box 7900
Stamford, Connecticut 06904
.........................................
(Name and Address of Agent for Service)
Copies to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
x on January 28, 2000 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on ____________ pursuant to paragraph (a)(1) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
___ on ___________ pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
___ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
[GRAPHIC OMITTED]
Prospectus
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GE LifeStyle
Funds
January 28, 2000
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GE Strategy Funds
GE Conservative Strategy Fund
GE Moderate Strategy Fund
GE Aggressive Strategy Fund
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Like all mutual funds, the GE Strategy Funds' shares have not been approved or
disapproved by the Securities and Exchange Commission, nor has the Securities
and Exchange Commission passed upon the accuracy or adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
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[GE LOGO]
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We bring good things to life.
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Contents
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GE Strategy Funds
Prospectus
GE Strategy Funds 2
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GE Conservative Strategy Fund 4
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GE Moderate Strategy Fund 6
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GE Aggressive Strategy Fund 8
Fund Expenses 10
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More on Strategies and Risks 12
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Important Definitions 12
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More on Investment Strategies 14
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More on Risks 20
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Other Risk Considerations 23
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How the Funds Are Managed 24
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About the Investment Adviser
and Administrator 24
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About the Portfolio Manager 24
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About the Investment Consultant 25
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About the Board of Trustees 25
How to Invest 26
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Who may Invest 26
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Defined Contribution
Plan Participants 26
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Dividends, Capital Gains and
Other Tax Information 27
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Calculating Share Value 28
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Financial Highlights 30
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Additional information regarding the GE LifeStyle Strategy Funds (the "GE
Strategy Funds" or the "Funds") is contained in the Statement of Additional
Information dated January 28, 2000 ("SAI"), which is incorporated by reference
into (legally forms a part of) this Prospectus.
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2 GE Strategy Funds GE Strategy
Prospectus Funds
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An investment in a GE Strategy Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. An investment in a GE Strategy Fund is subject to risk,
including possible loss of principal invested.
Who May Want To Invest in a GE Strategy Fund?
The GE Strategy Funds may be appropriate for your investment portfolio if you:
o prefer simplified investment decision making
o prefer to have your asset allocation decisions made by professional money
managers
o want a single diversified investment that is re-balanced periodically
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Introduction to the Asset Allocation Process
The GE Strategy Funds are designed to meet the needs of investors who prefer a
single diversified investment that has an investment objective which is
consistent with the length of time until their need for funds and their risk
tolerance. Depending on the Fund you choose, your investment will be subject to
varying degrees of potential investment risks and rewards.
GE Conservative Strategy Fund is designed for investors with shorter investment
time horizons and lower risk tolerances; GE Moderate Strategy Fund is designed
for investors with intermediate investment time horizons and moderate-to-high
risk tolerances; and GE Aggressive Strategy Fund is designed for investors with
longer investment time horizons and high risk tolerances.
The GE Strategy Funds invest primarily in a combination of certain GE Funds (the
"underlying GE Funds") that, in turn, invest directly in a wide range of
portfolio securities (like stocks and bonds). Each underlying GE Fund represents
an investment category, such as U.S. equity or fixed-income securities. Although
an investor may achieve the same level of diversification by investing directly
in a variety of GE Funds, each GE Strategy Fund provides investors with a means
to simplify their investment decisions by investing in a single diversified
portfolio.
Each GE Strategy Fund seeks to achieve its investment objective by allocating
its assets strategically among the equity and income funds selected from the
underlying GE Funds. The main differences among the GE Strategy Funds are
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3
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the percentages of their assets allocated to each of the underlying GE Funds
(and therefore the percentages allocated to equity versus income funds).
Currently, the group of underlying GE Funds is comprised of the following:
o GE U.S. Equity Fund
o GE Small-Cap Value Equity Fund
o GE International Equity Fund
o GE Emerging Markets Fund
o GE Fixed Income Fund
o GE High Yield Fund
The group of underlying GE Funds and the allocations among those funds may be
changed from time to time without shareholder approval. Any such changes will be
reflected immediately in the current Prospectus; however, it may take some time
to execute those changes. The Investment Adviser will re-allocate the
investments of the GE Strategy Funds over a reasonable period of time while
seeking to minimize disruptive effects and adverse costs to the GE Strategy
Funds and the underlying GE Funds.
Although each GE Strategy Fund is designed to serve as a diversified investment
portfolio, no single mutual fund can provide an appropriate investment program
for all investors. Because each GE Strategy Fund invests in a combination of
equity and income funds, an investor should not expect capital appreciation or
current income levels comparable to funds for which either capital appreciation
or current income is their sole objective. You should evaluate the Funds in the
context of your personal financial situation, investment goals and other
investments.
GE LifeStyle Funds is comprised of six separate series (or individual funds).
The GE Strategy Funds, which constitute three of those series, are offered by
this Prospectus. The GE Strategy Funds invest in Class A shares of the
underlying GE Funds. The GE Allocation Funds, which constitute the remaining
three series, are offered by a separate prospectus. The GE Allocation Funds
invest in Class Y shares of the underlying GE Funds.
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4 GE Strategy Funds
Prospectus
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GE Conservative Strategy Fund
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Investment Objective: Income and long-term growth of capital.
The Strategy
GE Conservative Strategy Fund seeks to achieve its investment objective by
investing among the underlying GE Funds within carefully determined ranges. The
Fund normally invests 38% to 52% of its net assets in equity funds and 48% to
58% in income funds.The Fund is designed for investors with shorter investment
time horizons and lower risk tolerances.
The table below shows the Fund's current investment targets and ranges
(expressed as a percentage of its net assets) for allocating its assets among
the underlying GE Funds.
The Risks
The principal risks of investing in the Fund are allocation risk, credit risk,
derivative securities risk, foreign exposure risk, interest rate risk,
prepayment risk, stock market risk, style risk (growth investing risk, value
investing risk and small-cap company risk), and underlying performance risk.
If you would like additional information regarding this Fund's investment
strategies and risks or the underlying GE Funds' investment strategies and
risks, including descriptions of the terms in bold type, please refer to "More
on Strategies and Risks" later in this Prospectus.
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Investment Allocations
Target Range
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U.S. Equity Fund 28% 23% - 33%
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Small-Cap Value Equity Fund 5% 2% - 8%
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International Equity Fund 12% 7% - 17%
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Emerging Markets Fund 0% 0%
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Fixed Income Fund 53% 48% - 58%
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High Yield Fund 0% 0%
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Cash* 2% 0% - 4%
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*For an explanation of the Fund's holdings of cash and cash equivalents, please
refer to "More on Strategies and Risks" later in this Prospectus.
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5
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Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to common measures of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the periods presented in the bar chart, the
Fund's highest return for a quarter was 7.20% for the quarter-ended December 31,
1999. The lowest return for a quarter was -1.19% for the quarter-ended September
30,1999.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of several securities market
indices. The table reflects the impact of the Fund's expenses and assumes that
you sold your shares at the end of each period.
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Calendar Year Total Returns
[BAR CHART]
1999 10%
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Average Annual Total Return
(as of December 31, 1999)
Since
1 Year Inception*
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GE Conservative
Strategy Fund 9.74% 10.60%
S&P 500 Index 21.07% 24.86%
LB Aggregate Bond Index -0.83% 3.82%
Composite Index** 9.53% 12.45%
Both the bar chart and table assume reinvestment of dividends and distributions.
If GE Asset Management had not reduced certain expenses during the periods
shown, the Fund's total returns would have been lower. As with all mutual funds,
past performance is not an indication of future performance.
* Inception date (commencement of investment operations) is January 5, 1998;
returns for indices are from January 1, 1998.
** The Composite Index is derived by applying each underlying GE Fund's
target allocations to the results of the benchmark index for each of those
underlying GE Funds.
All mutual funds use a standard formula to calculate the total return. Total
return measures the price change in a share assuming the reinvestment of all
dividend income and capital gain distributions.
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6 GE Strategy Funds
Prospectus
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GE Moderate Strategy Fund
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Investment Objective: Long-term growth of capital with a moderate level of
current income.
The Strategy
GE Moderate Strategy Fund seeks to achieve its investment objective by investing
among the underlying GE Funds within carefully determined ranges. The Fund
normally invests 55% to 75% of its net assets in equity funds and 25% to 41% in
income funds. The Fund is designed for investors with intermediate investment
time horizons and moderate-to-high risk tolerances.
The table below shows the Fund's current investment targets and ranges
(expressed as a percentage of its net assets) for allocating its assets among
the underlying GE Funds.
The Risks
The principal risks of investing in the Fund are allocation risk, credit risk,
foreign exposure risk, high yield securities risk, interest rate risk,
prepayment risk, stock market risk, style risk (growth investing risk, value
investing risk and small-cap company risk), and underlying performance risk.
If you would like additional information regarding this Fund's investment
strategies and risks or the underlying GE Funds' investment strategies and
risks, including descriptions of the terms in bold type, please refer to "More
on Strategies and Risks" later in this Prospectus.
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Investment Allocations
Target Range
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U.S. Equity Fund 34% 29% - 39%
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Small-Cap Value Equity Fund 12% 7% - 17%
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International Equity Fund 16% 11% - 21%
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Emerging Markets Fund 3% 1% - 5%
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Fixed Income Fund 28% 23% - 33%
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High Yield Fund 5% 2% - 8%
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Cash* 2% 0% - 4%
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*For an explanation of the Fund's holdings of cash and cash equivalents, please
refer to "More on Strategies and Risks" later in this Prospectus.
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7
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Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to common measures of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the periods presented in the bar chart, the
Fund's highest return for a quarter was 10.49% for the quarter-ended December
31, 1999. The lowest return for a quarter was -2.13 % for the quarter-ended
September 30, 1999.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of several securities market
indices. The table reflects the impact of the Fund's expenses and assumes that
you sold your shares at the end of each period.
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Calendar Year Total Returns
[BAR CHART]
1999 15%
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Average Annual Total Return
(as of December 31, 1999)
Since
1 Year Inception*
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GE Moderate
Strategy Fund 14.75% 14.54%
S&P 500 Index 21.07% 24.86%
LB Aggregate Bond Index -0.83% 3.82%
Composite Index** 15.55% 15.09%
Both the bar chart and table assume reinvestment of dividends and distributions.
If GE Asset Management had not reduced certain expenses during the periods
shown, the Fund's total returns would have been lower. As with all mutual funds,
past performance is not an indication of future performance.
* Inception date (commencement of investment operations) is January 5, 1998;
returns for indices are from January 1, 1998.
** The Composite Index is derived by applying each underlying GE Fund's
target allocations to the results of the benchmark index for each of those
underlying GE Funds.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
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<PAGE>
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8 GE Strategy Funds
Prospectus
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GE Aggressive Strategy Fund
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Investment Objective: Capital appreciation.
The Strategy
GE Aggressive Strategy Fund seeks to achieve its investment objective by
investing among the underlying GE Funds within carefully determined ranges. The
Fund normally invests 74% to 91% of its net assets in equity funds and 9% to 22%
in income funds. The Fund is designed for investors with longer investment time
horizons and high risk tolerances.
The table below shows the Fund's current investment targets and ranges
(expressed as a percentage of its net assets) for allocating its assets among
the underlying GE Funds.
The Risks
The principal risks of investing in the Fund are allocation risk, credit risk,
emerging markets risk, high yield securities risk, interest rate risk, foreign
exposure risk, prepayment risk, stock market risk, style risk (growth investing
risk, value investing risk, and small-cap company risk), and underlying
performance risk.
If you would like additional information regarding this Fund's investment
strategies and risks or the underlying GE Funds' investment strategies and
risks, including descriptions of the terms in bold type, please refer to "More
on Strategies and Risks" later in this Prospectus.
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Investment Allocations
Target Range
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U.S. Equity Fund 38% 33% - 43%
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Small-Cap Value Equity Fund 20% 15% - 25%
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International Equity Fund 19% 14% - 24%
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Emerging Markets Fund 5% 2% - 8%
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Fixed Income Fund 9% 6% - 12%
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High Yield Fund 7% 3% - 10%
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Cash* 2% 0% - 4%
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* For an explanation of the Fund's holdings of cash and cash equivalents, please
refer to "More on Strategies and Risks" later in this Prospectus.
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9
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Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to common measures of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the periods presented in the bar chart, the
Fund's highest return for a quarter was 13.75% for the quarter-ended December
31, 1999. The lowest return for a quarter was -2.85 % for the quarter-ended
September 30, 1999.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of several securities market
indices. The table reflects the impact of the Fund's expenses and assumes that
you sold your shares at the end of each period.
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Calendar Year Total Returns
Class A Shares*
[BAR CHART]
1999 20%
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Average Annual Total Return
(as of December 31, 1999)
Since
1 Year Inception*
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GE Aggressive
Strategy Fund 19.63% 18.24%
S&P 500 Index 21.07% 24.86%
LB Aggregate Bond Index -0.83% 3.82%
Composite Index** 20.54% 17.03%
Both the bar chart and table assume reinvestment of dividends and distributions.
If GE Asset Management had not reduced certain expenses during the periods
shown, the Fund's total returns would have been lower. As with all mutual funds,
past performance is not an indication of future performance.
* Inception date (commencement of investment operations) is January 5, 1998;
returns for indices are from January 1, 1998.
** The Composite Index is derived by applying each underlying GE Fund's
target allocations to the results of the benchmark index for each of those
underlying GE Funds.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
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<PAGE>
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10 GE Strategy Funds Fund
Prospectus Expenses
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The following tables describe the fees and expenses that you may pay if you buy
and hold shares of a Fund. Shareholder fees, if any, are paid directly from your
account and are not reflected in the share price. Annual fund operating expenses
come out of a Fund's assets and are reflected in the Fund's share price and
dividends. The figures below show actual expenses during the fiscal period ended
September 30, 1999.
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Shareholder Fees
(paid directly from your investment, not reflected in share price)
<TABLE>
<CAPTION>
GE Conservative GE Moderate GE Aggressive
Strategy Fund Strategy Fund Strategy Fund
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<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
of Shares (as a percentage of offering price) None None None
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Maximum Contingent Deferred Sales Charge (Load)
(as a percentage of redemption proceeds) None None None
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Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(as a percentage of offering price) None None None
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Redemption Fee None None None
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Exchange Fee None None None
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</TABLE>
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Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
GE Conservative GE Moderate GE Aggressive
Strategy Fund Strategy Fund Strategy Fund
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<S> <C> <C> <C>
Management Fees* 0.20% 0.20% 0.20%
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Distribution and Services (12b-1) Fees None None None
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Underlying GE Fund Expenses** 0.91% 1.02% 1.11%
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Other Expenses*** 0.59% 0.04% 0.21%
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Total Annual Fund Operating Expenses 1.70% 1.26% 1.52%
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Waiver and/or Reimbursement 0.62% 0.11% 0.30%
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Net Annual Fund Operating Expenses**** 1.08% 1.15% 1.22%
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</TABLE>
* The nature of the services provided to, and the advisory and administration
fees paid by, each Fund are further described under "How the Funds are Managed -
About the Investment Adviser and Administrator."
** The "Underlying GE Fund Expenses" figures for each GE Strategy Fund are based
upon its target allocations to the underlying GE Funds and upon the total
operating expenses of those underlying GE Funds without taking into
consideration the current contractual fee waivers or expense limitations for the
underlying GE Funds.
*** "Other expenses" includes fees beyond those borne by GE Asset Management
pursuant to each Fund's Investment Advisory and Administration Agreement. These
other expenses, which are not included in the management fees, include: fees and
expenses of the Funds' independent trustees, brokerage fees and commissions,
transfer agency fees, interest, taxes, and extraordinary expenses.
****The fee table reflects contractual arrangements with GE Asset Management and
the GE Strategy Funds and/or the underlying GE Funds to limit "Other Expenses"
on an annualized basis through January 28, 2001.
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11
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The Impact of Fund Expenses
The following example is intended to help you compare the cost of investing in a
Fund with the cost of investing in other mutual funds. Although actual costs may
be higher or lower, you would pay the following expenses on a $10,000
investment, assuming a 5% annual return and that the Fund's operating expenses
remain the same.
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Example
You would pay the following
expenses on a $10,000 investment,
assuming redemption:
1 Year 3 Years 5 Years 10 Years
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GE Conservative Strategy Fund: $110 $476 $866 $1,961
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GE Moderate Strategy Fund: $117 $390 $682 $1,516
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GE Aggressive Strategy Fund: $124 $450 $800 $1,786
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12 GE Strategy Funds More on
Prospectus Strategies
and Risks
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Important Definitions
This section defines important terms that may be unfamiliar to an investor
reading about the GE Strategy Funds.
Asset-backed securities represent a participation in, or are secured by and
payable from, a stream of payments generated by particular assets, such as
credit card receivables or auto loans.
Certificates of deposit include short-term debt securities issued by banks.
Commercial paper includes short-term debt securities issued by banks,
corporations and other borrowers.
Corporate bonds are debt securities issued by companies.
Correlation and covariance are statistical measures used to help analyze the way
that two or more things, such as the annual returns of two mutual funds, relate
to each other over time.
Debt securities are bonds and other securities that are used by issuers to
borrow money from investors. Holders of debt securities have a higher priority
claim to assets than do equity holders. Typically, the debt issuer pays the
investor a fixed, variable or floating rate of interest and must repay the
borrowed amount at maturity. Some debt securities, such as zero coupon bonds,
are sold at a discount from their face values instead of paying interest.
Defined contribution plans are retirement plans which provide for an individual
account for each participant and for benefits based solely on the amount
contributed to the participant's account and any income, expenses, gains and
losses, and any forfeitures of accounts of other participants which may be
allocated to the participant's account. Defined contribution plans include
profit-sharing plans, 401(k) plans and certain kinds of tax deferred
compensation plans of governmental and tax exempt entities (which meet certain
requirements of the Internal Revenue Code of 1986, as amended).
Derivative securities are securities whose values are based on other securities,
currencies or indices, and include options (on stocks, indices, currencies,
futures contracts or bonds), forward currency exchange contracts, futures
contracts, swaps, interest-only and principal-only debt securities, certain
mortgage-backed securities, like collateralized mortgage obligations (CMOs), and
structured securities.
Duration represents a mathematical calculation of the average life of a bond (or
portfolio of bonds) based on cash flows that serves as a useful measure of the
bond's sensitivity to changes in interest rates. Each year of duration
approximates an expected one percent change in the bond's price for every one
percent change in the interest rate.
Equity funds invest primarily in equity securities.
Equity securities may include common stocks, preferred securities, depositary
receipts, convertible securities, and rights and warrants of U.S. and foreign
corporations. Stock represents an ownership interest in a corporation.
Foreign debt securities are debt securities issued by foreign corporations and
governments. They may include Eurodollar bonds, which are dollar-denominated
securities issued outside the United States by foreign corporations and
financial institutions or by foreign branches of U.S. corporations and financial
institutions; Yankee bonds, which are dollar-denominated securities issued by
foreign issuers in the United States; and securities denominated in currencies
other than U.S. dollars.
Foreign securities include interests in or obligations of entities located
outside the United States. The determination of where an issuer of a security is
located will be made by reference to the country in which the issuer (i) is
organized, (ii) derives at least 50% of its revenues or profits from goods
produced or sold, investments made or services performed, (iii) has at least 50%
of its assets situated, or (iv) has the principal trading market for its
securities. Foreign securities may be denominated in non-U.S. currencies and
traded outside the United States or may be in the form of depositary receipts.
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<PAGE>
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13
Growth investing involves buying stocks with above-average growth rates.
Typically, growth stocks are the stocks of faster growing companies in more
rapidly growing sectors of the economy. Generally, growth stock valuation levels
will be higher than those of value stocks and the market averages.
High yield securities are debt securities of corporations, preferred securities
and convertible bonds and convertible preferred stock rated Ba through C by
Moody's or BB through D by S&P (or comparably rated by another nationally
recognized statistical rating organization) or, if not rated, are considered by
portfolio management to be of similar quality. High yield securities include
bonds rated below investment grade, sometimes called "junk bonds," and are
considered speculative by the major credit rating agencies.
Income funds invest primarily in debt securities.
Investment grade securities are rated Baa or better by Moody's and BBB or better
by S&P (or are comparably rated by another nationally recognized statistical
rating organization), or, if not rated, are considered by portfolio management
to be of similar quality. Securities rated in the fourth highest grade have some
speculative elements.
Maturity represents the date on which a debt security matures or when the issuer
must pay back the principal amount of the security.
Money market instruments are short-term debt securities of the U.S. government,
banks and corporations.
Mortgage-backed securities include securities issued by the Government National
Mortgage Association (Ginnie Mae), the Federal National Mortgage Association
(Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and other
government agencies and private issuers. They may also include collateralized
mortgage obligations which are derivative securities that are fully
collateralized by a portfolio of mortgages. Government stripped mortgage-related
securities are mortgage-backed securities that have been stripped into their
interest and principal components. They represent interests in distributions of
interest on or principal underlying mortgage-backed certificates. Mortgage
dollar rolls are transactions involving the sale of a mortgage-backed security
with a simultaneous contract (with the purchaser) to buy similar, but not
identical, securities at a future date.
Municipal obligations are debt obligations issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, or multi-state
agencies or authorities. They include: (i) municipal leases, which pay interest
that is exempt from federal, and in certain cases, state income tax; (ii)
participation interests in municipal obligations, which are proportionate,
undivided interests in municipal obligations, (iii) municipal obligation
components, which are municipal obligations that have been divided into two
components (one component pays interest at a rate adjusted periodically through
an auction process, the second pays the residual rate after the auction rate is
deducted from total interest payable); and (iv) custodial receipts on municipal
obligations, which evidence ownership of future interest payments, principal
payments, or both, on certain municipal obligations.
Preferred securities are classes of stock that pay dividends at a specified
rate. Dividends are paid on preferred stocks before they are paid on common
stocks. In addition, preferred stockholders have priority over common
stockholders as to proceeds from the liquidation of a company's assets.
Purchasing and writing options are permitted investment strategies for certain
underlying GE Funds. An option is the right to buy (i.e., a "call") or to sell
(i.e., a "put") securities or other interests for a predetermined price on or
before a fixed date. An option on a securities index represents the option
holder's right to obtain from the seller, 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 securities index on the
exercise date. An option on a foreign currency represents the right to buy or
sell a particular amount of that currency for a predetermined price on or before
a fixed date.
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<PAGE>
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14 GE Strategy Funds
Prospectus
More on
Strategies and Risks
- --------------------------------------------------------------------------------
U.S. Government securities are issued or guaranteed as to principal or interest
by the U.S. Government or one of its agencies or instrumentalities. Some U.S.
Government securities are backed by the full faith and credit of the federal
government. Other U.S. Government securities are backed by the issuer's right to
borrow from the U.S. Treasury and some are backed only by the credit of the
issuing organization. All U.S. Government securities are considered highly
creditworthy.
Value investing involves buying stocks that are out of favor and/or undervalued
in comparison to their peers and/or their prospects for growth. Generally, value
stock valuation levels are lower than those of growth stocks.
Various investment techniques may be used by an underlying GE Fund to increase
or decrease its exposure to changing security prices, interest rates, currency
exchange rates, commodity prices, or other factors that affect security values.
These techniques may involve derivative securities and transactions such as
buying and selling options and futures contracts, entering into currency
exchange contracts or swap agreements and purchasing indexed securities. These
techniques are designed to adjust the risk and return characteristics of a
fund's portfolio of investments and are not used for leverage. None of the
underlying GE Funds is obligated to use any of these techniques at any given
time or under any particular economic condition. To the extent that an
underlying GE Fund employs these techniques, it would be subject to derivative
securities risk.
Weighted average maturity represents the length of time in days or years until
the average security in a money market or income fund will mature or be redeemed
by its issuer. The average maturity is weighted according to the dollar amounts
invested in the various securities in the fund. This measure indicates an income
fund's sensitivity to changes in interest rates. In general, the longer a fund's
average weighted maturity, the more its share price will fluctuate in response
to changing interest rates.
More on Investment Strategies: the Asset Allocation Process
As described earlier in this Prospectus, each GE Strategy Fund pursues its
investment objective by investing primarily in a combination of the underlying
GE Funds. To assist in determining the mix of underlying GE Funds and setting
the appropriate allocation targets and ranges for investments in those
underlying GE Funds, GE Asset Management and the Funds have engaged the services
of DiMeo, Schneider & Associates, L.L.C. (the "Investment Consultant"). The
Investment Consultant, GE Asset Management, and the Board of Trustees determine
the appropriate mix of underlying GE Funds and allocation targets and ranges as
described below.
Periodically, based upon a variety of quantitative and qualitative factors, the
Investment Consultant uses proprietary economic and statistical methods to
determine the optimal allocation targets and ranges for each GE Strategy Fund
and whether any underlying GE Funds should be added or removed from the mix.
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The factors considered include:
o the investment objective of each GE Strategy Fund and each of the GE Funds;
o input from GE Asset Management;
o economic and market forecasts;
o proprietary and third-party reports and analyses;
o the risk/return characteristics, relative performance, and volatility of
underlying GE Funds; and
o the correlation and covariance among underlying GE Funds.
Based upon these determinations, the Investment Consultant and GE Asset
Management make formal recommendations to the Board of Trustees regarding:
o any additions or deletions to the mix of underlying GE Funds;
o the allocation ranges for investing in equity versus income underlying GE
Funds; and
o the allocation targets and ranges for investing in particular underlying GE
Funds.
The Board of Trustees then determines what if any changes should be made. To
assist the Board, the Investment Consultant and GE Asset Management provide such
quantitative and qualitative reports as the Board deems appropriate.
As market prices of the underlying GE Funds' portfolio securities change, a
Fund's actual allocations will vary somewhat from the targets although the
percentages generally will remain within the specified ranges. If changes are
made as described above, those changes will be reflected in the Prospectus.
However, it may take some time to fully implement the changes. GE Asset
Management will implement the changes over a reasonable period of time while
seeking to minimize disruptive effects and added costs to the GE Strategy Funds
and the underlying GE Funds.
On an ongoing basis, GE Asset Management monitors variances from the targets.
When a GE Strategy Fund receives new investment proceeds or redemption requests,
depending on the Fund's current cash reserves, GE Asset Management may determine
to purchase additional shares or redeem shares of underlying GE Funds. In making
those purchases or redemptions, GE Asset Management will attempt to re-balance
the Fund's holdings of underlying GE Funds to bring them more closely in line
with the Fund's investment targets. If GE Asset Management believes it is in the
best interests of the Fund and its shareholders, it may limit the degree of
re-balancing or avoid rebalancing altogether pending further analysis and more
favorable market conditions.
More on Investment Strategies: the Underlying GE Funds
Because the GE Strategy Funds invest most of their assets in underlying GE
Funds, their investment performance is directly related to the performance of
those underlying GE Funds. This section describes the principal investment
strategies and risks of the underlying GE Funds. The underlying GE Funds also
may use certain investment strategies and techniques not described here. More
information regarding the underlying GE Funds can be obtained by requesting the
GE Funds' prospectus and statement of additional information.
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16 GE Strategy Funds
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More on
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GE U.S. Equity Fund
GE U.S. Equity Fund seeks long-term growth of capital. The fund invests
primarily in equity securities of U.S. companies. The portfolio managers use a
Multi-Style(Registered) investment strategy that combines growth and value
investment management styles. As a result, the fund's portfolio has
characteristics similar to the Standard & Poor's 500 Composite Stock Index,
including capital appreciation and income potential. Stock selection is key to
the performance of the fund.
Through fundamental company research, the portfolio managers seek to identify
securities of large companies with characteristics such as attractive
valuations, financial strength and high quality management focused on generating
shareholder value.
The fund also may invest to a lesser extent in foreign securities and debt
securities. The fund generally intends to hold its investments for a long time,
which may result in a relatively low portfolio turnover rate. The portfolio
managers may use various investment techniques to adjust the fund's investment
exposure, but there is no guarantee that these techniques will work.
The principal risk associated with investing in the fund is stock market risk.
To the extent that the portfolio managers invest in foreign securities or debt
securities, the fund would be subject to foreign exposure risk or interest rate
risk and credit risk.
GE Small-Cap Value Equity Fund
GE Small-Cap Value Equity Fund seeks long-term growth of capital. The fund
invests primarily in equity securities of small-cap companies that the porfolio
managers believe are undervalued by the market but have solid growth prospects.
A company may be undervalued for reasons such as market overreaction to recent
company, industry or economic problems. The fund defines a small-cap company as
one with a market capitalization within the capitalization range of the Russell
2000 Index. As of December 31, 1999, the market capitalization of companies in
the index ranged from $10 million to $13.04 billion. The portfolio managers will
not sell a stock merely because the market capitalization of a company in the
portfolio moves above or below the maximum or minimum capitalization of the
index. Stock selection is key to the performance of the fund.
The portfolio managers seek to identify securities of companies with
characteristics such as high quality management, attractive products or
services, appropriate capital structure, strong competitive positions in their
industries and management focused on generating shareholder value.
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The fund also may invest to a lesser extent in securities with capitalizations
outside the fund's small cap range, debt securities and foreign securities. The
fund generally intends to hold its investments for a long time, which may result
in a relatively low portfolio turnover rate. The portfolio managers may use
various investment techniques to adjust the fund's investment exposure, but
there is no guarantee that these techniques will work.
The principal risks associated with investing in the fund are stock market risk
and style risk (value investing risk and small-cap company risk). To the extent
that the portfolio managers invest in foreign securities or debt securities, the
fund would be subject to foreign exposure risk or interest rate risk and credit
risk.
GE International Equity Fund
GE International Equity Fund seeks long-term growth of capital. The fund invests
primarily in equity securities of companies located in developed and developing
countries other than the United States. The portfolio managers focus on
companies that they expect will grow faster than relevant markets and whose
security prices do not fully reflect their potential for growth. Under normal
circumstances, the fund's assets are invested in foreign securities of companies
representing at least three different countries. Stock selection is key to the
performance of the fund.
The portfolio managers seek to identify securities of growth companies with
characteristics such as low prices relative to their long-term cash earnings
potential, potential for significant improvement in the company's business,
financial strength and sufficient liquidity.
The fund also may invest to a lesser extent in debt securities. The fund also
may invest in securities of companies located in the United States. The
portfolio managers may use various investment techniques to adjust the fund's
investment exposure, but there is no guarantee that these techniques will work.
The principal risks associated with investing in the fund are stock market risk,
foreign exposure risk, style risk (growth investing risk) and emerging markets
risk. To the extent that the portfolio managers invest in debt securities, the
fund would be subject to interest rate risk and credit risk.
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18 GE Strategy Funds
Prospectus
More on
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GE Emerging Markets Fund
GE Emerging Markets Fund seeks long-term growth of capital. The fund invests
primarily in equity securities of issuers located in emerging markets. The
portfolio managers focus on companies that are expected to grow faster than
relevant markets and whose security prices do not fully reflect their potential
for growth. Under normal circumstances, the fund's assets are invested in
foreign securities of companies representing at least three different countries.
The portfolio managers consider which emerging market countries in which to
invest based on certain factors, including investment restrictions, tax
barriers, local market cycles, economic outlook for growth, currency exchange
rates and the political environment. The portfolio managers consider the
following factors in determining whether an issuer is located in an emerging
market country: country of organization, primary securities trading market,
location of assets, or country where the issuer derives at least half of its
revenues and profits.
An emerging market country is any country having an economy and market that are
(or would be) considered by the World Bank to be emerging or developing, or
listed in the Morgan Stanley Capital International Emerging Markets Index.
The portfolio managers seek to identify securities of growth companies with
characteristics such as low prices relative to their long-term cash earnings
potential, potential for significant improvement in the company's business,
financial strength and sufficient liquidity.
The fund also may invest to a lesser extent in securities of companies located
in countries other than emerging market countries (including the United States)
and debt securities. The portfolio managers may use various investment
techniques to adjust the fund's investment exposure, but there is no guarantee
these techniques will work.
The principal risks associated with investing in the fund are stock market risk,
foreign exposure risk, emerging markets risk and style risk (growth investing
risk and small-cap company risk). To the extent the portfolio managers invest in
debt securities, the fund would be subject to interest rate risk and credit
risk.
GE Fixed Income Fund
GE Fixed Income Fund seeks maximum income consistent with prudent investment
management and the preservation of capital. The fund invests primarily in a
variety of investment grade debt securities, such as mortgage-backed securities,
corporate bonds, U.S. Government securities and money market instruments. The
fund normally has a weighted average maturity of approximately five to ten
years.
The portfolio managers seek to identify debt securities with characteristics
such as: attractive yields and prices, the potential for capital appreciation
and reasonable credit quality.
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The fund also may invest to a lesser extent in asset-backed securities and
foreign securities. The portfolio managers may use various investment techniques
to adjust the fund's investment exposure, but there is no guarantee that these
techniques will work.
The fund's investment strategy may result in a high portfolio turnover rate,
which may cause the fund to experience increased transaction costs and
shareholders to incur increased taxes on their investment in the fund.
The principal risks associated with investing in the fund are interest rate
risk, credit risk and prepayment risk. To the extent that the portfolio managers
invest in foreign securities, the fund would be subject to foreign exposure
risk. Certain portfolio securities are derivative securities that carry
derivative securities risk.
GE High Yield Fund
GE High Yield Fund seeks to achieve above-average total return over a market
cycle of three to five years, consistent with reasonable risk. The fund invests
primarily in high yield securities (including bonds rated below investment
grade, sometimes called "junk bonds"). The portfolio managers will not sell a
particular security solely because it is no longer classified as high yield. The
fund may also invest in U.S. Government securities, mortgage-backed securities,
investment grade debt securities, municipal obligations, agency securities, and
short-term fixed income securities, such as certificates of deposit, Treasury
bills and commercial paper. The fund expects to achieve its objective by earning
a high rate of current income, although the fund may seek capital growth
opportunities when consistent with its objective. The fund's weighted average
maturity will ordinarily be greater than five years.
The portfolio managers use equity and fixed income valuation techniques,
analyses of economic and industry trends and maturity and duration management to
determine the portfolio's structure. Individual securities are selected and
monitored by fixed income portfolio managers who specialize in corporate bonds
and use in-depth financial analysis to uncover opportunities in undervalued
issues.
The fund also may invest to a lesser extent in foreign debt securities,
including high yield securities of foreign issuers. The fund also may use
derivative securities to pursue its portfolio strategy. The portfolio managers
may use various investment techniques to adjust the fund's investment exposure,
but there is no guarantee that these techniques will work.
The principal risk associated with investing in this fund is high yield
securities risk. The fund also is subject to interest rate risk, credit risk,
prepayment risk and style risk (high yield value investing risk). To the extent
that the fund invests in foreign securities and derivative securities, the fund
would be subject to foreign exposure risk, emerging markets risk and derivative
securities risk.
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20 GE Strategy Funds
Prospectus
More on
Strategies and Risks
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More on Investment Strategies: Holding Cash
Although each GE Strategy Fund invests most of its assets in underlying GE
Funds, each Fund holds a small portion of its assets in cash or cash
equivalents. Under normal circumstances, a Fund will hold cash and/or money
market instruments (i) pending investment, (ii) for cash management purposes,
(iii) to meet operating expenses, and (iv) to promote stability in trading by
reducing the frequency of relatively small transactions. A Fund may invest in
money market instruments directly or indirectly by investing in the GEI
Short-Term Investment Fund (the "Investment Fund"). The Investment Fund is
advised by GE Asset Management, which charges no advisory fee to the Investment
Fund.
More on Risks
Like all mutual funds, investing in the GE Strategy Funds involves risk factors
and special considerations. A Fund's risk is defined primarily by its principal
investment strategies, which are described earlier in this Prospectus.
Investments in a Fund are not insured against loss of principal. As with any
mutual fund, there can be no assurance that a GE Strategy Fund or an underlying
GE Fund will achieve its investment objective.
One of your most important investment considerations should be balancing risk
and return. Different types of investments tend to respond differently to shifts
in the economic and financial environments. So, diversifying your investments
among different asset classes can help you manage risk and achieve the results
you need to comfortably reach your financial goals. Although each GE Strategy
Fund provides a diversified investment option with a conservative, moderate, or
aggressive approach, investing in a Fund may not provide a complete investment
program for all investors.
Because the GE Strategy Funds invest most of their assets in underlying GE
Funds, they will be exposed to the risks associated with the securities in which
those underlying GE Funds invest. The principal risks associated with investing
in the GE Strategy Funds are summarized below. For more information about these
and other risks, please see the SAI.
Allocation Risk: The ability of each GE Strategy Fund to achieve its investment
objective depends in part on the ability of GE Asset Management and the
Investment Consultant to allocate effectively the Fund's assets among the
underlying GE Funds. There can be no assurance that the actual allocations will
be effective in achieving the Fund's investment objective.
Credit Risk: The price of a bond is affected by the issuer's or counterparty's
credit quality. Changes in financial condition and general economic conditions
can affect the ability to honor financial obligations and therefore lower credit
quality. Lower quality bonds are generally more sensitive to these changes than
higher quality bonds. Even within securities considered investment grade,
differences exist in credit quality and some investment grade debt securities
may have speculative characteristics. A security's price may be adversely
affected by the market's opinion of the security's credit quality level even if
the issuer or counterparty has suffered no degradation in its ability to honor
the obligation.
Derivative Securities Risk: A fund's use of various investment techniques to
increase or decrease its exposure to changing security prices, interest rates,
currency exchange rates, commodity prices or other factors that affect security
values may involve derivative securities and contracts. Derivative securities
and contracts (securities and contracts whose values are based on other
securities, currencies
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or indices) include option contracts (on stocks, indices, currencies, futures
contracts and bonds), forward currency exchange contracts, futures contracts,
swaps, and structured securities. Derivative securities and contracts may be
used as direct investment or as a hedge for a fund's portfolio or a portion of a
portfolio. Hedging involves using a security or contract to offset investment
risk. Hedging may include reducing the risk of a position held in a portfolio.
Hedging and other investment techniques also may be used to increase a fund's
exposure to a particular investment strategy. If the portfolio manager's
judgement of market conditions proves incorrect or the strategy does not
correlate well with a fund's investments, the use of derivatives could result in
a loss regardless of whether the intent was to reduce risk or increase return
and may increase a fund's volatility. In addition, in the event that
non-exchange traded derivatives are used, those derivatives could result in a
loss if the counterparty to the transaction does not perform as promised. A fund
is not obligated to pursue any hedging strategy. In addition, hedging techniques
may not be available, may be too costly to be used effectively or may be unable
to be used for other reasons. These investments may be considered speculative.
Emerging Markets Risk: Emerging market securities bear most foreign exposure
risks discussed below. In addition, there are greater risks involved in
investing in emerging markets than in developed foreign markets. Specifically,
the economic structures in emerging market countries are less diverse and mature
than those in developed countries, and their political systems are less stable.
Investments in emerging market countries may be affected by national policies
that restrict foreign investment. Emerging market countries may have less
developed legal structures, and the small size of their securities markets and
low trading volumes can make investments illiquid and more volatile than
investments in developed countries. As a result, a Fund investing in emerging
market countries may be required to establish special custody or other
arrangements before investing.
Foreign Exposure Risk: Investing in foreign securities, including depositary
receipts, or securities of U.S. entities with significant foreign operations,
involves additional risks that can affect a fund's performance. The values of
foreign investments may be affected by changes in currency rates or exchange
control regulations. Less information may be available about foreign issuers.
Foreign markets, particularly emerging markets, may be less liquid, more
volatile and subject to less government supervision than U.S. markets. Foreign
companies often are not subject to uniform accounting, auditing and financial
reporting standards or to other regulatory practices and requirements common to
U.S. companies. There may be difficulties enforcing contractual obligations, and
it may take more time for transactions to clear and settle in foreign countries
than in the United States. The costs of buying and selling foreign securities,
including tax, brokerage and custody costs, generally are higher than those
involving domestic transactions. Changes in economic, tax, foreign investment
policies, government stability, war or other political or economic actions may
have an adverse effect on a fund's foreign investments.
High Yield Securities Risk: Below investment-grade securities, sometimes called
"junk bonds," are considered speculative. These securities have greater risk of
default than higher rated secu rities. The market value of below
investment-grade securities is more sensitive to individual corporate
developments and economic changes than higher rated securities. The market for
below investment-grade securities may be less active than for higher rated
securities, which can adversely affect the price at which these securities may
be sold. Less active markets may diminish a fund's ability to obtain accurate
market quotations when valuing the portfolio securities and calculating a fund's
net asset value. In addition, a fund may incur additional expenses if a holding
defaults and a fund has to seek recovery of its principal investment. Below
investment-grade securities may also present risks based on payment
expectations. For example, these securities may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market the fund would have to replace the secu-
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22 GE Strategy Funds
Prospectus
More on
Strategies and Risks
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rity with a lower yielding security resulting in a decreased return for
investors.
Interest Rate Risk: Bond prices generally rise when interest rates decline and
decline when interest rates rise. Generally, the longer the duration of a bond,
the more a change in interest rates affects the bond's price. Short-term and
long-term interest rates may not move the same amount and may not move in the
same direction.
Prepayment Risk: Prices and yields of mortgage-backed securities assume the
securities will be redeemed at a given time. When interest rates decline,
mortgage-backed securities experience higher prepayments because the underlying
mortgages are repaid earlier than expected. A fund's portfolio manager may be
forced to invest the proceeds from prepaid mortgage-backed securities at lower
rates, which results in a lower return for the fund. When interest rates
increase, mortgage-backed securities experience lower prepayments because the
underlying mortgages may be repaid later than expected. This typically reduces
the value of the underlying securities.
Stock Market Risk: A fund's share price will move up and down in reaction to
stock market movements. Stock prices change daily in response to company
activity and general economic and market conditions. A fund's investments in
common stocks and other equity securities are subject to stock market risk,
which is the risk that the value of equity securities may decline. Also, equity
securities are subject to the risk that a particular issuer's securities may
decline in value, even during periods when equity securities in general are
rising. Additional stock market risks may be introduced when a particular equity
security is traded on a foreign market. For more detail on the related risks
involved in foreign markets, see foreign exposure risk.
Style Risk: Securities with different characteristics tend to shift in and out
of favor depending upon market and economic conditions as well as investor
sentiment. A fund may underperform other funds that employ a different style. A
fund also may employ a combination of styles that impact its risk
characteristics. Examples of different styles include growth and value
investing, as well as those focusing on large or small company securities.
o Growth Investing Risk: Growth stocks may be more volatile than other stocks
because they are more sensitive to investor perceptions of the issuing company's
growth potential. Growth oriented funds will typically underperform when value
investing is in favor.
o High Yield Value Investing Risk: The GE High Yield Fund, one of the underlying
GE Funds, uses value-based criteria to select securities. Such securities may
not realize their perceived value for extended periods of time or may never
realize their perceived value.
o Small-Cap Company Risk: Investing in securities of small-cap companies may
involve greater risks than investing in larger, more established issuers.
Smaller companies may have limited product lines, markets or financial
resources. Their securities may trade less frequently and in more limited volume
than the securities of larger, more established companies. In addition, smaller
companies are typically subject to greater changes in earnings and business
prospects than are larger companies. Consequently, the prices of small company
stocks tend to rise and fall in value more than other stocks. Although investing
in small-cap companies offers potential for above-average returns, the companies
may not succeed and their stock prices could decline significantly.
o Value Investing Risk: Undervalued stocks may not realize their perceived value
for extended periods of time or may never realize their perceived value. Value
stocks may respond differently to market and other developments than other types
of stocks. Value oriented funds will typically underperform when growth
investing is in favor.
Underlying Performance Risk: Because each GE Strategy Fund invests most of its
assets in underlying GE Funds, each GE Strategy Fund's investment performance is
directly related to the performance of those underlying GE Funds. The
performance of those underlying GE Funds, in turn, depends upon the performance
of the securities in which they invest.
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Other Risk Considerations
Conflicts of Interest Risk: The Investment Adviser serves as investment manager
to the GE Strategy Funds and the underlying GE Funds. Similarly, GE Strategy
Funds and the underlying GE Funds have a common Board of Trustees. The interests
of a GE Strategy Fund on the one hand, and an underlying GE Fund on the other,
will not always be the same. Therefore, conflicts may arise as the Investment
Adviser and the Board of Trustees fulfill their fiduciary duties to the GE
Strategy Funds and the underlying GE Funds.
EURO Risk: The introduction of the EURO, a new common currency in Europe, may
result in uncertainties for European companies and markets. Individual issuers
may suffer increased costs and decreased earnings. Market disruptions may occur
that adversely affect the value of European securities and currencies.
Non-Diversified Investment Company Risk: Because each GE Strategy Fund invests
most of its assets in a limited variety of securities--shares of the underlying
GE Funds--each GE Strategy Fund is considered a "non-diversified" investment
company within the meaning of federal securities laws. Being non-diversified
sometimes creates the risk that a fund's return will be heavily dependent upon
the performance of a relatively small number of investments. Because each
underlying GE Fund is diversified, such risk is mitigated for the GE Strategy
Funds.
Underlying Expense Risk: Investors may invest directly in the GE Funds rather
than indirectly through a GE Strategy Fund. By investing in a GE Strategy Fund,
investors bear their proportionate share of the expenses of that Fund, as well
as similar expenses of the underlying GE Funds.
Y2K Risk: The inability of computer systems worldwide to process correctly
date-related information from before, on, and after January 1, 2000 could cause
difficulties for systems' users (the "Year 2000 Issue"). The impact of failures
by companies, markets, or governments of countries in which the GE Strategy
Funds or the underlying GE Funds invest to address effectively the Year 2000
Issue may be felt well after January 1, 2000 and may negatively impact a fund's
performance. In addition, a fund could be adversely affected if the computer
systems used by its investment adviser or external service providers do not
correctly process such date-related information.
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24 GE Strategy Funds How the Funds
Prospectus Are Managed
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About the Investment Adviser
and Administrator
GE Asset Management Incorporated ("GE Asset Management" or the "Investment
Adviser"), located at 3003 Summer Street, P.O. Box 7900, Stamford, Connecticut
06904, is the investment adviser and administrator of each Fund. GE Asset
Management is a registered investment adviser and a wholly-owned subsidiary of
General Electric Company (GE). GE Asset Management's principal officers,
directors and portfolio managers hold similar positions with General Electric
Investment Corporation (GEIC), also a wholly-owned subsidiary of GE. As of
December 31, 1999, GE's investment advisory firms oversaw $115.8 billion of
assets and managed individual and institutional assets of $91.7 billion, of
which more than $18.2 billion was invested in mutual funds.
For many years, GE's tradition of ingenuity and customer focus has included
financial services. In the late 1920s, through a desire to promote the financial
well-being of its employees, GE began managing assets for its employee pension
plan. By the mid-1930s, GE pioneered some of the nation's earliest mutual funds,
the Elfun Funds--to be followed years later by the GE Savings and Security
Program Funds. The success of these funds spurred growth; eventually GE expanded
its mutual fund offerings to include a wide variety of investment products
called the GE Family of Funds, created specifically for the general public.
GE Asset Management bases its investment philosophy on two enduring principles.
First, GE Asset Management believes that a disciplined, consistent approach to
investing can add value to an investment portfolio over the long term. Its
commitment to in-depth research, sound judgment and hard work provides investors
with an opportunity to take advantage of attractive investments around the
world. Second, GE Asset Management follows the same principles of integrity and
quality that have guided GE over the past century and have made it the
world-class company that it is today.
Each Fund pays GE Asset Management an investment management fee for advisory and
administrative services. Out of this management fee, GE Asset Management is
responsible for paying the Funds' custodial fees, legal and accounting costs,
printing costs, shareholder communication costs, registration fees, the costs of
regulatory compliance and certain related expenses. The investment management
fee is accrued daily and paid monthly up to the following maximum rates:
GE Conservative Strategy Fund 0.20%
GE Moderate Strategy Fund 0.20%
GE Aggressive Strategy Fund 0.20%
About the Portfolio Manager
Eugene Bolton is the portfolio manager of the GE Strategy Funds and is a
Director and Executive Vice President of GE Asset Management. Mr. Bolton manages
the overall U.S. equity investments for GE Asset Management and leads a team of
portfolio managers for the U.S. Equity Fund, one of the underlying GE Funds. Mr.
Bolton has served in this capacity since the Funds' commencement. He joined GE
Asset Management in 1984 as Chief Financial Officer and has been a portfolio
manager since 1986.
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About the Investment Consultant
GE Strategy Funds and GE Asset Management have entered into an Investment
Consulting Agreement with DiMeo, Schneider & Associates, L.L.C., 211 West Wacker
Drive, Suite 500, Chicago, IL 60657 (the "Investment Consultant"). Founded on
May 1, 1995, the Investment Consultant is a mid-sized investment management
consulting firm providing services such as asset allocation analysis and
performance evaluation. Its seven founding members previously worked as a team
at Kidder, Peabody & Co., Inc. in Chicago. Pursuant to the Agreement, the
Investment Consultant provides certain services to GE Asset Management and the
Funds' Board of Trustees to assist each Fund in allocating its assets in
accordance with its investment objective.
The Investment Consultant, in conjunction with GE Asset Management, recommends
to the Board of Trustees:
o changes to the mix of underlying GE Funds in which the GE Strategy Funds
should invest; and
o changes to the asset allocation ranges and targets.
In addition, the Investment Consultant provides certain other services
including:
o performing comprehensive analyses of the underlying GE Funds involving both
quantitative and qualitative research including comparisons of performance
relative to appropriate indices and peer groups and style analysis to determine
consistency and adherence to stated investment objectives;
o monitoring the performance, risk and style consistency of each GE Strategy
Fund;
o reviewing and analyzing the asset allocation targets and ranges among the
underlying GE Funds; and
o providing quantitative and qualitative reports and analyses that are requested
periodically by the Board of Trustees or GE Asset Management.
In exchange for these services, the Investment Consultant receives an
investment-consulting fee that is paid directly by GE Asset Management out of
its investment management fee. No additional cost is borne by the GE Strategy
Funds.
About the Board of Trustees
The Board of Trustees of the GE Strategy Funds have overall responsibility for
supervising and overseeing the management of the Funds. As with most mutual
funds, the Board of Trustees has delegated responsibility for day-to-day
operations of the Funds to its investment adviser. Still, the Board of Trustees
is responsible for approving:
o proposed additions or deletions to the mix of underlying GE Funds;
o proposed changes to the allocation ranges for investing in equity versus
income underlying GE Funds; and
o proposed changes to the allocation targets and ranges among the underlying GE
Funds.
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26 GE Strategy Funds How to Invest
Prospectus
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Who May Invest
The GE Strategy Funds are offered to retirement plans, including defined
contribution plans that:
O are determined not to be affiliated plans with respect to GE Asset Management,
and
O seek services in connection with their investments in the Funds that are
provided or paid by GE Asset Management or its affiliates, in addition to
investment advisory services.
Other retirement plan investors (those that are affiliated plans or do not seek
additional services) should consider investing in the GE Allocation Funds, which
are offered by a separate prospectus.
Defined Contribution Plan Participants
Plan participants should consult the Summary Plan Description and other
materials describing their plan for information about how to invest in the GE
Strategy Funds.
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<PAGE>
--------------------------------------------------
Dividends, GE Strategy Funds 27
Capital Gains Propectus
and Other Tax
Information
- --------------------------------------------------------------------------------
Distributions
Each Fund intends to distribute substantially all of its net investment income
and substantially all of its net realized gains annually. All income dividends
and capital gains distributions made by a Fund to a retirement plan, such as a
defined contribution plan, are reinvested in shares of the Fund at the Fund's
net asset value.
Taxes
The following tax discussion is a general tax discussion and does discuss the
tax consequences specific to retirement plans, such as defined contribution
plans. For information concerning the federal tax consequences to retirement
plan investors, please consult your plan summary and other documents describing
your plan.
Tax issues can be complicated. We suggest you see your investment professional
or tax advisor for any questions you may have.
Except for investments in tax-deferred accounts, you generally will owe taxes on
amounts distributed to you. Dividends from net investment income and short-term
capital gains are taxed as ordinary income. Long-term capital gain dividends are
taxed at the long-term capital gains rate. Distributions will be taxed in the
same manner whether they are received in cash or reinvested.
In addition, if you sell or redeem Fund shares, you generally will realize a
capital gain or loss, which will be long-term or short-term, depending upon how
long you held those shares. If you exchange shares in one Fund for shares in
another, the exchange will be treated as a sale and purchase of shares for tax
purposes.
Tax Statement
You will receive an annual statement summarizing your dividend and capital gains
distributions. Please consult a tax advisor if you have questions about your
specific tax situation.
- --------------------------------------------------------------------------------
Backup Withholding
If you do not provide complete and certified taxpayer identification
information, each Fund is obligated by law to withhold 31% of Fund distributions
and redemption proceeds.
- --------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------
28 GE Strategy Funds Calculating
Prospectus Share Value
- --------------------------------------------------------------------------------
Fund shares are sold at their net asset value (NAV). The NAV of each share is
calculated at the close of regular trading on the New York Stock Exchange
(NYSE), normally 4:00 p.m. Eastern time, each day the NYSE is open for trading.
The NAV per share for a Fund is calculated by adding the value of the Fund's
investments, cash and other assets; subtracting the Fund's liabilities from that
sum; and then dividing the difference by the number of that Fund's outstanding
shares.
The assets of each Fund consist primarily of underlying GE Fund shares, which
are valued at their respective net asset values as of the time of computation.
Redemptions in kind will be valued on the effective date at the net asset value
of the underlying GE Funds. In general, the underlying GE Funds value their
portfolio securities at market value or, in the absence of market value, at fair
value as determined by or under the direction of the underlying 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 when the GE Strategy Funds' Board of
Trustees determines that amortized cost is fair value. Amortized cost 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.
- --------------------------------------------------------------------------------
<PAGE>
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- --------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------
30 GE Strategy Funds Financial
Prospectus Highlights
- --------------------------------------------------------------------------------
The financial highlights table that follows is intended to help you understand a
Fund's financial performance for the fiscal years ended September 30. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned or
lost on an investment in the Fund (assuming reinvestment of all dividends and
distributions). Fiscal year end information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Funds' financial
statements, are included in the Funds' Annual Report, which is available upon
request.
- --------------------------------------------------------------------------------
<PAGE>
----------
31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GE Conservative GE Moderate GE Aggressive
Strategy Fund Strategy Fund Strategy Fund
-------------------- --------------------- --------------------
9/30/99 9/30/98(a) 9/30/99 9/30/98(a) 9/30/99 9/30/98(a)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Inception date -- 1/5/98 -- 1/5/98 -- 1/5/98
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.32 $10.00 $10.22 $10.00 $10.15 $10.00
- --------------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Investment Operations
Net Investment Income 0.27 0.31 0.22 0.61 0.18 0.34
- --------------------------------------------------------------------------------------------------------------------------------
Net Gains (Losses) on Securities (both realized
and unrealized) 0.78 0.01(b) 1.36 (0.39) 1.87 (0.19)(b)
- --------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Investment Operations 1.05 0.32 1.58 0.22 2.05 0.15
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions
- --------------------------------------------------------------------------------------------------------------------------------
Dividends (from net investment income) 0.36 0.00 0.40 0.00 0.31 0.00
- --------------------------------------------------------------------------------------------------------------------------------
Distributions (from capital gains) 0.22 0.00 0.37 0.00 0.29 0.00
- --------------------------------------------------------------------------------------------------------------------------------
Returns of Capital 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions 0.58 0.00 0.77 0.00 0.60 0.00
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.79 $10.32 $11.03 $10.22 $11.60 $10.15
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 10.44% 3.20%(c) 16.02% 2.20%(c) 20.86% 1.50%(c)
- --------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $2,058 $979 $32,319 $25,148 $5,100 $2,939
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets* 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average
Net Assets* 3.39% 5.85% 2.83% 7.39% 2.07% 5.79%
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets* 0.79% 5.65% 0.24% 0.33% 0.41% 1.80%
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 71% 67% 41% 22% 27% 28%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes to Financial Highlights
(a) Information is for the period January 5, 1998, inception of investment
operations, through September 30, 1998.
(b) As a result of the timing of purchases and sales of fund shares, purchase
amounts do not accord with aggressive amounts appearing in the Statement
of Operations.
(c) Total returns are historical and assume changes in share price,
reinvestment for dividends and capital gains, and assume no sales charge.
Had the Adviser not absorbed a portion of expenses of the funds and of the
underlying GE Funds, total returns would have been lower. Total returns
are not annualized.
* Annualized for periods less than one year.
- --------------------------------------------------------------------------------
<PAGE>
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- --------------------------------------------------------------------------------
<PAGE>
[This page intentionally left blank.]
- --------------------------------------------------------------------------------
<PAGE>
GE Strategy Funds
Prospectus
- --------------------------------------------------------------------------------
If you wish to You will find additional information about the GE
know more LifeStyle Funds in the following documents:
Annual/Semi-Annual Reports to Shareholders: These
reports detail the Funds' actual investments as of the
report date. Reports include performance numbers and a
discussion of market conditions and investment
strategies that significantly affected Fund performance
during the Funds' last fiscal year.
Statement of Additional Information (SAI): The SAI
contains additional information about the Funds and
their investment strategies and policies and is
incorporated by reference (legally considered part of
this Prospectus).
You may visit the SEC's Internet Website
(http://www.sec.gov) to view the Annual/Semi-Annual
Reports, the SAI and other information about GE
LifeStyle Funds. Also, you may obtain copies of this
information, upon paying a duplication fee, by sending
your request electronically to the following e-mail
address: [email protected], or in writing to the SEC's
Public Reference Section, Washington, D.C. 20549-0102.
You may review and copy information about the Funds,
including the SAI, at the SEC's Public Reference Room in
Washington, D.C. To find out more about the Public
Reference Room, call the SEC at 1-202-942-8090.
- --------------------------------------------------------------------------------
GE LifeStyle You may obtain a free copy of the SAI or the Funds'
Funds annual/semiannual report and make shareholder inquiries
by contacting:
GE Investment Distributors, Inc.
P.O. Box 7900
3003 Summer Street
Stamford, CT 06904
Telephone 1-800-242-0134
Website http://www.ge.com/mutualfunds
- --------------------------------------------------------------------------------
Investment GE Asset Management Incorporated
Adviser P.O. Box 7900
3003 Summer Street
Stamford, CT 06904
- --------------------------------------------------------------------------------
Transfer Agent State Street Bank and Trust Company
and Custodian 225 Franklin Street
Boston, MA 02101
- --------------------------------------------------------------------------------
Distributor GE Investment Distributors, Inc.
777 Long Ridge Road, Building B
Stamford, CT 06927
Investment Company Act file number: 811-07701
- --------------------------------------------------------------------------------
RS - LS - 1
<PAGE>
[GRAPHIC OMITTED]
Prospectus
------------
GE LifeStyle
Funds
January 28, 2000
- --------------------------------------------------------------------------------
GE Allocation Funds
GE Conservative Allocation Fund
GE Moderate Allocation Fund
GE Aggressive Allocation Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Like all mutual funds, the GE Allocation Funds' shares have not been approved or
disapproved by the Securities and Exchange Commission, nor has the Securities
and Exchange Commission passed upon the accuracy or adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
[GE LOGO]
- -----------------
We bring good things to life.
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
------------------------------------
Contents
- --------------------------------------------------------------------------------
GE Allocation Funds
Prospectus
GE Allocation Funds 2
-----------------------------------
GE Conservative Allocation Fund 4
-----------------------------------
GE Moderate Allocation Fund 6
-----------------------------------
GE Aggressive Allocation Fund 8
-----------------------------------
Fund Expenses 10
-----------------------------------
More on Strategies and Risks 12
-----------------------------------
Important Definitions 12
-----------------------------------
More on Investment Strategies 14
-----------------------------------
More on Risks 20
-----------------------------------
Other Risk Considerations 23
-----------------------------------
How the Funds Are Managed 24
-----------------------------------
About the Investment Adviser
and Administrator 24
-----------------------------------
About the Portfolio Manager 24
-----------------------------------
About the Investment Consultant 25
-----------------------------------
About the Board of Trustees 25
-----------------------------------
How to Invest 26
-----------------------------------
Who May Invest 26
-----------------------------------
Defined Contribution
Plan Participants 26
-----------------------------------
Dividends, Capital Gains and
Other Tax Information 27
-----------------------------------
Calculating Share Value 28
-----------------------------------
Financial Highlights 30
-----------------------------------
Additional information regarding the GE LifeStyle Allocation Funds (the "GE
Allocation Funds" or the "Funds") is contained in the Statement of Additional
Information dated January 28, 2000 ("SAI"), which is incorporated by reference
into (legally forms a part of) this Prospectus.
<PAGE>
- -------------------------------------------------
2 GE Allocation Funds GE Allocation
Prospectus Funds
- --------------------------------------------------------------------------------
An investment in a GE Allocation Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. An investment in a GE Allocation Fund is subject to risk,
including possible loss of principal invested.
Who May Want To Invest in a GE Allocation Fund?
The GE Allocation Funds may be appropriate for your investment portfolio if you:
o prefer simplified investment decision making
o prefer to have your asset allocation decisions made by professional money
managers
o want a single diversified investment that is re-balanced periodically
- --------------------------------------------------------------------------------
Introduction to the Asset Allocation Process
The GE Allocation Funds are designed to meet the needs of investors who prefer a
single diversified investment that has an investment objective which is
consistent with the length of time until their need for funds and their risk
tolerance. Depending on the Fund you choose, your investment will be subject to
varying degrees of potential investment risks and rewards.
GE Conservative Allocation Fund is designed for investors with shorter
investment time horizons and lower risk tolerances; GE Moderate Allocation Fund
is designed for investors with intermediate investment time horizons and
moderate-to-high risk tolerances; and GE Aggressive Allocation Fund is designed
for investors with longer investment time horizons and high risk tolerances.
The GE Allocation Funds invest primarily in a combination of certain GE Funds
(the "underlying GE Funds") that, in turn, invest directly in a wide range of
portfolio securities (like stocks and bonds). Each underlying GE Fund represents
an investment category, such as U.S. equity or fixed-income securities. Although
an investor may achieve the same level of diversification by investing directly
in a variety of GE Funds, each GE Allocation Fund provides investors with a
means to simplify their investment decisions by investing in a single
diversified portfolio.
- --------------------------------------------------------------------------------
<PAGE>
----------
3
- --------------------------------------------------------------------------------
Each GE Allocation Fund seeks to achieve its investment objective by allocating
its assets strategically among the equity and income funds selected from the
underlying GE Funds. The main differences among the GE Allocation Funds are the
percentages of their assets allocated to each of the underlying GE Funds (and
therefore the percentages allocated to equity versus income funds).
Currently, the group of underlying GE Funds is comprised of the following:
o GE U.S. Equity Fund
o GE Small-Cap Value Equity Fund
o GE International Equity Fund
o GE Emerging Markets Fund
o GE Fixed Income Fund
o GE High Yield Fund
The group of underlying GE Funds and the allocations among those funds may be
changed from time to time without shareholder approval. Any such changes will be
reflected immediately in the current Prospectus; however, it may take some time
to execute those changes. The Investment Adviser will re-allocate the
investments of the GE Allocation Funds over a reasonable period of time while
seeking to minimize disruptive effects and adverse costs to the GE Allocation
Funds and the underlying GE Funds.
Although each GE Allocation Fund is designed to serve as a diversified
investment portfolio, no single mutual fund can provide an appropriate
investment program for all investors. Because each GE Allocation Fund invests in
a combination of equity and income funds, an investor should not expect capital
appreciation or current income levels comparable to funds for which either
capital appreciation or current income is their sole objective. You should
evaluate the Funds in the context of your personal financial situation,
investment goals and other investments.
GE LifeStyle Funds is comprised of six separate series (or individual funds).
The GE Allocation Funds, which constitute three of those series, are offered by
this Prospectus. The GE Allocation Funds invest in Class Y shares of the
underlying GE Funds. The GE Strategy Funds, which constitute the remaining three
series, are offered by a separate prospectus. The GE Strategy Funds invest in
Class A shares of the underlying GE Funds.
- --------------------------------------------------------------------------------
<PAGE>
- ----------------------
4 GE Allocation Funds
Prospectus
- --------------------------------------------------------------------------------
GE Conservative Allocation Fund
- ----------------------
Investment Objective: Income and long-term growth of capital.
The Strategy
GE Conservative Allocation Fund seeks to achieve its investment objective by
investing among the underlying GE Funds within carefully determined ranges. The
Fund normally invests 38% to 52% of its net assets in equity funds and 48% to
58% in income funds. The Fund is designed for investors with shorter investment
time horizons and lower risk tolerances.
The table below shows the Fund's current investment targets and ranges
(expressed as a percentage of its net assets) for allocating its assets among
the underlying GE Funds.
The Risks
The principal risks of investing in the Fund are allocation risk, credit risk,
derivative securities risk, foreign exposure risk, interest rate risk,
prepayment risk, stock market risk, style risk (growth investing risk, value
investing risk and small-cap company risk), and underlying performance risk.
If you would like additional information regarding this Fund's investment
strategies and risks or the underlying GE Funds' investment strategies and
risks, including descriptions of the terms in bold type, please refer to "More
on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
Investment Allocations
Target Range
------------ ------------
U.S. Equity Fund 28% 23% - 33%
- --------------------------------------------------------------------------------
Small-Cap Value Equity Fund 5% 2% - 8%
- --------------------------------------------------------------------------------
International Equity Fund 12% 7% - 17%
- --------------------------------------------------------------------------------
Emerging Markets Fund 0% 0%
- --------------------------------------------------------------------------------
Fixed Income Fund 53% 48% - 58%
- --------------------------------------------------------------------------------
High Yield Fund 0% 0%
- --------------------------------------------------------------------------------
Cash* 2% 0% - 4%
- --------------------------------------------------------------------------------
* For an explanation of the Fund's holdings of cash and cash equivalents, please
refer to "More on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
<PAGE>
----------
5
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to common measures of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the periods presented in the bar chart, the
Fund's highest return for a quarter was 7.13% for the quarter-ended December 31,
1999. The lowest return for a quarter was -1.15 % for the quarter-ended
September 30, 1999.
The table opposite illustrates how the Fund's average annual returns for the
1999 calendar period compare to the returns of several securities market
indices. The table reflects the impact of the Fund's expenses and assumes that
you sold your shares at the end of each period.
- --------------------------------------------------------------------------------
Calendar Year Total Returns
[BAR CHART]
1999 10%
- --------------------------------------------------------------------------------
Average Annual Total Return
(as of December 31, 1999)
1 Year*
-------
GE Conservative
Allocation Fund 10.03%
S&P 500 Index 21.07%
LB Aggregate Bond Index -0.83%
Composite Index** 9.53%
Both the bar chart and table assume reinvestment of dividends and distributions.
If GE Asset Management had not reduced certain expenses during the periods
shown, the Fund's total returns would have been lower. As with all mutual funds,
past performance is not an indication of future performance.
* Inception date (commencement of investment operations) is December 31,
1998.
** The Composite Index is derived by applying each underlying GE Fund's
target allocations to the results of the benchmark index for each of those
underlying GE Funds.
All mutual funds use a standard formula to calculate the total return. Total
return measures the price change in a share assuming the reinvestment of all
dividend income and capital gain distributions.
- --------------------------------------------------------------------------------
<PAGE>
- ----------------------
6 GE Allocation Funds
Prospectus
- --------------------------------------------------------------------------------
GE Moderate Allocation Fund
- ----------------------
Investment Objective: Long-term growth of capital with a moderate level of
current income.
The Strategy
GE Moderate Allocation Fund seeks to achieve its investment objective by
investing among the underlying GE Funds within carefully determined ranges. The
Fund normally invests 55% to 75% of its net assets in equity funds and 25% to
41% in income funds. The Fund is designed for investors with intermediate
investment time horizons and moderate-to-high risk tolerances.
The table below shows the Fund's current investment targets and ranges
(expressed as a percentage of its net assets) for allocating its assets among
the underlying GE Funds.
The Risks
The principal risks of investing in the Fund are allocation risk, credit risk,
foreign exposure risk, high yield securities risk, interest rate risk,
prepayment risk, stock market risk, style risk (growth investing risk, value
investing risk and small-cap company risk), and underlying performance risk.
If you would like additional information regarding this Fund's investment
strategies and risks or the underlying GE Funds' investment strategies and
risks, including descriptions of the terms in bold type, please refer to "More
on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
Investment Allocations
Target Range
------------ ------------
U.S. Equity Fund 34% 29% - 39%
- --------------------------------------------------------------------------------
Small-Cap Value Equity Fund 12% 7% - 17%
- --------------------------------------------------------------------------------
International Equity Fund 16% 11% - 21%
- --------------------------------------------------------------------------------
Emerging Markets Fund 3% 1% - 5%
- --------------------------------------------------------------------------------
Fixed Income Fund 28% 23% - 33%
- --------------------------------------------------------------------------------
High Yield Fund 5% 2% - 8%
- --------------------------------------------------------------------------------
Cash* 2% 0% - 4%
- --------------------------------------------------------------------------------
* For an explanation of the Fund's holdings of cash and cash equivalents, please
refer to "More on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
<PAGE>
----------
7
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to common measures of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the periods presented in the bar chart, the
Fund's highest return for a quarter was 10.45% for the quarter-ended December
31, 1999. The lowest return for a quarter was -1.98% for the quarter-ended
September 30, 1999.
The table opposite illustrates how the Fund's average annual returns for the
1999 calendar period compare to the returns of several securities market
indices. The table reflects the impact of the Fund's expenses and assumes that
you sold your shares at the end of each period.
- --------------------------------------------------------------------------------
Calendar Year Total Returns
[BAR CHART]
1999 15%
- --------------------------------------------------------------------------------
Average Annual Total Return
(as of December 31, 1999)
1 Year*
-------
GE Moderate
Allocation Fund 14.76%
S&P 500 Index 21.07%
LB Aggregate Bond Index -0.83%
Composite Index** 15.55%
Both the bar chart and table assume reinvestment of dividends and distributions.
If GE Asset Management had not reduced certain expenses during the periods
shown, the Fund's total returns would have been lower. As with all mutual funds,
past performance is not an indication of future performance.
* Inception date (commencement of investment operations) is December 31,
1998.
** The Composite Index is derived by applying each underlying GE Fund's
target allocations to the results of the benchmark index for each of those
underlying GE Funds.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
- --------------------------------------------------------------------------------
<PAGE>
- ----------------------
8 GE Allocation Funds
Prospectus
- --------------------------------------------------------------------------------
GE Aggressive Allocation Fund
- ----------------------
Investment Objective: Capital appreciation.
The Strategy
GE Aggressive Allocation Fund seeks to achieve its investment objective by
investing among the underlying GE Funds within carefully determined ranges. The
Fund normally invests 74% to 91% of its net assets in equity funds and 9% to 22%
in income funds. The Fund is designed for investors with longer investment time
horizons and high risk tolerances.
The table below shows the Fund's current investment targets and ranges
(expressed as a percentage of its net assets) for allocating its assets among
the underlying GE Funds.
The Risks
The principal risks of investing in the Fund are allocation risk, credit risk,
emerging markets risk, high yield securities risk, interest rate risk, foreign
exposure risk, prepayment risk, stock market risk, style risk (growth investing
risk, value investing risk, and small-cap company risk), and underlying
performance risk.
If you would like additional information regarding this Fund's investment
strategies and risks or the underlying GE Funds' investment strategies and
risks, including descriptions of the terms in bold type, please refer to "More
on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
Investment Allocations
Target Range
------------ ------------
U.S. Equity Fund 38% 33% - 43%
- --------------------------------------------------------------------------------
Small-Cap Value Equity Fund 20% 15% - 25%
- --------------------------------------------------------------------------------
International Equity Fund 19% 14% - 24%
- --------------------------------------------------------------------------------
Emerging Markets Fund 5% 2% - 8%
- --------------------------------------------------------------------------------
Fixed Income Fund 9% 6% - 12%
- --------------------------------------------------------------------------------
High Yield Fund 7% 3% - 10%
- --------------------------------------------------------------------------------
Cash* 2% 0% - 4%
- --------------------------------------------------------------------------------
* For an explanation of the Fund's holdings of cash and cash equivalents, please
refer to "More on Strategies and Risks" later in this Prospectus.
- --------------------------------------------------------------------------------
<PAGE>
----------
9
- --------------------------------------------------------------------------------
Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to common measures of
performance.
The bar chart illustrates how the Fund's performance varies from year to year
over the periods shown. During the periods presented in the bar chart, the
Fund's highest return for a quarter was 13.84% for the quarter-ended December
31, 1999. The lowest return for a quarter was -2.85 % for the quarter-ended
September 30, 1999.
The table opposite illustrates how the Fund's average annual returns for the
1999 calendar period compare to the returns of several securities market
indices. The table reflects the impact of the Fund's expenses and assumes that
you sold your shares at the end of each period.
- --------------------------------------------------------------------------------
Calendar Year Total Returns
[BAR CHART]
1999 20%
- --------------------------------------------------------------------------------
Average Annual Total Return
(as of December 31, 1999)
1 Year*
-------
GE Aggressive
Allocation Fund 20.22%
S&P 500 Index 21.07%
LB Aggregate Bond Index -0.83%
Composite Index** 20.54%
Both the bar chart and table assume reinvestment of dividends and distributions.
If GE Asset Management had not reduced certain expenses during the periods
shown, the Fund's total returns would have been lower. As with all mutual funds,
past performance is not an indication of future performance.
* Inception date (commencement of investment operations) is December 31,
1998.
** The Composite Index is derived by applying each underlying GE Fund's
target allocations to the results of the benchmark index for each of those
underlying GE Funds.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a share assuming the reinvestment of all dividend
income and capital gain distributions.
- --------------------------------------------------------------------------------
<PAGE>
- ---------------------------------------------
10 GE Allocation Funds Fund
Prospectus Expenses
- --------------------------------------------------------------------------------
The following tables describe the fees and expenses that you may pay if you buy
and hold shares of a Fund. Shareholder fees, if any, are paid directly from your
account and are not reflected in the share price. Annual fund operating expenses
come out of a Fund's assets and are reflected in the Fund's share price and
dividends. The figures below show actual expenses during the fiscal period ended
September 30, 1999.
- --------------------------------------------------------------------------------
Shareholder Fees
(paid directly from your investment, not reflected in share price)
<TABLE>
<CAPTION>
GE Conservative GE Moderate GE Aggressive
Allocation Fund Allocation Fund Allocation Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
of Shares (as a percentage of offering price) None None None
- -----------------------------------------------------------------------------------------------------------------------------------
Maximum Contingent Deferred Sales Charge (Load)
(as a percentage of redemption proceeds) None None None
- -----------------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(as a percentage of offering price) None None None
- -----------------------------------------------------------------------------------------------------------------------------------
Redemption Fee None None None
- -----------------------------------------------------------------------------------------------------------------------------------
Exchange Fee None None None
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
GE Conservative GE Moderate GE Aggressive
Allocation Fund Allocation Fund Allocation Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees* 0.20% 0.20% 0.20%
- -----------------------------------------------------------------------------------------------------------------------------------
Distribution and Services (12b-1) Fees None None None
- -----------------------------------------------------------------------------------------------------------------------------------
Underlying GE Fund Expenses** 0.67% 0.78% 0.88%
- -----------------------------------------------------------------------------------------------------------------------------------
Other Expenses*** 2.27% 0.25% 0.41%
- -----------------------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 3.14% 1.23% 1.49%
- -----------------------------------------------------------------------------------------------------------------------------------
Waiver and/or Reimbursement 2.31% 0.32% 0.51%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Annual Fund Operating Expenses**** 0.83% 0.91% 0.98%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The nature of the services provided to, and the advisory and administration
fees paid by, each Fund are further described under "How the Funds are Managed -
About the Investment Adviser and Administrator."
** The "Underlying GE Fund Expenses" figures for each GE Allocation Fund are
based upon its target allocations to the underlying GE Funds and upon the total
operating expenses of those underlying GE Funds without taking into
consideration the current contractual fee waivers or expense limitations for the
underlying GE Funds.
*** "Other expenses" includes fees beyond those borne by GE Asset Management
pursuant to each Fund's Investment Advisory and Administration Agreement. These
other expenses, which are not included in the management fees, include: fees and
expenses of the Funds' independent trustees, brokerage fees and commissions,
transfer agency fees, interest, taxes, and extraordinary expenses.
**** The fee table reflects contractual arrangements with GE Asset Management
and the GE Allocation Funds and/or the underlying GE Funds to limit "Other
Expenses" on an annualized basis through January 28, 2001.
- --------------------------------------------------------------------------------
<PAGE>
----------
11
- --------------------------------------------------------------------------------
The Impact of Fund Expenses
The following example is intended to help you compare the cost of investing in a
Fund with the cost of investing in other mutual funds. Although actual costs may
be higher or lower, you would pay the following expenses on a $10,000
investment, assuming a 5% annual return and that the Fund's operating expenses
remain the same.
- --------------------------------------------------------------------------------
Example
You would pay the following
expenses on a $10,000 investment,
assuming redemption:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
GE Conservative Allocation Fund $85 $751 $1,442 $3,285
- --------------------------------------------------------------------------------
GE Moderate Allocation Fund $93 $359 $645 $1,460
- --------------------------------------------------------------------------------
GE Aggressive Allocation Fund $100 $420 $763 $1.733
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------
12 GE Allocation Funds More on
Prospectus Strategies
and Risks
- --------------------------------------------------------------------------------
Important Definitions
This section defines important terms that may be unfamiliar to an investor
reading about the GE Allocation Funds.
Asset-backed securities represent a participation in, or are secured by and
payable from, a stream of payments generated by particular assets, such as
credit card receivables or auto loans.
Certificates of deposit include short-term debt securities issued by banks.
Commercial paper includes short-term debt securities issued by banks,
corporations and other borrowers.
Corporate bonds are debt securities issued by companies.
Correlation and covariance are statistical measures used to help analyze the way
that two or more things, such as the annual returns of two mutual funds, relate
to each other over time.
Debt securities are bonds and other securities that are used by issuers to
borrow money from investors. Holders of debt securities have a higher priority
claim to assets than do equity holders. Typically, the debt issuer pays the
investor a fixed, variable or floating rate of interest and must repay the
borrowed amount at maturity. Some debt securities, such as zero coupon bonds,
are sold at a discount from their face values instead of paying interest.
Defined contribution plans are retirement plans which provide for an individual
account for each participant and for benefits based solely on the amount
contributed to the participant's account and any income, expenses, gains and
losses, and any forfeitures of accounts of other participants which may be
allocated to the participant's account. Defined contribution plans include
profit-sharing plans, 401(k) plans and certain kinds of tax deferred
compensation plans of governmental and tax exempt entities (which meet certain
requirements of the Internal Revenue Code of 1986, as amended).
Derivative securities are securities whose values are based on other securities,
currencies or indices, and include options (on stocks, indices, currencies,
futures contracts or bonds), forward currency exchange contracts, futures
contracts, swaps, interest-only and principal-only debt securities, certain
mortgage-backed securities, like collateralized mortgage obligations (CMOs), and
structured securities.
Duration represents a mathematical calculation of the average life of a bond (or
portfolio of bonds) based on cash flows that serves as a useful measure of the
bond's sensitivity to changes in interest rates. Each year of duration
approximates an expected one percent change in the bond's price for every one
percent change in the interest rate.
Equity funds invest primarily in equity securities.
Equity securities may include common stocks, preferred securities, depositary
receipts, convertible securities and rights and warrants of U.S. and foreign
companies. Stocks represent an ownership interest in a corporation.
Foreign debt securities are debt securities issued by foreign corporations and
governments. They may include Eurodollar bonds, which are dollar-denominated
securities issued outside the United States by foreign corporations and
financial institutions or by foreign branches of U.S. corporations and financial
institutions; Yankee bonds, which are dollar-denominated securities issued by
foreign issuers in the United States; and securities denominated in currencies
other than U.S. dollars.
Foreign securities include interests in or obligations of entities located
outside the United States. The determination of where an issuer of a security is
located will be made by reference to the country in which the issuer (i) is
organized, (ii) derives at least 50% of its revenues or profits from goods
produced or sold, investments made or services performed, (iii) has at least 50%
of its assets situated, or (iv) has the principal trading market for its
securities. Foreign securities may be denominated in non-U.S. currencies and
traded outside the United States or may be in the form of depositary receipts.
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Growth investing involves buying stocks with above-average growth rates.
Typically, growth stocks are the stocks of faster growing companies in more
rapidly growing sectors of the economy. Generally, growth stock valuation levels
will be higher than those of value stocks and the market averages.
High yield securities are debt securities of corporations, preferred securities
and convertible bonds and convertible preferred stock rated Ba through C by
Moody's or BB through D by S&P (or comparably rated by another nationally
recognized statistical rating organization) or, if not rated, are considered by
portfolio management to be of similar quality. High yield securities include
bonds rated below investment grade, sometimes called "junk bonds," and are
considered speculative by the major credit rating agencies.
Income funds invest primarily in debt securities.
Investment-grade securities are rated Baa or better by Moody's and BBB or better
by S&P (or are comparably rated by another nationally recognized statistical
rating organization), or, if not rated, are considered by portfolio management
to be of similar quality. Securities rated in the fourth highest grade have some
speculative elements.
Maturity represents the date on which a debt security matures or when the issuer
must pay back the principal amount of the security.
Money market instruments are short-term debt securities of the U.S. government,
banks and corporations.
Mortgage-backed securities include securities issued by the Government National
Mortgage Association (Ginnie Mae), the Federal National Mortgage Association
(Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and other
government agencies and private issuers. They may also include collateralized
mortgage obligations which are derivative securities that are fully
collateralized by a portfolio of mortgages. Government stripped mortgage-related
securities are mortgage-backed securities that have been stripped into their
interest and principal components. They represent interests in distributions of
interest on or principal underlying mortgage-backed certificates. Mortgage
dollar rolls are transactions involving the sale of a mortgage-backed security
with a simultaneous contract (with the purchaser) to buy similar, but not
identical, securities at a future date.
Municipal obligations are debt obligations issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, or multi-state
agencies or authorities. They include: (i) municipal leases, which pay interest
that is exempt from federal, and in certain cases, state income tax; (ii)
participation interests in municipal obligations, which are proportionate,
undivided interests in municipal obligations; (iii) municipal obligation
components, which are municipal obligations that have been divided into two
components (one component pays interest at a rate adjusted periodically through
an auction process, the second pays the residual rate after the auction rate is
deducted from total interest payable); and (iv) custodial receipts on municipal
obligations, which evidence ownership of future interest payments, principal
payments, or both, on certain municipal obligations.
Preferred securities are classes of stock that pay dividends at a specified
rate. Dividends are paid on preferred stocks before they are paid on common
stocks. In addition, preferred stockholders have priority over common
stockholders as to the proceeds from the liquidation of a company's assets.
Purchasing and writing options are permitted investment strategies for certain
Funds. An option is the right to buy (i.e., a "call") or sell (i.e., a "put")
securities or other interests for a predetermined price on or before a fixed
date. An option on a securities index represents the option holder's right to
obtain from the seller, 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 securities index on the exercise date. An option
on a foreign currency represents the right to buy or sell a particular amount of
that currency for a predetermined price on or before a fixed date.
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U.S. Government securities are issued or guaranteed as to principal or interest
by the U.S. Government or one of its agencies or instrumentalities. Some U.S.
Government securities are backed by the full faith and credit of the federal
government. Other U.S. Government securities are backed by the issuer's right to
borrow from the U.S. Treasury and some are backed only by the credit of the
issuing organization. All U.S. Government securities are considered highly
creditworthy.
Value investing involves buying stocks that are out of favor and/or undervalued
in comparison to their peers and/or their prospects for growth. Generally, value
stock valuation levels are lower than those of growth stocks.
Various investment techniques may be used by an underlying GE Fund to increase
or decrease its exposure to changing security prices, interest rates, currency
exchange rates, commodity prices, or other factors that affect security values.
These techniques may involve derivative securities and derivative transactions
such as buying and selling options and futures contracts, entering into currency
exchange contracts or swap agreements and purchasing indexed securities. These
techniques are designed to adjust the risk and return characteristics of a
fund's portfolio of investments and are not used for leverage. None of the
underlying GE Funds is obligated to use any of these techniques at any given
time or under any particular economic condition. To the extent that an
underlying GE Fund employs these techniques, it would be subject to derivative
securities risk.
Weighted average maturity represents the length of time in days or years until
the average security in a money market or income fund will mature or be redeemed
by its issuer. The average maturity is weighted according to the dollar amounts
invested in the various securities in the fund. This measure indicates an income
fund's sensitivity to changes in interest rates. In general, the longer a fund's
average weighted maturity, the more its share price will fluctuate in response
to changing interest rates.
More on Investment Strategies: the Asset Allocation Process
As described earlier in this Prospectus, each GE Allocation Fund pursues its
investment objective by investing primarily in a combination of the underlying
GE Funds. To assist in determining the mix of underlying GE Funds and setting
the appropriate allocation targets and ranges for investments in those
underlying GE Funds, GE Asset Management and the Funds have engaged the services
of DiMeo, Schneider & Associates, L.L.C. (the "Investment Consultant"). The
Investment Consultant, GE Asset Management, and the Board of Trustees determine
the appropriate mix of underlying GE Funds and allocation targets and ranges as
described below.
Periodically, based upon a variety of quantitative and qualitative factors, the
Investment Consultant uses proprietary economic and statistical methods to
determine the optimal allocation targets and ranges for each GE Allocation Fund
and whether any underlying GE Funds should be added or removed from the mix.
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The factors considered include:
o the investment objective of each GE Allocation Fund and each of the GE Funds;
o input from GE Asset Management;
o economic and market forecasts;
o proprietary and third-party reports and analyses;
o the risk/return characteristics, relative performance, and volatility of the
underlying GE Funds; and
o the correlation and covariance among underlying GE Funds.
Based upon these determinations, the Investment Consultant and GE Asset
Management make formal recommendations to the Board of Trustees regarding:
o any additions or deletions to the underlying GE Funds;
o the allocation ranges for investing in equity versus income underlying GE
Funds; and
o the allocation targets and ranges for investing in particular underlying GE
Funds.
The Board of Trustees then determines what if any changes should be made. To
assist the Board, the Investment Consultant and GE Asset Management provide such
quantitative and qualitative reports as the Board deems appropriate.
As market prices of the underlying GE Funds' portfolio securities change, a
Fund's actual allocations will vary somewhat from the targets although the
percentages generally will remain within the specified ranges. If changes are
made as described above, those changes will be reflected in the Prospectus.
However, it may take some time to fully implement the changes. GE Asset
Management will implement the changes over a reasonable period of time while
seeking to minimize disruptive effects and added costs to the GE Strategy Funds
and the underlying GE Funds.
On an ongoing basis, GE Asset Management will monitor variances from the
targets. When a GE Allocation Fund receives new investment proceeds or
redemption requests, depending on the Fund's current cash reserves, GE Asset
Management may determine to purchase additional shares or redeem shares of
underlying GE Funds. In making those purchases or redemptions, GE Asset
Management will attempt to re-balance the Fund's holdings of underlying GE Funds
to bring them more closely in line with the Fund's investment targets. If GE
Asset Management believes it is in the best interests of the Fund and its
shareholders, it may limit the degree of re-balancing or avoid re-balancing
altogether pending further analysis and more favorable market conditions.
More on Investment Strategies: Underlying GE Funds
Because the GE Allocation Funds invest most of their assets in underlying GE
Funds, their investment performance is directly related to the performance of
those underlying GE Funds. This section describes the principal investment
strategies and risks of the underlying GE Funds. The underlying GE Funds also
may use certain investment strategies and techniques not described here. More
information regarding the underlying GE Funds can be obtained by requesting the
GE Funds' prospectus and statement of additional information.
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GE U.S. Equity Fund
GE U.S. Equity Fund seeks long-term growth of capital. The fund invests
primarily in equity securities of U.S. companies. The portfolio managers use a
Multi-Style(R) investment strategy that combines growth and value investment
management styles. As a result, the fund's portfolio has characteristics similar
to the Standard & Poor's 500 Composite Stock Index, including capital
appreciation and income potential. Stock selection is key to the performance of
the fund.
Through fundamental company research, the portfolio managers seek to identify
securities of large companies with characteristics such as attractive
valuations, financial strength and high quality management focused on generating
shareholder value.
The fund also may invest to a lesser extent in foreign securities and debt
securities. The fund generally intends to hold its investments for a long time,
which may result in a relatively low portfolio turnover rate. The portfolio
managers may use various investment techniques to adjust the fund's investment
exposure, but there is no guarantee that these techniques will work.
The principal risk associated with investing in the fund is stock market risk.
To the extent that the portfolio managers invest in foreign securities or debt
securities, the fund would be subject to foreign exposure risk or interest rate
risk and credit risk.
GE Small-Cap Value Equity Fund
GE Small-Cap Value Equity Fund seeks long-term growth of capital. The fund
invests primarily in equity securities of small-cap companies that the portfolio
managers believe are undervalued by the market but have solid growth prospects.
A company may be undervalued for reasons such as market overreaction to recent
company, industry or economic problems. The fund defines a small-cap company as
one with a market capitalization within the capitalization range of the Russell
2000 Index. As of December 31, 1999, the market capitalization of companies in
the index ranged from $10 million to $13.04 billion. The portfolio managers will
not sell a stock merely because the market capitalization of a company in the
portfolio moves above or below the maximum or minimum capitalization of the
index. Stock selection is key to the performance of the fund.
The portfolio managers seek to identify securities of companies with
characteristics such as high quality management, attractive products or
services, appropriate capital structure, strong competitive positions in their
industries and management focused on generating shareholder value.
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The fund also may invest to a lesser extent in securities with capitalizations
outside the fund's small cap range, debt securities and foreign securities. The
fund generally intends to hold its investments for a long time, which may result
in a relatively low portfolio turnover rate. The portfolio managers may use
various investment techniques to adjust the fund's investment exposure, but
there is no guarantee that these techniques will work.
The principal risks of investing in the fund are stock market risk and style
risk (value investing risk and small-cap company risk). To the extent that the
portfolio managers invest in foreign securities or debt securities, the fund
would be subject to foreign exposure risk or interest rate risk and credit risk.
GE International Equity Fund
GE International Equity Fund seeks long-term growth of capital. The fund invests
primarily in equity securities of companies located in developed and developing
countries other than the United States. The portfolio managers focus on
companies that they expect will grow faster than relevant markets and whose
security prices do not fully reflect their potential for growth. Under normal
circumstances, the fund's assets are invested in foreign securities of companies
representing at least three different countries. Stock selection is key to the
performance of the fund.
The portfolio managers seek to identify securities of growth companies with
characteristics such as low prices relative to their long-term cash earnings
potential, potential for significant improvement in the company's business,
financial strength and sufficient liquidity.
The fund also may invest to a lesser extent in debt securities. The fund also
may invest in securities of companies located in the United States. The
portfolio managers may use various investment techniques to adjust the fund's
investment exposure, but there is no guarantee that these techniques will work.
The principal risks associated with investing in the fund are stock market risk,
foreign exposure risk, style risk (growth investing risk) and emerging markets
risk. To the extent that the portfolio managers invest in debt securities, the
fund would be subject to interest rate risk and credit risk.
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GE Emerging Markets Fund
GE Emerging Markets Fund seeks long-term growth of capital. The fund invests
primarily in equity securities of issuers located in emerging markets. The
portfolio managers focus on companies that are expected to grow faster than
relevant markets and whose security prices do not fully reflect their potential
for growth. Under normal circumstances, the fund's assets are invested in
foreign securities of companies representing at least three different countries.
The portfolio managers consider which emerging market countries in which to
invest based on certain factors, including investment restrictions, tax
barriers, local market cycles, economic outlook for growth, currency exchange
rates and the political environment. The portfolio managers consider the
following factors in determining whether an issuer is located in an emerging
market country: country of organization, primary securities trading market,
location of assets, or country where the issuer derives at least half of its
revenues and profits.
An emerging market country is any country having an economy and market that are
(or would be) considered by the World Bank to be emerging or developing, or
listed in the Morgan Stanley Capital International Emerging Markets Index.
The portfolio managers seek to identify securities of growth companies with
characteristics such as low prices relative to their long-term cash earnings
potential, potential for significant improvement in the company's business,
financial strength and sufficient liquidity.
The fund also may invest to a lesser extent in securities of companies located
in countries other than emerging market countries (including the United States)
and debt securities. The portfolio managers may use various investment
techniques to adjust the fund's investment exposure, but there is no guarantee
these techniques will work.
The principal risks associated with investing in the fund are stock market risk,
foreign exposure risk, emerging markets risk and style risk (growth investing
risk and small-cap company risk). To the extent the portfolio managers invest in
debt securities, the fund would be subject to interest rate risk and credit
risk.
GE Fixed Income Fund
GE Fixed Income Fund seeks maximum income consistent with prudent investment
management and the preservation of capital. The fund invests primarily in a
variety of investment grade debt securities, such as mortgage-backed securities,
corporate bonds, U.S. Government securities and money market instruments. The
fund normally has a weighted average maturity of approximately five to ten
years.
The portfolio managers seek to identify debt securities with characteristics
such as: attractive yields and prices, the potential for capital appreciation
and reasonable credit quality.
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The fund also may invest to a lesser extent in asset-backed securities and
foreign securities. The portfolio managers may use various investment techniques
to adjust the fund's investment exposure, but there is no guarantee that these
techniques will work.
The fund's investment strategy may result in a high portfolio turnover rate,
which may cause the fund to experience increased transaction costs and
shareholders to incur increased taxes on their investment in the fund.
The principal risks associated with investing in the fund are interest rate
risk, credit risk and prepayment risk. To the extent that the portfolio managers
invest in foreign securities, the fund would be subject to foreign exposure
risk. Certain portfolio securities are derivative securities that carry
derivative securities risk.
GE High Yield Fund
GE High Yield Fund seeks to achieve above-average total return over a market
cycle of three to five years, consistent with reasonable risk. The fund invests
primarily in high yield securities (including bonds rated below investment
grade, sometimes called "junk bonds"). The portfolio managers will not sell a
particular security solely because it is no longer classified as high yield. The
fund may also invest in U.S. Government securities, mortgage-backed securities,
investment-grade debt securities, municipal obligations, agency securities, and
short-term fixed income securities, such as certificates of deposit, Treasury
bills and commercial paper. The fund expects to achieve its objective by earning
a high rate of current income, although the fund may seek capital growth
opportunities when consistent with its objective. The fund's weighted average
maturity will ordinarily be greater than five years.
The portfolio managers use equity and fixed income valuation techniques,
analyses of economic and industry trends and maturity and duration management to
determine the portfolio's structure. Individual securities are selected and
monitored by fixed income portfolio managers who specialize in corporate bonds
and use in-depth financial analysis to uncover opportunities in undervalued
issues.
The fund also may invest to a lesser extent in foreign debt securities,
including high yield securities of foreign issuers. The fund also may use
derivative securities to pursue its portfolio strategy. The portfolio managers
may use various investment techniques to adjust the fund's investment exposure,
but there is no guarantee that these techniques will work.
The principal risk associated with investing in this fund is high yield
securities risk. The fund also is subject to interest rate risk, credit risk,
prepayment risk and style risk (high yield value investing risk). To the extent
that the fund invests in foreign securities and derivative securities, the fund
would be subject to foreign exposure risk, emerging markets risk and derivative
securities risk.
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More on Investment Strategies: Holding Cash
Although each GE Allocation Fund invests most of its assets in underlying GE
Funds, each Fund holds a small portion of its assets in cash or cash
equivalents. Under normal circumstances, a Fund will hold cash and/or money
market instruments (i) pending investment, (ii) for cash management purposes,
(iii) to meet operating expenses, and (iv) to promote stability in trading by
reducing the frequency of relatively small transactions. A Fund may invest in
money market instruments directly or indirectly by investing in the GEI
Short-Term Investment Fund (the "Investment Fund"). The Investment Fund is
advised by GE Asset Management, which charges no advisory fee to the Investment
Fund.
More on Risks
Like all mutual funds, investing in the GE Allocation Funds involves risk
factors and special considerations. A Fund's risk is defined primarily by its
principal investment strategies, which are described earlier in this Prospectus.
Investments in a Fund are not insured against loss of principal. As with any
mutual fund, there can be no assurance that a GE Allocation Fund or an
underlying GE Fund will achieve its investment objective.
One of your most important investment considerations should be balancing risk
and return. Different types of investments tend to respond differently to shifts
in the economic and financial environments. So, diversifying your investments
among different asset classes can help you manage risk and achieve the results
you need to comfortably reach your financial goals. Although each GE Allocation
Fund provides a diversified investment option with a conservative, moderate, or
aggressive approach, investing in a Fund may not provide a complete investment
program for all investors.
Because the Funds invest most of their assets in underlying GE Funds, they will
be exposed to the risks associated with the securities in which those underlying
GE Funds invest. The principal risks associated with investing in the GE
Allocation Funds are summarized below. For more information about these and
other risks, please see the SAI.
Allocation Risk: The ability of each GE Allocation Fund to achieve its
investment objective depends in part on the ability of GE Asset Management and
the Investment Consultant to allocate effectively the Fund's assets among the
underlying GE Funds. There can be no assurance that the actual allocations will
be effective in achieving the Fund's investment objective.
Credit Risk: The price of a bond is affected by the issuer's or counterparty's
credit quality. Changes in financial condition and general economic conditions
can affect the ability to honor financial obligations and therefore lower credit
quality. Lower quality bonds are generally more sensitive to these changes than
higher quality bonds. Even within securities considered investment grade,
differences exist in credit quality and some investment grade debt securities
may have speculative characteristics. A security's price may be adversely
affected by the market's opinion of the security's credit quality level even if
the issuer or counterparty has suffered no degradation in its ability to honor
the obligation.
Derivative Securities Risk: A fund's use of various investment techniques to
increase or decrease its exposure to changing security prices, interest rates,
currency exchange rates, commodity prices or other factors that affect security
values may involve derivative securities and contracts. Derivative securities
and contracts (securities and contracts whose values are based on other
securities,
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currencies or indices) include option contracts (on stocks, indices, currencies,
futures contracts and bonds), forward currency exchange contracts, futures
contracts, swaps, and structured securities. Derivative securities and contracts
may be used as direct investment or as a hedge for a fund's portfolio or a
portion of a portfolio. Hedging involves using a security or contract to offset
investment risk. Hedging may include reducing the risk of a position held in a
portfolio. Hedging and other investment techniques also may be used to increase
a fund's exposure to a particular investment strategy. If the portfolio
manager's judgement of market conditions proves incorrect or the strategy does
not correlate well with a fund's investments, the use of derivatives could
result in a loss regardless of whether the intent was to reduce risk or increase
return and may increase a fund's volatility. In addition, in the event that
non-exchange traded derivatives are used, those derivatives could result in a
loss if the counterparty to the transaction does not perform as promised. A fund
is not obligated to pursue any hedging strategy. In addition, hedging techniques
may not be available, may be too costly to be used effectively or may be unable
to be used for other reasons. These investments may be considered speculative.
Emerging Markets Risk: Emerging market securities bear most foreign exposure
risks discussed below. In addition, there are greater risks involved in
investing in emerging markets than in developed foreign markets. Specifically,
the economic structures in emerging market countries are less diverse and mature
than those in developed countries, and their political systems are less stable.
Investments in emerging market countries may be affected by national policies
that restrict foreign investment. Emerging market countries may have less
developed legal structures, and the small size of their securities markets and
low trading volumes can make investments illiquid and more volatile than
investments in developed countries. As a result, a Fund investing in emerging
market countries may be required to establish special custody or other
arrangements before investing.
Foreign Exposure Risk: Investing in foreign securities, including depositary
receipts, or securities of U.S. entities with significant foreign operations,
involves additional risks that can affect a fund's performance. The values of
foreign investments may be affected by changes in currency rates or exchange
control regulations. Less information may be available about foreign issuers.
Foreign markets, particularly emerging markets, may be less liquid, more
volatile and subject to less government supervision than U.S. markets. Foreign
companies often are not subject to uniform accounting, auditing and financial
reporting standards or to other regulatory practices and requirements common to
U.S. companies. There may be difficulties enforcing contractual obligations, and
it may take more time for transactions to clear and settle in foreign countries
than in the United States. The costs of buying and selling foreign securities,
including tax, brokerage and custody costs, generally are higher than those
involving domestic transactions. Changes in economic, tax, foreign investment
policies, government stability, war or other political or economic actions may
have an adverse effect on a fund's foreign investments.
High Yield Securities Risk: Below investment-grade securities, sometimes called
"junk bonds," are considered speculative. These securities have greater risk of
default than higher rated securities. The market value of below investment-grade
securities is more sensitive to individual corporate developments and economic
changes than higher rated securities. The market for below investment-grade
securities may be less active than for higher rated securities, which can
adversely affect the price at which these securities may be sold. Less active
markets may diminish a fund's ability to obtain accurate market quotations when
valuing the portfolio securities and calculating a fund's net asset value. In
addition, a fund may incur additional expenses if a holding defaults and a fund
has to seek recovery of its principal investment. Below investment-grade
securities may also present risks based on payment expectations. For example,
these securities may contain redemption or call provisions. If an issuer
exercises these provisions in a declining interest rate market the fund would
have to replace the security with a lower yield-
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ing security resulting in a decreased return for investors.
Interest Rate Risk: Bond prices generally rise when interest rates decline and
decline when interest rates rise. Generally, the longer the duration of a bond,
the more a change in interest rates affects the bond's price. Short-term and
long-term interest rates may not move the same amount and may not move in the
same direction.
Prepayment Risk: Prices and yields of mortgage-backed securities assume the
securities will be redeemed at a given time. When interest rates decline,
mortgage-backed securities experience higher prepayments because the underlying
mortgages are repaid earlier than expected. A fund's portfolio manager may be
forced to invest the proceeds from prepaid mortgage-backed securities at lower
rates, which results in a lower return for the fund. When interest rates
increase, mortgage-backed securities experience lower prepayments because the
underlying mortgages may be repaid later than expected. This typically reduces
the value of the underlying securities.
Stock Market Risk: A fund's share price will move up and down in reaction to
stock market movements. Stock prices change daily in response to company
activity and general economic and market conditions. A fund's investments in
common stocks and other equity securities are subject to stock market risk,
which is the risk that the value of equity securities may decline. Also, equity
securities are subject to the risk that a particular issuer's securities may
decline in value, even during periods when equity securities in general are
rising. Additional stock market risks may be introduced when a particular equity
security is traded on a foreign market. For more detail on the related risks
involved in foreign markets, see foreign exposure risk.
Style Risk: Securities with different characteristics tend to shift in and out
of favor depending upon market and economic conditions as well as investor
sentiment. A fund may underperform other funds that employ a different style. A
fund also may employ a combination of styles that impact its risk
characteristics. Examples of different styles include growth and value
investing, as well as those focusing on large or small company securities.
o Growth Investing Risk: Growth stocks may be more volatile than other stocks
because they are more sensitive to investor perceptions of the issuing company's
growth potential. Growth oriented funds will typically underperform when value
investing is in favor.
o High Yield Investing Risk: The GE High Yield Fund, one of the underlying GE
Funds, uses value-based criteria to select securities. Such securities may not
realize their perceived value for extended periods of time or may never realize
their perceived value.
o Small-Cap Company Risk: Investing in securities of small-cap companies may
involve greater risks than investing in larger, more established issuers.
Smaller companies may have limited product lines, markets or financial
resources. Their securities may trade less frequently and in more limited volume
than the securities of larger, more established companies. In addition, smaller
companies are typically subject to greater changes in earnings and business
prospects than are larger companies. Consequently, the prices of small company
stocks tend to rise and fall in value more than other stocks. Although investing
in small-cap companies offers potential for above-average returns, the companies
may not succeed and their stock prices could decline significantly.
o Value Investing Risk: Undervalued stocks may not realize their perceived value
for extended periods of time or may never realize their perceived value. Value
stocks may respond differently to market and other developments than other types
of stocks. Value oriented funds will typically underperform when growth
investing is in favor.
Underlying Performance Risk: Because each GE Allocation Fund invests most of its
assets in underlying GE Funds, each GE Allocation Fund's investment performance
is directly related to the performance of those underlying GE Funds. The
performance of those underlying GE Funds, in turn, depends upon the performance
of the securities in which they invest.
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Other Risk Considerations
Conflicts of Interest Risk: The Investment Adviser serves as investment manager
to the GE Allocation Funds and the underlying GE Funds. Similarly, GE Allocation
Funds and the underlying GE Funds have a common Board of Trustees. The interests
of a GE Allocation Fund on the one hand, and an underlying GE Fund on the other,
will not always be the same. Therefore, conflicts may arise as the Investment
Adviser and the Board of Trustees fulfill their fiduciary duties to the GE
Allocation Funds and the underlying GE Funds.
EURO Risk: The introduction of the EURO, a new common currency in Europe, may
result in uncertainties for European companies and markets. Individual issuers
may suffer increased costs and decreased earnings. Market disruptions may occur
that could adversely affect the value of European securities and currencies.
Non-Diversified Investment Company Risk: Because each GE Allocation Fund invests
most of its assets in a limited variety of securities - shares of the underlying
GE Funds - each GE Allocation Fund is considered a "non-diversified" investment
company within the meaning of federal securities laws. Being non-diversified
sometimes creates the risk that a fund's return will be heavily dependent upon
the performance of a relatively small number of investments. Because each
underlying GE Fund is diversified, such risk is mitigated for the GE Allocation
Funds.
Underlying Expense Risk: Investors may invest directly in the GE Funds rather
than indirectly through a GE Allocation Fund. By investing in a GE Allocation
Fund, investors bear their proportionate share of the expenses of that Fund, as
well as similar expenses of the underlying GE Funds.
Y2K Risk: The inability of computer systems worldwide to process correctly
date-related information from before, on, and after January 1, 2000 could cause
difficulties for systems' users (the "Year 2000 Issue"). The impact of failures
by companies, markets, or governments of countries in which the GE Allocation
Funds or the underlying GE Funds invest to address effectively the Year 2000
Issue may be felt well after January 1, 2000 and may negatively impact a fund's
performance. In addition, a fund could be adversely affected if the computer
systems used by its investment adviser or external service providers do not
correctly process such date-related information.
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24 GE Allocation Funds How the Funds
Prospectus Are Managed
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About the Investment Adviser and Administrator
GE Asset Management Incorporated ("GE Asset Management" or the "Investment
Adviser"), located at 3003 Summer Street, P.O. Box 7900, Stamford, Connecticut
06904, is the investment adviser and administrator of each Fund. GE Asset
Management is a registered investment adviser and a wholly-owned subsidiary of
General Electric Company (GE). GE Asset Management's principal officers,
directors and portfolio managers hold similar positions with General Electric
Investment Corporation (GEIC), also a wholly-owned subsidiary of GE. As of
December 31, 1999, GE's investment advisory firms oversaw $115.8 billion of
assets, and managed individual and institutional assets of $91.7 billion, of
which more than $18.2 billion was invested in mutual funds.
For many years, GE's tradition of ingenuity and customer focus has included
financial services. In the late 1920s, through a desire to promote the financial
well-being of its employees, GE began managing assets for its employee pension
plan. By the mid-1930s, GE pioneered some of the nation's earliest mutual funds,
the Elfun Funds -- to be followed years later by the GE Savings and Security
Program Funds. The success of these funds spurred growth; eventually GE expanded
its mutual fund offerings to include a wide variety of investment products
called the GE Family of Funds, created specifically for the general public.
GE Asset Management bases its investment philosophy on two enduring principles.
First, GE Asset Management believes that a disciplined, consistent approach to
investing can add value to an investment portfolio over the long term. Its
commitment to in-depth research, sound judgment and hard work provides investors
with an opportunity to take advantage of attractive investments around the
world. Second, GE Asset Management follows the same principles of integrity and
quality that have guided GE over the past century and have made it the
world-class company that it is today.
Each Fund pays GE Asset Management an investment management fee for advisory and
administrative services. Out of this management fee, GE Asset Management is
responsible for paying the Funds' custodial fees, legal and accounting costs,
printing costs, shareholder communication costs, registration fees, the costs of
regulatory compliance and certain related expenses. The investment management
fee is accrued daily and paid monthly up to the following maximum rates:
GE Conservative Allocation Fund 0.20%
GE Moderate Allocation Fund 0.20%
GE Aggressive Allocation Fund 0.20%
About the Portfolio Manager
Eugene Bolton is the portfolio manager of the GE Allocation Funds and is a
Director and Executive Vice President of GE Asset Management. Mr. Bolton manages
the overall U.S. equity investments for GE Asset Management and leads a team of
portfolio managers for the U.S. Equity Fund, one of the underlying GE Funds. Mr.
Bolton has served in this capacity since the Funds' commencement. He joined GE
Asset Management in 1984 as Chief Financial Officer and has been a portfolio
manager since 1986.
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<PAGE>
----------
25
- --------------------------------------------------------------------------------
About the Investment Consultant
GE Allocation Funds and the GE Asset Management have entered into an Investment
Consulting Agreement with DiMeo, Schneider & Associates, L.L.C., 211 West Wacker
Drive, Suite 500, Chicago, IL 60657 (the "Investment Consultant"). Founded on
May 1, 1995, the Investment Consultant is a mid-sized investment management
consulting firm providing services such as asset allocation analysis and
performance evaluation. Its seven founding members previously worked as a team
at Kidder, Peabody & Co., Inc. in Chicago. Pursuant to the Agreement, the
Investment Consultant provides certain services to GE Asset Management and the
Funds' Board of Trustees to assist each Fund in allocating its assets in
accordance with its investment objective.
The Investment Consultant, in conjunction with GE Asset Management, recommends
to the Board of Trustees:
o changes to the mix of underlying GE Funds in which the GE Allocation Funds
should invest; and
o changes to the asset allocation ranges and targets.
In addition, the Investment Consultant provides certain other services
including:
o performing comprehensive analyses of the underlying GE Funds involving both
quantitative and qualitative research including comparisons of performance
relative to appropriate indices and peer groups and style analysis to determine
consistency and adherence to stated investment objectives;
o monitoring the performance, risk and style consistency of each GE Allocation
Fund;
o reviewing and analyzing the asset allocation targets and ranges among the
underlying GE Funds; and
o providing quantitative and qualitative reports and analyses that are requested
periodically by the Board of Trustees or GE Asset Management.
In exchange for these services, the Investment Consultant receives an
investment-consulting fee that is paid directly by GE Asset Management out of
its investment management fee. No additional cost is borne by the GE Allocation
Funds.
About the Board of Trustees
The Board of Trustees of the GE Allocation Funds have overall responsibility for
supervising and overseeing the management of the Funds. As with most mutual
funds, the Board of Trustees has delegated responsibility for day-to-day
operations of the Funds to its investment adviser. Still, the Board of Trustees
is responsible for approving:
o proposed additions or deletions to the mix of underlying GE Funds;
o proposed changes to the allocation ranges for investing in equity versus
income underlying GE Funds; and
o proposed changes to the allocation targets and ranges among the underlying GE
Funds.
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<PAGE>
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26 GE Allocation Funds How to Invest
Prospectus
- --------------------------------------------------------------------------------
Who May Invest
The GE Allocation Funds are offered to retirement plans, including defined
contribution plans that:
o are determined to be affiliated plans with respect to GE Asset Management, or
o do not seek services in connection with their investments in the Funds that
are provided or paid by GE Asset Management or its affiliates, in addition to
investment advisory services.
Other retirement plan investors (those that are not affiliated plans and seek
additional services) should consider investing in the GE Strategy Funds, which
are offered by a separate prospectus.
Defined Contribution Plan Participants
Plan participants should consult the Summary Plan Description and other
materials describing their plan for information about how to invest in the GE
Allocation Funds.
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<PAGE>
------------------------------------------
Dividends, GE Allocation Funds 27
Capital Gains Prospectus
and Other Tax
Information
- --------------------------------------------------------------------------------
Distributions
Each Fund intends to distribute substancially all of its net investment income
and substantially all of its net realized gains annually. All income dividends
and capital gains distributions made by a Fund to a retirement plan, such as a
defined contribution plan, are reinvested in shares of the Fund at the Fund's
net asset value.
Taxes
Each Fund intends to distribute substantially all of its net investment income
and substantially all of its net realized gains annually. All income dividends
and capital gains distributions made by a Fund to a retirement plan, such as a
defined contribution plan, are reinvested in shares of the Fund at the Fund's
net asset value.
Tax issues can be complicated. We suggest you see your investment professional
or tax advisor for any questions you may have.
Except for investments in tax-deferred accounts, you will generally owe taxes on
amounts distributed to you. Dividends from net investment income and short-term
capital gains are taxed as ordinary income. Long-term capital gain dividends are
taxed at the long-term capital gains rate. Distributions will be taxed in the
same manner whether they are received in cash or reinvested.
In addition, if you sell or redeem Fund shares, you generally will realize a
capital gain or loss, which will be long-term or short-term, depending upon how
long you held those shares. If you exchange shares in one Fund for shares in
another, the exchange will be treated as a sale and purchase of shares for tax
purposes.
Tax Statement
You will receive an annual statement summarizing your dividend and capital gains
distributions. Please consult a tax advisor if you have questions about your
specific tax situation.
- --------------------------------------------------------------------------------
Backup Withholding
If you do not provide complete and certified taxpayer identification
information, each Fund is obligated by law to withhold 31% of Fund
distributions.
- --------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------
28 GE Allocation Funds Calculating
Prospectus Share Value
- --------------------------------------------------------------------------------
Fund shares are sold at their net asset value (NAV). The NAV of each share is
calculated at the close of regular trading on the New York Stock Exchange
(NYSE), normally 4:00 p.m. Eastern time, each day the NYSE is open for trading.
The NAV per share for a Fund is calculated by adding the value of the Fund's
investments, cash and other assets; subtracting the Fund's liabilities from that
sum; and then dividing the difference by the number of that Fund's outstanding
shares.
The assets of each Fund consist primarily of underlying GE Fund shares, which
are valued at their respective net asset values as of the time of computation.
Redemptions in kind will be valued on the effective date at the net asset value
of the underlying GE Funds. In general, the underlying GE Funds value their
portfolio securities at market value or, in the absence of market value, at fair
value as determined by or under the direction of the underlying 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 when the GE Allocation Funds' Board of
Trustees determines that amortized cost is fair value. Amortized cost 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.
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30 GE Allocation Funds Financial
Prospectus Highlights
- --------------------------------------------------------------------------------
The financial highlights table that follows is intended to help you understand a
Fund's financial performance for the fiscal years ended September 30. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned or
lost on an investment in the Fund (assuming reinvestment of all dividends and
distributions). Fiscal year end information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Funds' financial
statements, are included in the Funds' Annual Report, which is available upon
request.
- --------------------------------------------------------------------------------
<PAGE>
----------
31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GE Conservative GE Moderate GE Aggressive
Allocation Fund Allocation Fund Allocation Fund
--------------- --------------- ---------------
9/30/99(a) 9/30/99(a) 9/30/99(a)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Inception date 12/31/98 12/31/98 12/31/98
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00 $10.00 $10.00
- ----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Investment Operations
Net Investment Income (b) 0.13 0.08 0.03
- ----------------------------------------------------------------------------------------------------------------------------------
Net Gains (Losses) on Securities (both realized and unrealized) (c) 0.14 0.31 0.53
- ----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Investment Operations 0.27 0.39 0.56
- ----------------------------------------------------------------------------------------------------------------------------------
Less Distributions
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends (from net investment income) 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions (from capital gains) 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
Returns of Capital 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.27 $10.39 $10.56
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return (d) 2.70% 3.90% 5.60%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $841 $8,422 $7,339
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets* 0.20% 0.20% 0.20%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net Assets* 3.09% 1.98% 0.99%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets* 2.47% 0.45% 0.61%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 140% 18% 10%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes to Financial Highlights
(a) Information is for the period December 31, 1998, inception of investment
operations, through September 30, 1999.
(b) Recognition of net investment income is affected by the timing of the
declaration of dividends by the underlying GE Funds in which the fund
invests.
(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.
(d) Total returns are historical and assume changes in share price,
reinvestment for dividends and capital gains, and assumes no sales charge.
Had the Adviser not absorbed a portion of expenses of the funds and of the
underlying GE Funds, total returns would have been lower. Total returns
are not annualized.
* Annualized for periods less than one year.
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<PAGE>
GE Allocation Funds
Prospectus
- --------------------------------------------------------------------------------
If you wish to You will find additional information about the GE
know more LifeStyle Funds in the following documents:
Annual/Semi-Annual Reports to Shareholders: These
reports detail the Funds' actual investments as of the
report date. Reports include performance numbers and a
discussion of market conditions and investment
strategies that significantly affected Fund performance
during the Funds' last fiscal year.
Statement of Additional Information (SAI): The SAI
contains additional information about the Funds and
their investment strategies and policies and is
incorporated by reference (legally considered part of
this Prospectus).
You may visit the SEC's Internet Website
(http://www.sec.gov) to view the Annual/Semi-Annual
Reports, the SAI and other information about GE
LifeStyle Funds. Also, you may obtain copies of this
information, upon paying a duplication fee, by sending
your request electronically to the following e-mail
address: [email protected], or in writing to the SEC's
Public Reference Section, Washington, D.C. 20549-0102.
You may review and copy information about the Funds,
including the SAI, at the SEC's Public Reference Room in
Washington, D.C. To find out more about the Public
Reference Room, call the SEC at 1-202-942-8090
- --------------------------------------------------------------------------------
GE LifeStyle You may obtain a free copy of the SAI or the Funds'
Funds annual/semiannual report and make shareholder inquiries
by contacting:
GE Investment Distributors, Inc.
P.O. Box 7900
3003 Summer Street
Stamford, CT 06904
Telephone 1-800-242-0134
Website http://www.ge.com/mutualfunds
- --------------------------------------------------------------------------------
Investment GE Asset Management Incorporated
Adviser P.O. Box 7900
3003 Summer Street
Stamford, CT 06904
- --------------------------------------------------------------------------------
Transfer Agent State Street Bank and Trust Company
and Custodian 225 Franklin Street
Boston, MA 02101
- --------------------------------------------------------------------------------
Distributor GE Investment Distributors, Inc.
777 Long Ridge Road, Building B
Stamford, CT 06927
Investment Company Act file number: 811-07701
- --------------------------------------------------------------------------------
RS - LSA - 1
<PAGE>
[Current Draft As of 1/20/00: 2000-SAI-05]
STATEMENT OF ADDITIONAL INFORMATION
January 28, 2000
GE LIFESTYLE FUNDS
3003 Summer Street, Stamford, Connecticut 06905
For information, call 1.800.242.0134
* GE Conservative Strategy Fund * GE Conservative Allocation Fund
* GE Moderate Strategy Fund * GE Moderate Allocation Fund
* GE Aggressive Strategy Fund * GE Aggressive Allocation Fund
This Statement of Additional Information ("SAI") supplements the
information contained in the Prospectuses of GE LifeStyle Funds (the "Trust")
dated January 28, 2000 (each, a "Prospectus," and together the "Prospectuses"),
and should be read in conjunction with the Prospectuses. Terms that are defined
in the Prospectuses have the same meanings in this SAI.
This SAI, although not a Prospectus, is incorporated in its entirety by
reference into the Prospectuses. Copies of the Prospectuses describing the Funds
may be obtained without charge by calling the Trust at 1.800.242.0134. The
Trust's financial statements for the fiscal year ended September 30, 1999 and
the Auditor's Report thereon are incorporated herein by reference to the Trust's
Annual Report dated September 30, 1999, which may be obtained without charge by
telephoning the Trust at 1.800.242.0134 or by writing to the Trust at P.O. Box
120065, Stamford, CT 06912-0065.
<PAGE>
TABLE OF CONTENTS
PRINCIPAL INVESTMENT STRATEGIES AND RISKS OF THE FUNDS.......................3
PRINCIPAL INVESTMENT STRATEGIES OF THE UNDERLYING GE FUNDS...................4
MONEY MARKET INSTRUMENTS.....................................................5
SUPPLEMENTAL INVESTMENT STRATEGIES AND TECHNIQUES OF THE UNDERLYING GE FUNDS.9
INVESTMENT RESTRICTIONS OF THE FUNDS........................................41
INVESTMENT RESTRICTIONS OF THE UNDERLYING GE FUNDS..........................43
PORTFOLIO TRANSACTIONS AND TURNOVER.........................................47
MANAGEMENT OF THE TRUST.....................................................49
PURCHASE, REDEMPTION AND EXCHANGE OF SHARES.................................55
NET ASSET VALUE.............................................................56
DIVIDENDS, DISTRIBUTIONS AND TAXES..........................................56
THE FUNDS'PERFORMANCE.......................................................59
PRINCIPAL SHAREHOLDERS......................................................63
THE FUNDS'HISTORY AND ADDITIONAL INFORMATION................................66
FINANCIAL STATEMENTS........................................................68
APPENDIX - DESCRIPTION OF RATINGS..........................................A-1
<PAGE>
PRINCIPAL INVESTMENT STRATEGIES AND RISKS OF THE FUNDS
------------------------------------------------------
The Trust offers six separate series via two separate Prospectuses. One
Prospectus provides information about GE Conservative Strategy Fund, GE Moderate
Strategy Fund and GE Aggressive Strategy Fund (collectively, the "GE Strategy
Funds"). Another Prospectus provides information about GE Conservative
Allocation Fund, GE Moderate Allocation Fund and GE Aggressive Allocation Fund
(collectively, the "GE Allocation Funds," and together with the "GE Strategy
Funds," the "Funds").
The Funds are asset allocation funds. Each Fund seeks to achieve its
investment objective by investing primarily in a strategic combination of
certain GE Funds (the "Underlying GE Funds"). Each Fund will not necessarily
invest in all Underlying GE Funds. GE Strategy Funds will purchase Class A
shares of the Underlying GE Funds. GE Allocation Funds will purchase Class Y
shares of the Underlying GE Funds. Currently, the Underlying GE Funds are
comprised of the following:
o GE U.S. Equity Fund
o GE Small-Cap Value Equity Fund
o GE International Equity Fund
o GE Emerging Markets Fund
o GE Fixed Income Fund
o GE High Yield Fund
Each Fund may also invest directly in money market instruments or
indirectly by purchasing shares of GEI Short-Term Investment Fund (the
"Investment Fund") or of GE Money Market Fund.
A majority of the Trust's Trustees are non-interested persons of the
Trust as defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended (the "1940 Act"). However, the Trustees and Officers of the Trust also
serve in similar positions with the GE Funds. Thus, if the interests of a Fund
and the Underlying GE Funds were ever to become divergent, it is possible that a
conflict of interest could arise and affect how the Trustees and Officers of the
Trust fulfill their fiduciary duties to that Fund and the Underlying GE Funds.
The Trustees of the Trust believe they have structured each Fund to avoid these
concerns. However, conceivably a situation could occur where proper action for
the Trust or a Fund separately could be adverse to the interests of an
Underlying GE Fund, or the reverse could occur. If such a possibility arises,
the Trustees and Officers of the Trust, GE Funds and GE Asset Management will
carefully analyze the situation and take all steps they believe reasonable to
minimize and, where possible, eliminate the potential conflict.
From time to time, the Underlying GE Funds may experience relatively
large purchases or redemptions due to asset allocation decisions made by GE
Asset Management 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
- 3 -
<PAGE>
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. GE Asset Management 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. Still, GE Asset Management could face conflicts in fulfilling its
responsibilities because of the possible differences between interests of the
Funds and the interests of the Underlying GE Funds.
Under certain circumstances, an Underlying GE Fund may determine to
make payment of a redemption request by a Fund wholly or partly by a
distribution in kind of securities from its portfolio, instead of cash, in
accordance with the rules of the SEC. In such cases, the Funds may hold
securities distributed by an Underlying GE Fund until GE Asset Management
determines that it is appropriate to dispose of such securities.
PRINCIPAL INVESTMENT STRATEGIES OF THE UNDERLYING GE FUNDS
--------------------------------------------------------------------
GE U.S. Equity Fund: The investment objective of the GE 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. The
portfolio managers use a Multi-Style(R) investment strategy that combines growth
and value investment management styles. As a result, the portfolio has
characteristics similar to the Standard & Poor's 500 Composite Stock Index,
including capital appreciation and income potential. Stock selection is key to
the performance of the fund.
GE Small-Cap Value Equity Fund: The investment objective of the GE
Small-Cap Value Fund is long-term growth of capital. The fund seeks to achieve
its investment objective by investing primarily in equity securities of
small-cap companies that the portfolio managers believe are undervalued by the
market but have solid growth prospects. A company may be undervalued for reasons
such as market overreaction to recent company, industry or economic problems.
The fund defines a small-cap company as one with a market capitalization within
the capitalization range of the Russell 2000 Index. As of December 31, 1999 the
market capitalization of companies in the index ranged from $10 million to
$13.04 billion. The portfolio managers will not sell a stock merely because the
market capitalization of a company in the portfolio moves above or below the
maximum or minimum capitalization of the index. Stock selection is key to the
performance of the fund.
GE International Equity Fund: The investment objective of the GE
International Equity Fund is long-term growth of capital, which the fund seeks
to achieve by investing primarily in equity securities of companies located in
developed and developing countries other than the United States. The portfolio
managers focus on companies that they expect will grow faster than relevant
markets and whose security prices do not fully reflect
- 4 -
<PAGE>
their potential for growth. Under normal circumstances, the fund's assets are
invested in foreign securities of companies representing at least three
different countries. Stock selection is key to the performance of the fund.
GE Emerging Markets Fund: The investment objective of the GE Emerging
Markets Fund is long-term growth of capital, which the fund seeks to achieve by
investing primarily in equity securities of issuers located in emerging markets.
GE Fixed Income Fund: The investment objective of the GE Fixed Income
Fund is maximum income consistent with prudent investment management and the
preservation of capital, which the fund seeks to achieve by investing primarily
in a variety of investment grade debt securities, such as mortgage-backed
securities, corporate bonds, U.S. Government securities, and money market
instruments. The fund normally has a weighted average maturity of approximately
five to ten years.
GE High Yield Fund: The investment objective of the GE High Yield Fund
is above-average total return over a market cycle of three to five years,
consistent with reasonable risk, which the fund seeks to achieve by investing
primarily in high yield securities. High yield securities include debt
securities of corporations, preferred stock and convertible bonds and
convertible preferred stock rated Ba through C by Moody's or BB through D by S&P
(or comparably rated by another nationally recognized statistical rating
organization) or, if not rated by Moody's or S&P, are considered by portfolio
management to be of equivalent quality. High yield securities include bonds
rated below investment grade, sometimes called "junk bonds," and are considered
speculative by the major credit rating agencies
MONEY MARKET INSTRUMENTS
------------------------
Types of Money Market Instruments
The types of money market instruments in which each Fund and Underlying
GE Fund may invest directly or indirectly through investment in the GEI
Short-Term Investment Fund (the "Investment Fund"), described below, are as
follows: (i) securities issued or guaranteed by the U.S. Government or one of
its agencies or instrumentalities ("Government Securities"), (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.
- 5 -
<PAGE>
Each Fund and Underlying GE Fund may invest in money market instruments
issued or guaranteed by foreign governments or by any of their political
subdivisions, authorities, agencies or instrumentalities. Money market
instruments held by a Fund may be rated no lower than A-2 by Standard & Poor's
("S&P") or Prime-2 by Moody's Investor's Service ("Moody's") or the equivalent
from another NRSRO, or if unrated, must be issued by an issuer having an
outstanding unsecured debt issue then rated within the three highest categories.
A description of the rating systems of Moody's and S&P is contained in the
Appendix. At no time will the investments of a Fund or an Underlying GE Fund in
bank obligations, including time deposits, exceed 25% of the value of its
assets.
The Investment Fund
Each Fund and Underlying GE Fund may also invest in the Investment
Fund, an investment fund created specifically to serve as a vehicle for the
collective investment of cash balances of the Funds, the Underlying GE Funds and
other accounts advised by GE Asset Management, investment adviser of the Funds
and the Underlying GE Funds, or by its affiliate, General Electric Investment
Corporation ("GEIC"). The Investment Fund invests exclusively in the money
market instruments described in (i) through (vii) above. The Investment Fund is
advised by GE Asset Management. No advisory fee is charged by GE Asset
Management to the Investment Fund, nor will a Fund or an Underlying GE Fund
incur any sales charge, redemption fee, distribution fee or service fee in
connection with its investments in the Investment Fund. Each Fund and Underlying
GE Fund may invest up to 25% of its assets in the Investment Fund.
Government Securities
Each Fund and Underlying GE Fund may invest in the following types of
Government Securities: debt obligations of varying maturities issued by the U.S.
Treasury or issued or guaranteed by the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association ("Ginnie Mae"), General
Services Administration, Central Bank for Cooperatives, Federal Farm Credit
Banks Funding Corporation, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation ("Freddie Mac"), Federal Intermediate Credit Banks, Federal Land
Banks, Federal National Mortgage Association ("Fannie Mae"), Federal Deposit
Insurance Corporation, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board, Student Loan Marketing Association and
Resolution Trust Corporation. Direct obligations of the U.S. Treasury include a
variety of securities that differ in their interest rates, maturities and dates
of issuance. Certain of the Government Securities that may be held by the
Funds or Underlying GE Funds are instruments that are supported by the full
faith and credit of the United States, whereas other Government Securities that
may be held by the Funds or Underlying GE Funds are supported by the right of
the issuer to borrow from the U.S. Treasury or are supported solely by the
credit of the instrumentality. Because the U.S. Government is not obligated by
law to provide support to an instrumentality that it sponsors, a Fund or an
Underlying GE Fund will invest in obligations issued by an instrumentality of
the
- 6 -
<PAGE>
U.S. Government only if the Investment Manager(1) determines that the
instrumentality's credit risk does not make its securities unsuitable for
investment by the Fund or Underlying GE Fund, as the case may be.
GE Money Market Fund
Each Fund may also invest in the GE Money Market Fund. The investment
objective of the GE 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 fund invests in the following U.S. dollar
denominated, short-term money market instruments: (i) Government Securities;
(ii) debt obligations of banks, savings and loan institutions, insurance
companies and mortgage bankers; (iii) commercial paper and notes, including
those with floating or variable 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
GE Money Market Fund limits its portfolio investments to securities
that the GE Funds' Board of Trustees determines present minimal credit risk and
that are "Eligible Securities" at the time of acquisition by the fund. "Eligible
Securities" means securities rated by the requisite nationally recognized
statistical rating organizations ("NRSROs") in one of the two highest short-term
rating categories, consisting of issuers that have received these ratings with
respect to other short-term debt securities and comparable unrated securities.
"Requisite NRSROs" means (i) any two NRSROs that have issued ratings with
respect to a security or class of debt obligations of an issuer or (ii) one
NRSRO, if only one NRSRO has issued such a rating at the time that the fund
acquires the security. Currently, five organizations are NRSROs: S&P, Moody's
Investors Service, Inc. ("Moody's"), Fitch Investors Service, Inc., Duff and
Phelps, Inc. and Thomson BankWatch Inc. A discussion of the ratings categories
is contained in the appendix to this SAI. By limiting its investments to
Eligible Securities, the fund may not achieve as high a level of current income
as a fund investing in lower-rated securities.
GE 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 Securities and Exchange
Commission ("SEC") under the 1940 Act. In addition, the fund may not invest more
than 5% of its total assets in Eligible Securities that have not received the
highest short-term rating for debt obligations and comparable unrated securities
(collectively, "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 fund
- ------------------------
1 As used in this SAI, the term "Investment Manager" shall refer to GE
Asset Management, the investment adviser of the Funds and the
Underlying GE Funds, Palisade Capital Management, L.L.C., sub-adviser
to the GE Small-Cap Value Equity Fund, and Miller Anderson & Sherrerd,
LLP, sub-adviser to the GE High Yield Fund.
- 7 -
<PAGE>
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 (i) 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 (ii) the fund does not make
more than one such investment at any one time. Determinations of comparable
quality for purchases of unrated securities are made by GE Asset Management in
accordance with procedures established by the GE Funds' Board of Trustees. The
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. Up to 25% of the
fund's total assets may be invested in foreign securities, excluding, for
purposes of this limitation, ADRs, U.S., 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 Small-Cap Market. The fund will
maintain a dollar-weighted average portfolio maturity of 90 days or less. The
assets of the fund are valued on the basis of amortized cost, as described below
under "Net Asset Value." The fund also may hold liquid Rule 144A Securities.
SUPPLEMENTAL INVESTMENT STRATEGIES AND TECHNIQUES OF THE UNDERLYING GE FUNDS
----------------------------------------------------------------------------
This section contains certain supplemental information regarding (i)
certain of the securities and other instruments in which the Underlying GE Funds
may invest; (ii) the investment policies and strategies that the Underlying GE
Funds may utilize; and (iii) certain risks attendant to those investments,
policies and strategies. Additional information is provided in the GE Funds'
current prospectus and statement of additional information, which is available
from the Trust upon request.
Some or all of the Underlying GE Funds may invest in the types of
instruments and engage in the types of strategies and techniques described
below. Unless otherwise indicated, all of the Underlying GE Funds are permitted
to invest in these instruments and employ these investment strategies and
techniques. A GE LifeStyle Fund will not purchase any of the following types of
securities or employ any of the following strategies unless doing so is
consistent with its investment objective. The Underlying GE Funds are not
obligated to pursue the following strategies or techniques and neither the Trust
nor the Investment Adviser represents that these strategies and techniques are
available now or will be available at any time in the future. Certain
strategies, techniques and limitations may be changed at the discretion of GE
Asset Management.
- 8 -
<PAGE>
Summary of Investment Techniques of the Underlying GE Funds
The following table summarizes the investment techniques that may be
but are not necessarily employed by the Underlying GE Funds. Percentage figures
refer to the percentage of an Underlying GE Fund's assets that may be invested
in accordance with the indicated technique.
<TABLE>
<CAPTION>
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Emerging Fixed
U.S. Equity Small-Cap International Markets Income High Yield
Fund Value Fund Equity Fund Fund Fund Fund
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Borrowing 33.33% 33.33% 33.33% 33.33% 33.33% 33.33%
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Repurchase Agreements Yes Yes Yes Yes Yes Yes
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Reverse Repurchase Agreements No Yes No Yes No Yes
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Restricted and Illiquid Securities Yes Yes Yes Yes Yes Yes
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Structured and Indexed Securities No No No No Yes Yes
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Purchasing and Writing Securities Yes Yes Yes Yes Yes Yes
Options
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Purchasing and Writing Securities Yes Yes Yes Yes Yes Yes
Index Options
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Futures and Options on Futures Yes No Yes Yes Yes Yes
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Forward Currency Transactions Yes No Yes Yes Yes Yes
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Options on Foreign Currencies Yes No Yes Yes Yes Yes
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Maximum Investment in Debt 35% 35% 35% 35% 100% 100%
Securities (maximum of
25% in BBB by
S&P, Baa by
Moody's or
equivalent)
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Maximum Investment in 5% 10% 5% 10% in BB or B 10% in BB 100%
Below-Investment Grade Debt by S&P or Ba or B by S&P
Securities or B by or Ba or B by
Moody's or Moody's or
equivalent equivalent
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
</TABLE>
- 9 -
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Emerging Fixed
U.S. Equity Small-Cap International Markets Income High Yield
Fund Value Fund Equity Fund Fund Fund Fund
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Maximum Investment in Foreign 15%* 10%* 100% 100% 35%* 35%*
Securities
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
When-Issued and Delayed Delivery Yes Yes Yes Yes Yes Yes
Securities
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Lending Portfolio Securities Yes Yes Yes Yes Yes Yes
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Rule 144A Securities Yes Yes Yes Yes Yes Yes
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Debt Obligations of Supranational Yes Yes Yes Yes Yes Yes
Agencies
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Depositary Receipts Yes Yes Yes Yes Yes Yes
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Securities of Other Investment No Yes Yes Yes Yes Yes
Funds
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Municipal Leases No No No No No No
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Floating and Variable Rate No** No** No** No** Yes Yes
Instruments
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Participation Interests in No No No No No No
Municipal Obligations
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Zero Coupon Obligations Yes No No No Yes Yes
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Municipal Obligations Components No No No No No No
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Custodial Receipts on Municipal No No No No No No
Obligations
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Mortgage Related Securities, No No No No Yes Yes
including CMOs
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Government Stripped Mortgage No No No No Yes Yes
Related Securities
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Asset-Backed Securities and No No No No Yes Yes
Receivables-Backed Securities
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Mortgage Dollar Rolls No No No No Yes Yes
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
Short Sales Against the Box No Yes Yes Yes No Yes
- ------------------------------------- -------------- --------------- ----------------- --------------- -------------- --------------
</TABLE>
- 10 -
<PAGE>
* This limitation excludes ADRs, and securities of a foreign issuer with
a class of securities registered with the Securities and Exchange
Commission and listed on a U.S. national securities exchange or traded
on the Nasdaq National Market or the Nasdaq Small-Cap Market.
** Excludes commercial paper and notes with variable and floating rates of
interest.
Additional Detail Concerning Strategies, Techniques and Risks of the
Underlying GE Funds
Asset-Backed and Receivable-Backed Securities: Certain Underlying GE
Funds 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" ("CARs(SM)")
and interests in pools of credit card receivables. CARs(SM) 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 CARs(SM) may be affected by early prepayment of
principal on the underlying vehicle sales contracts. If the letter of credit is
exhausted, these Underlying GE Funds may be prevented from realizing the full
amount due on a sales contract because of state law requirements and
restrictions relating to foreclosure sales of vehicles and the availability of
deficiency judgments following these sales, because of depreciation, damage or
loss of a vehicle, because of the application of Federal and state bankruptcy
and insolvency laws or other factors. As a result, certificate holders may
experience delays in payment if the letter of credit is exhausted. Consistent
with each of these Underlying GE Funds' investment objective and policies and
subject to the review and approval of the Board, these Underlying GE Funds may
also invest in other types of asset-backed and receivable-backed securities.
Bank Obligations: Domestic commercial banks organized under Federal law
are supervised and examined by the U.S. Comptroller of the Currency and are
required to be members of the Federal Reserve System and to be insured by the
Federal Deposit Insurance Corporation ("FDIC"). Foreign branches of U.S. banks
and foreign banks are not regulated by U.S. banking authorities and generally
are not bound by mandatory reserve requirements, loan limitations, accounting,
auditing and financial reporting standards comparable to U.S. banks. Obligations
of foreign branches of U.S. banks and foreign banks are subject to the risks
associated with investing in foreign securities generally. These obligations
entail risks that are different from those of investments in obligations in
domestic banks, including foreign economic and political developments outside
the United States, foreign governmental restrictions that may adversely affect
payment of principal and interest on the obligations, foreign exchange controls
and foreign withholding or other taxes on income.
- 11 -
<PAGE>
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: (i) 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 (ii) 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.
Below Investment-Grade Debt Securities: Certain Underlying GE Funds are
authorized to invest in securities rated lower than investment grade (sometimes
referred to as "junk bonds"). Below investment-grade and comparable unrated
securities (collectively referred to as "below investment-grade" 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 below investment-grade securities tend to
be more sensitive to individual corporate developments and changes in economic
conditions than higher-rated securities. In addition, below investment-grade
securities generally present a higher degree of credit risks. Issuers of below
investment-grade 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 below investment-grade
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 below investment-grade securities may diminish GE Funds'
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.
Certain Investment Grade Debt 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.
Covered Option Writing: Each Underlying GE Fund may write covered put
and call options on securities. An Underlying GE Fund will realize fees
(referred to as "premiums") for granting the
- 12 -
<PAGE>
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 will write only
options that are covered. A call option written by an Underlying GE Fund will be
deemed covered (i) if the Underlying GE 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, (ii) if the Underlying GE Fund holds a call at the same
exercise price for the same exercise period and on the same securities as the
call written, (iii) in the case of a call option on a stock index, if the
Underlying GE Fund owns a portfolio of securities substantially replicating the
movement of the index underlying the call option, or (iv) if at the time the
call is written, an amount of cash, securities issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities ("Government Securities")
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 (i) 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 GE Funds' custodian or with a designated sub-custodian, or
(ii) if the Underlying GE Fund continues to own an equivalent number of puts of
the same "series" (that is, puts on the same underlying securities having the
same exercise prices and expiration dates as those written by the fund), or an
equivalent number of puts of the same "class" (that is, puts on the same
underlying securities) with exercise prices greater than those that it has
written (or if the exercise prices of the puts it holds are less than the
exercise prices of those it has written, the difference is segregated with GE
Funds' custodian or with a 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.
- 13 -
<PAGE>
So long as the obligation of an Underlying GE Fund as the writer of an
option continues, the Underlying GE Fund may be assigned an exercise notice by
the broker-dealer through which the option was sold, requiring the Underlying GE
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 Underlying GE Fund may engage in a closing purchase transaction to
realize a profit, to prevent an underlying security from being called or put or,
in the case of a call option, to unfreeze an underlying security (thereby
permitting its sale or the writing of a new option on the security prior to the
outstanding option's expiration). To effect a closing purchase transaction, an
Underlying GE Fund would purchase, prior to the holder's exercise of an option
that the Underlying GE Fund has written, an option of the same series as that on
which the Underlying GE 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 Underlying GE Fund would not be
deemed to own an option as the result of the transaction. 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. The Investment Manager 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 Underlying GE 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 Underlying GE 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 Underlying GE Fund initially paid for the original
option plus the related transaction costs.
Option writing for an Underlying GE Fund may be limited by position and
exercise limits established by U.S. securities exchanges and the National
Association of Securities Dealers, Inc. and by requirements of the Internal
Revenue Code of 1986, as amended (the "Code") for qualification as a regulated
investment company. In addition to writing covered
- 14 -
<PAGE>
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's position being offset by a loss
on the hedge position.
An Underlying GE Fund will engage in hedging transactions only when
deemed advisable by the Investment Manager. Successful use by an Underlying GE
Fund of options will depend on the Investment Manager'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 a fund's performance.
Currency Exchange Rates: A 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.
Custodial Receipts: Certain Underlying GE Funds may acquire custodial
receipts or certificates underwritten by securities dealers or banks that
evidence ownership of future interest payments, principal payments, or both, on
certain Municipal Obligations. The underwriter of these certificates or receipts
typically purchases Municipal Obligations and deposits the obligations in an
irrevocable trust or custodial account with a custodian bank, which then issues
receipts or certificates that evidence ownership of the periodic unmatured
coupon payments and the final principal payment on the obligations. Custodial
receipts evidencing specific coupon or principal payments have the same general
attributes as zero coupon Municipal Obligations described below. Although under
the terms of a custodial receipt an Underlying GE Fund would be typically
authorized to assert its rights directly against the issuer of the underlying
obligation, the Underlying GE Fund could be required to assert through the
custodian bank those rights as may exist against the underlying issuers. Thus,
in the event the underlying issuer fails to pay principal and/or interest when
due, an Underlying GE Fund may be subject to delays, expenses and risks that are
greater than those that would have been involved if the Underlying GE Fund had
purchased a direct obligation of the issuer. In addition, in the event that the
trust or custodial account in which the underlying security has been deposited
is determined to be an association taxable as a corporation, instead of a
non-taxable entity, the yield on the underlying security would be reduced in
recognition of any taxes paid.
- 15 -
<PAGE>
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 a fund's portfolio can be expected to vary
inversely to changes in prevailing interest rates. In periods of declining
interest rates, the yield of an Underlying GE Fund holding a significant amount
of debt instruments will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates, the 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.
Depositary Receipts: Certain Underlying GE Funds may 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 of these Underlying GE Funds
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.
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.
EURO Conversion: The introduction of a single European currency, the
EURO, on January 1, 1999 for participating European countries in the Economic
Monetary Union ("Participating Countries") presents unique risks and
uncertainties for investors in those countries, including (i) whether the
payment and operational systems of banks and other financial institutions will
perform as expected; (ii) the creation of suitable clearing and settlement
payment schemes for the EURO; (iii) the legal treatment of outstanding financial
contracts after January 1, 1999 that refer to existing currencies rather than
the EURO; (iv) the fluctuation of the EURO relative to non-EURO currencies
during the transition period from January 1, 1999 to December
- 16 -
<PAGE>
31, 2000 and beyond; and (v) whether the interest rate, tax and labor regimes of
the Participating Countries will converge over time. Further, the conversion of
the currencies of other Economic Monetary Union countries, such as the United
Kingdom, and the admission of other countries, including Central and Eastern
European countries, to the Economic Monetary Union could adversely affect the
EURO. These or other factors may cause market disruptions and could adversely
affect the value of European securities and currencies held by the Underlying GE
Funds.
Floating and Variable Rate Instruments: Certain Underlying GE Funds may
invest in floating and variable rate instruments. Income securities may provide
for floating or variable rate interest or dividend payments. The floating or
variable rate may be determined by reference to a known lending rate, such as a
bank's prime rate, a certificate of deposit rate or the London InterBank Offered
Rate (LIBOR). Alternatively, the rate may be determined through an auction or
remarketing process. The rate also may be indexed to changes in the values of
interest rate or securities indexes, currency exchange rate or other
commodities. Variable and floating rate securities tend to be less sensitive
than fixed rate securities to interest rate changes and to have higher yields
when interest rates increase. However, during periods of rising interest rates,
changes in the interest rate of an adjustable rate security may lag changes in
market rates.
The amount by which the rates paid on an income security may increase
or decrease may be subject to periodic or lifetime caps. Fluctuations in
interest rates above these caps could cause adjustable rate securities to behave
more like fixed rate securities in response to extreme movements in interest
rates.
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.
Certain Underlying GE Funds may purchase floating and variable rate
demand bonds and notes, which are Municipal Obligations ordinarily having stated
maturities in excess of one year but which permit their holder to demand payment
of principal at any time or at specified intervals. Variable rate demand notes
include master demand notes, which are obligations that permit an Underlying GE
Fund to invest fluctuating amounts, which may change daily without penalty,
pursuant to direct arrangements between the fund, as lender, and the borrower.
These obligations have interest rates that fluctuate from time to time and
frequently are secured by letters of credit or other credit support arrangements
provided by banks. Use of letters of credit or other credit support arrangements
will not adversely affect the tax-exempt status of variable rate demand notes.
Because they are direct lending arrangements between the lender and borrower,
variable rate demand notes generally will not be traded and no established
secondary market generally exists for them, although they are redeemable at face
value. If variable rate demand notes are not secured by letters of credit or
other credit support arrangements, a fund's right to demand payment will be
dependent on the ability of the borrower to pay principal and
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interest on demand. Each obligation purchased by an Underlying GE Fund will meet
the quality criteria established by the Investment Manager for the purchase of
Municipal Obligations. The Investment Manager considers on an ongoing basis the
creditworthiness of the issuers of the floating and variable rate demand
obligations in the relevant Fund's portfolio.
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 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 Underlying GE 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.
Forward Currency Transactions: Certain Underlying GE Funds may hold
currencies to meet settlement requirements for foreign securities and may engage
in currency exchange transactions to protect against uncertainty in the level of
future exchange rates between a particular foreign currency and the U.S. dollar
or between foreign currencies in which the fund's securities are or may be
denominated. 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. No Underlying GE Fund will
enter into forward currency transactions for speculative purposes. 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 Code for a given year.
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 (i) are traded in a market conducted directly between
currency traders (typically, commercial banks or other financial institutions)
and their customers, (ii) generally have no deposit requirements and (iii) are
typically consummated without payment of any commissions. A fund, however, may
enter into forward currency
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contracts requiring deposits or involving the payment of commissions. 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. To assure that a 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
(i) pay for and receive the underlying currency, (ii) negotiate with the dealer
to roll over the contract into a new forward currency contract with a new future
settlement date or (iii) 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 a 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 the Investment
Manager. A 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.
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 fund's
ability to hedge against the risk of devaluation of currencies in which the
Underlying GE Fund holds a substantial quantity of securities. The successful
use of forward currency contracts as a hedging technique draws upon the
Investment Manager's special skills and experience with respect to those
instruments and will usually depend upon the Investment Manager'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. 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. 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.
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.
The ability to dispose of a fund's positions in forward currency
contracts depends on the availability of active markets in those instruments,
and the Investment Manager cannot predict the amount of trading interest that
may exist in the future in forward currency contracts.
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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.
Futures and Related Options: Each Fund, other than the GE Small-Cap
Value Equity 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 CFTC 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 Underlying GE Fund
involved. No Underlying GE Fund will enter into a transaction involving futures
and options on futures for speculative purposes.
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 indices that reflect the market value of common stock of the
companies included in the indices. 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.
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 staff of
the SEC 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 GE Funds' custodian or a
designated sub-custodian or "covered" in a manner similar to that for covered
options on securities and designed to eliminate any potential leveraging.
No consideration is paid or received by an Underlying GE Fund upon
trading a futures contract. Upon entering into a futures contract, cash,
short-term Government Securities or other U.S. dollar-denominated, high-grade,
short-term money market instruments equal to approximately 1% to 10% of the
contract amount will be segregated with GE Funds' custodian or
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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, an Underlying GE Fund
may elect to close a position by taking an opposite position, which will operate
to terminate the fund's existing position in the contract.
If an Underlying GE Fund has hedged against the possibility of an
increase in interest rates 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.
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 Underlying GE Fund holding the
options.
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.
Losses incurred in hedging transactions and the costs of these transactions will
affect a fund's performance.
Although GE Funds intends that the Underlying GE Funds enter into
futures contracts only if an active market exists for the contracts, 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 the contracts at any particular
time. Most U.S. futures exchanges and boards of trade limit the amount of
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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.
Government Stripped Mortgage Related Securities: Certain Underlying GE
Funds may invest in government stripped mortgage related securities issued and
guaranteed by Ginnie Mae, Fannie Mae or Freddie Mae. These securities represent
beneficial ownership interests in either periodic principal distributions
("principal-only") or interest distributions ("interest-only") on mortgage
related certificates issued by Ginnie Mae, Fannie Mae or Freddie Mae. The
certificates underlying the government stripped mortgage related securities
represent all or part of the beneficial interest in pools of mortgage loans.
These Underlying GE Funds 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 the Investment Manager 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 these Underlying GE Funds.
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
prepayment 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 these Underlying
GE Funds not fully recovering their initial investment in an interest-only
government stripped mortgage related security. 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 these Underlying GE
Funds will be able to effect a trade of a government stripped mortgage related
security at a desired time. These Underlying GE Funds 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 GE Funds'
Board of Trustees, GE Funds treats government stripped mortgage related
securities as illiquid and will limit each of these Underlying GE Funds'
investments in these securities, together with other illiquid investments, to
not more than 15% of its net assets.
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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
a fund's assets taken at value. The fund's loans of securities will be
collateralized by cash, letters of credit or Government Securities. Cash or
instruments collateralizing a fund's loans of securities are segregated and
maintained at all times with GE Funds' custodian, or with a designated
sub-custodian, in an amount at least equal to the current market value of the
loaned securities. In lending securities, an Underlying GE Fund will be subject
to risks, which, like those associated with other extensions of credit, include
possible loss of rights in the collateral should the borrower fail financially.
If an Underlying GE Fund loans its portfolio securities, it will adhere
to the following conditions whenever its portfolio securities are loaned: (i)
the Underlying GE Fund must receive at least 100% cash collateral or equivalent
securities from the borrower; (ii) the borrower must increase the collateral
whenever the market value of the securities loaned rises above the level of the
collateral; (iii) the Underlying GE Fund must be able to terminate the loan at
any time; (iv) 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; (v) the Underlying GE Fund may pay
only reasonable custodian fees in connection with the loan; and (vi) 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 (the "Board") 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 Underlying GE Fund and is acting as a "finder."
Mortgage Dollar Rolls: Certain Underlying GE Funds may, with respect to
up to 25% of their total assets, enter into mortgage "dollar rolls" in which the
Underlying GE Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Underlying GE Fund loses the right to receive principal and interest
paid on the securities sold. However, the Underlying GE Fund would benefit to
the extent of any price received for the securities sold and the lower forward
price for the future purchase (often referred to as the "drop") or fee income
plus the interest earned on the cash proceeds of the securities sold until the
settlement date of the forward purchase. Unless such benefits exceed the income,
capital appreciation and gain or loss due to mortgage repayments that would have
been realized on the securities sold as part of the mortgage dollar roll, the
use of this technique will diminish the investment performance of the Underlying
GE Fund compared with what such performance would have been without the use of
mortgage dollar rolls. The Underlying GE Fund will hold and maintain in a
segregated account until the settlement date cash or liquid assets in an amount
equal to the forward purchase price. The benefits derived from the use of
mortgage dollar rolls may depend upon the Investment Manager's ability to
predict correctly mortgage prepayments and interest rates. There is no assurance
that mortgage dollar rolls can be successfully employed.
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For financial reporting and tax purposes, each of these Underlying GE
Funds proposes to treat mortgage dollar rolls as two separate transactions: one
involving the purchase of a security and the other involving a sale. The
Underlying GE Funds do not currently intend to enter into mortgage dollar rolls
that are accounted for as a financing.
Mortgage Related Securities: Certain Underlying GE Funds may invest in
mortgage related securities which 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.
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. Ginnie Mae, the principal U.S.
guarantor of these securities, is a wholly-owned U.S. government corporation
within the Department of Housing and Urban Development. Government-related
mortgage related securities are not backed by the full faith and credit of the
United States. Issuers include Fannie Mae and Freddie Mae. Fannie Mae 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 Fannie Mae are guaranteed as to
timely payment of principal and interest by Fannie Mae. Freddie Mae 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 Freddie Mae's national portfolio are guaranteed as to the
timely payment of interest and ultimate collection of principal by Freddie Mae.
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. The Investment Manager assesses new types of mortgage related
securities as they are developed and offered to determine their appropriateness
for investment by the relevant Fund.
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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 these Underlying GE Funds. 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 these Underlying GE Funds. Because prepayments of
principal generally occur when interest rates are declining, the Underlying GE
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 these Underlying
GE Funds purchase mortgage related securities at a premium, unscheduled
prepayments, which are made at par, will result in a loss equal to any
unamortized premium.
Adjustable rate mortgage related securities ("ARMs") have interest
rates that reset at periodic intervals, thereby allowing certain Underlying GE
Funds 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, these
Underlying GE Funds generally will be able to reinvest these amounts in
securities with a higher current rate of return. None of these Underlying GE
Funds, 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, these Underlying GE Funds' 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 behind changes in market rates, creating the potential for
some principal loss for shareholders who redeem their shares of these Underlying
GE Funds before the interest rates on the underlying mortgages are adjusted to
reflect current market rates.
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Collateralized mortgage related securities ("CMOs") are obligations
fully collateralized by a portfolio of mortgages or mortgage related securities.
Payments of principal and interest on the mortgages are passed through to the
holders of the CMOs on the same schedule as they are received, although certain
classes of CMOs have priority over others with respect to the receipt of
prepayments on the mortgages. Therefore, depending on the type of CMOs in which
these Underlying GE Funds 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 the
Investment Manager, each of these Underlying GE Funds limits its investments in
these securities, together with other illiquid instruments, to not more than 15%
of the value of its net assets.
Municipal Leases: Municipal leases are Municipal Obligations that may
take the form of a lease or an installment purchase contract issued by state and
local governmental authorities to obtain Underlying GE Funds to acquire a wide
variety of equipment and facilities such as fire and sanitation vehicles,
computer equipment and other capital assets. Interest payments on qualifying
municipal leases are exempt from Federal income taxes and state income taxes
within the state of issuance. Although municipal lease obligations do not
normally constitute general obligations of the municipality, a lease obligation
is ordinarily backed by the municipality's agreement to make the payments due
under the lease obligation. These obligations have evolved to make it possible
for state and local government authorities to acquire property and equipment
without meeting constitutional and statutory requirements for the issuance of
debt. Thus, municipal leases have special risks not normally associated with
Municipal Obligations. These obligations frequently contain "non-appropriation"
clauses that provide that the governmental issuer of the obligation has no
obligation to make future payments under the lease or contract unless money is
appropriated for those purposes by the legislative body on a yearly or other
periodic basis. In addition to the non-appropriation risk, municipal leases
represent a type of financing that has not yet developed the depth of
marketability associated with other Municipal Obligations. Some municipal lease
obligations may be, and could become, illiquid. Moreover, although municipal
leases will be secured by the leased equipment, the disposition of the equipment
in the event of foreclosure might prove to be difficult.
Municipal lease obligations may be deemed to be illiquid as determined
by or in accordance with methods adopted by the Board. In determining the
liquidity and appropriate valuation of a municipal lease obligation, the
following factors relating to the security are considered, among others: (i) the
frequency of trades and quotes; (ii) the number of dealers willing to purchase
or sell the security; (iii) the willingness of dealers to undertake to make a
market; (iv) the nature of the marketplace trades; and (v) the likelihood that
the obligation will continue to be marketable based on the credit quality of the
municipality or relevant obligor.
Municipal leases held by an Underlying GE Fund will be considered
illiquid securities unless its Board of Trustees determines on an ongoing basis
that the leases are readily marketable. An unrated municipal lease with a
non-appropriation risk that is backed by an irrevocable bank
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letter of credit or an insurance policy issued by a bank or insurer deemed by
the Investment Manager to be of high quality and minimal credit risk, will not
be deemed to be illiquid solely because the underlying municipal lease is
unrated, if the Investment Manager determines that the lease is readily
marketable because it is backed by the letter of credit or insurance policy.
Municipal leases that an Underlying GE Fund may acquire will be both
rated and unrated. Rated leases that may be held by an Underlying GE Fund
include those rated investment grade at the time of investment or those issued
by issuers whose senior debt is rated investment grade at the time of
investment. An Underlying GE Fund may acquire unrated issues that the Investment
Manager deems to be comparable in quality to rated issues in which an Underlying
GE Fund is authorized to invest. A determination that an unrated lease
obligation is comparable in quality to a rated lease obligation and that there
is a reasonable likelihood that the lease will not be canceled will be subject
to oversight and approval by the Board.
To limit the risks associated with municipal leases, an Underlying GE
Fund will invest no more than 5% of its total assets in those leases. In
addition, an Underlying GE Fund will purchase lease obligations that contain
non-appropriation clauses when the lease payments will commence amortization of
principal at an early date resulting in an average life of five years or less
for the lease obligation.
Municipal Obligations: The term "Municipal Obligations" as used herein
means debt obligations issued by, or on behalf of, states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities or multistate agencies or
authorities, the interest from which debt obligations is, in the opinion of bond
counsel to the issuer, excluded from gross income for Federal income tax
purposes. Municipal Obligations generally are understood to include debt
obligations issued to obtain Underlying GE Funds for various public purposes,
including the construction of a wide range of public facilities, refunding of
outstanding obligations, payment of general operating expenses and extensions of
loans to public institutions and facilities. Private activity bonds that are
issued by or on behalf of public authorities to finance privately operated
facilities are considered to be Municipal Obligations if the interest paid on
them qualifies as excluded from gross income (but not necessarily from
alternative minimum taxable income) for Federal income tax purposes in the
opinion of bond counsel to the issuer.
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest on them from Federal income taxes are rendered by bond
counsel to the respective issuers at the time of issuance. Neither GE Funds nor
the Investment Manager will review the proceedings relating to the issuance of
Municipal Obligations or the basis for opinions of counsel. Sizable investments
in these obligations could involve an increased risk to the Underlying GE Funds
should any of the related projects or facilities experience financial
difficulties.
Municipal Obligations may be issued to finance life care facilities,
which are an alternative form of long-term housing for the elderly that offer
residents the independence of a condominium life-style and, if needed, the
comprehensive care of nursing home services. Bonds
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to finance these facilities have been issued by various state industrial
development authorities. Because the bonds are secured only by the revenues of
each facility and not by state or local government tax payments, they are
subject to a wide variety of risks, including a drop in occupancy levels, the
difficulty of maintaining adequate financial reserves to secure estimated
actuarial liabilities, the possibility of regulatory cost restrictions applied
to health care delivery and competition from alternative health care or
conventional housing facilities.
Even though Municipal Obligations are interest-bearing investments that
promise a stable flow of income, their prices are inversely affected by changes
in interest rates and, therefore, are subject to the risk of market price
fluctuations. The values of Municipal Obligations with longer remaining
maturities typically fluctuate more than those of similarly rated Municipal
Obligations with shorter remaining maturities. The values of fixed income
securities also may be affected by changes in the credit rating or financial
condition of the issuing entities.
Tax legislation in recent years has included several provisions that
may affect the supply of, and the demand for, Municipal Obligations, as well as
the tax-exempt nature of interest paid on those obligations. Neither GE Funds
nor the Investment Manager can predict with certainty the effect of recent tax
law changes upon the Municipal Obligation market, including the availability of
instruments for investment by a fund. In addition, neither GE Funds nor the
Investment Manager can predict whether additional legislation adversely
affecting the Municipal Obligation market will be enacted in the future. GE
Funds monitors legislative developments and considers whether changes in the
objective or policies of an Underlying GE Fund need to be made in response to
those developments. If legislation were enacted that would treat a type of
Municipal Obligation as taxable for Federal income tax purposes, GE Funds would
treat the security as a permissible taxable money market instrument for the
Underlying GE Fund within the applicable limits set forth in its current
prospectus. Investors in certain states may be subject to state taxation on all
or a portion of the income and capital gains produced by such securities.
Municipal Obligation Components: Certain Underlying GE Funds may invest
in Municipal Obligations, the interest rate on which has been divided by the
issuer into two different and variable components, which together result in a
fixed interest rate. Typically, the first of the components (the "Auction
Component") pays an interest rate that is reset periodically through an auction
process, whereas the second of the components (the "Residual Component") pays a
residual interest rate based on the difference between the total interest paid
by the issuer on the Municipal Obligation and the auction rate paid on the
Auction Component. An Underlying GE Fund may purchase both Auction and Residual
Components. Because the interest rate paid to holders of Residual Components is
generally determined by subtracting the interest rate paid to the holders of
Auction Components from a fixed amount, the interest rate paid to Residual
Component holders will decrease as the Auction Component's rate increases and
increase as the Auction Component's rate decreases. Moreover, the extent of the
increases and decreases in market value of Residual Components may be larger
than comparable changes in the market value of an equal principal amount of a
fixed rate Municipal Obligation having similar credit quality, redemption
provisions and maturity.
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Options on Foreign Currencies: Certain Underlying GE Funds 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 a fund's options on foreign currencies
to 5% of the value of the fund's total assets.
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.
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 a fund's position, the Underlying GE Fund could forfeit the entire amount of
the premium plus related transaction costs.
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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 (i)
other complex foreign political and economic factors, (ii) lesser availability
of data on which to make trading decisions than in the United States, (iii)
delays in a fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the United States, (iv) the imposition of
different exercise and settlement terms and procedures and margin requirements
than in the United States and (5) lesser trading volume.
Over-the-Counter ("OTC") Options: Certain 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 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 an
Underlying GE 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
transaction may result in material losses to a 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 a 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.
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Participation Interests: Certain Underlying GE Funds may purchase from
financial institutions participation interests in certain Municipal Obligations.
A participation interest gives the Underlying GE Fund an undivided interest in
the Municipal Obligation in the proportion that the fund's participation
interest bears to the total principal amount of the Municipal Obligation. These
instruments may have fixed, floating or variable rates of interest. If the
participation interest is unrated, or has been given a rating below one that is
otherwise permissible for purchase by a fund, the participation interest will be
backed by an irrevocable letter of credit or guarantee of a bank that the fund's
Board of Trustees has determined meets certain quality standards, or the payment
obligation otherwise will be collateralized by Government Securities. An
Underlying GE Fund will have the right, with respect to certain participation
interests, to demand payment, on a specified number of days' notice, for all or
any part of the fund's participation interest in the Municipal Obligation, plus
accrued interest. GE Funds intends that an Underlying GE Fund exercise its
right to demand payment only upon a default under the terms of the Municipal
Obligation, or to maintain or improve the quality of its investment portfolio.
An Underlying GE Fund will invest no more than 5% of the value of its total
assets in participation interests.
Purchasing Put and Call Options on Securities: Each Underlying GE Fund
may purchase put and call options that are traded on a U.S. or foreign
securities exchange or in the over-the-counter market. An Underlying GE Fund
may utilize up to 10% of its assets to purchase put options on portfolio
securities and may do so at or about the same time that it purchases the
underlying security or at a later time. By buying a put, an Underlying GE Fund
will seek to limit its risk of loss from a decline in the market value of the
security until the put expires. Any appreciation in the value of the underlying
security, however, will be partially offset by the amount of the premium paid
for the put option and any related transaction costs. An Underlying GE 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
a fund. In addition, the premiums paid by an Underlying GE Fund in purchasing
options on securities, options on securities indices, options on foreign
currencies and options on futures contracts will not exceed 20% of the fund's
net assets.
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 the Investment
Manager as initial criteria for the selection of portfolio
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securities on behalf of an Underlying GE Fund, the Investment Manager also
relies upon its own analysis to evaluate potential investments.
Subsequent to its purchase by a fund, an issue of securities may cease
to be rated or its rating may be reduced below the minimum required for purchase
by the fund. Although neither event will require the sale of the securities by a
fund, the Investment Manager will consider the event in its determination of
whether the Underlying GE Fund should continue to hold the securities. 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.
Repurchase and Reverse Repurchase Agreements: Each Underlying GE Fund
may engage in repurchase agreement transactions with respect to instruments in
which the Underlying GE Fund is authorized to invest. The Underlying GE Funds
may engage in repurchase agreement transactions with certain member banks of the
Federal Reserve System and with certain dealers listed on the Federal Reserve
Bank of New York's list of reporting dealers. Under the terms of a typical
repurchase agreement, which is deemed a loan for purposes of the 1940 Act, an
Underlying GE Fund would acquire an underlying obligation for a relatively short
period (usually from one to seven days) subject to an obligation of the seller
to repurchase, and the Underlying GE Fund to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the fund's
holding period. This arrangement results in a fixed rate of return that is not
subject to market fluctuations during the fund's holding period. The value of
the securities underlying a repurchase agreement of an Underlying GE Fund are
monitored on an ongoing basis by the Investment Manager to ensure that the value
is at least equal at all times to the total amount of the repurchase obligation,
including interest. The Investment Manager also monitors, on an ongoing basis to
evaluate potential risks, the creditworthiness of those banks and dealers with
which an Underlying GE Fund enters into repurchase agreements.
Certain Underlying GE Funds 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
Underlying GE Fund of securities that it holds concurrently with an agreement by
the Underlying GE Fund to repurchase the same securities at an agreed upon price
and date. An Underlying GE Fund uses the proceeds of reverse repurchase
agreements to provide liquidity to meet redemption requests and to make cash
payments of dividends and distributions when the sale of the fund's securities
is considered to be disadvantageous. Cash, Government Securities or other liquid
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.
In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, a fund's use of the
proceeds of the agreement may be restricted pending a determination by the
party, or its trustee or receiver, whether to enforce the fund's obligation to
repurchase the securities.
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Restricted and Other Illiquid Securities: Each Fund may invest up to
10% of its assets 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 the fund's Board of Trustees based upon the trading markets for the
securities. In addition, each fund may invest up to 15% of its assets 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 Underlying GE 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 the Investment Manager has
determined are not liquid under guidelines established by the Board.
Restricted 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 a 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.
Investments in illiquid securities are subject to the risk that should the
Investment Manager desire to sell any of those securities when a ready buyer is
not available at a price that the Investment Manager deems representative of
their value, the value of the fund's net assets could be adversely affected.
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 a fund's limitation on the purchase of illiquid securities,
unless the Board determines on an ongoing basis that an adequate trading market
exists for the Rule 144A Securities. A fund's purchase of Rule 144A Securities
could have the effect of increasing the level of illiquidity in the Underlying
GE Fund to the extent that qualified institutional buyers become uninterested
for a time in purchasing Rule 144A Securities held by the fund. GE Funds' Board
of Trustees has established standards and procedures for determining the
liquidity of a Rule 144A Security and monitors the Investment Manager's
implementation of the standards and procedures. The ability to sell to qualified
institutional buyers under Rule 144A is a recent development and GE Asset
Management cannot predict how this market will develop.
Securities Index Options: In seeking to hedge all or a portion of its
investments, each fund may purchase and write put and call options on securities
indices listed on U.S. or foreign securities exchanges or traded in the
over-the-counter market, which indices include securities held in the 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
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on securities indices 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. An Underlying GE Fund may purchase and write put and call options on
securities indexes or securities 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 securities index
fluctuates with changes in the market values of the securities included in the
index. Securities 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 securities indices differ from
options on securities. Unlike a securities option, which contemplates the right
to take or make delivery of securities at a specified price, an option on a
securities index gives the holder the right to receive a cash "exercise
settlement amount" equal to (i) 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 (ii) a fixed "index multiplier." Receipt of this cash amount will
depend upon the closing level of the securities 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 securities index options
prior to expiration by entering into a closing transaction on an exchange or it
may allow the option to expire unexercised.
The effectiveness of purchasing or writing securities 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 securities 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
security, 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 prices in the market generally or, in the case of certain indices, in an
industry or market segment, rather than movements in the price of a particular
security. As a result, successful use by an Underlying GE Fund of options on
securities indices is subject to the Investment Manager's ability to predict
correctly movements in the direction of the 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 securities.
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
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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 the Investment Manager desires that an Underlying GE Fund engage in such a
transaction.
Securities of Other Investment Companies: Certain Underlying GE Funds
may invest in investment funds that invest principally in securities in which
the Underlying GE Fund is authorized to invest. Currently, pursuant to the 1940
Act, an Underlying GE Fund may hold securities of another investment company in
amounts which (i) do not exceed 3% of the total outstanding voting stock of such
company, (ii) do not exceed 5% of the value of the fund's total assets and (iii)
when added to all other investment company securities held by the fund, do not
exceed 10% of the value of the fund's total assets. Investments by an Underlying
GE Fund in the Investment Fund is not considered an investment in another
investment company for purposes of this restriction. 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.
Short Sales Against the Box: Certain Underlying GE Funds may sell
securities "short against the box." Whereas a short sale is the sale of a
security an Underlying GE Fund does not own, a short sale is "against the box"
if at all times during which the short position is open, the Underlying GE 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.
Structured and Indexed Securities: Certain Underlying GE Funds 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 or 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 Underlying GE Funds will bear the market risk of the reference
instrument.
Supranational Agencies: Each Underlying GE Fund may invest up to 10% of
its assets in debt obligations of supranational agencies such as: the
International Bank for Reconstruction and Development (commonly referred to as
the World Bank), which was chartered to finance development projects in
developing member countries; the European Community, which is a multi-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
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agencies are not considered Government Securities and are not supported,
directly or indirectly, by the U.S. Government.
Temporary Defensive Positions: During periods when the Investment
Manager believes there are unstable market, economic, political or currency
conditions domestically or abroad, the Investment Manager may assume, on behalf
of a fund, a temporary defensive posture and (i) without limitation hold cash
and/or invest in money market instruments, or (ii) restrict the securities
markets in which the fund's assets will be invested by investing those assets in
securities markets deemed by the Investment Manager to be conservative in light
of the fund's investment objective and policies. Under normal circumstances,
each Underlying GE Fund may invest a portion of its total assets in cash and/or
money market instruments for cash management purposes, pending investment in
accordance with the fund's investment objective and policies and to meet
operating expenses. To the extent that a fund holds cash or invests in money
market instruments, it may not achieve its investment objective.
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 fund's net
assets. Warrants acquired by an Underlying GE Fund in units or attached to
securities may be deemed to be without value.
WEBS and Other Index-Related Securities: Certain Underlying GE Funds
may invest in shares in an investment company whose shares are known as "World
Equity Benchmark Shares" or "WEBS." WEBS have been listed for trading on the
American Stock Exchange, Inc. The Underlying GE Funds also may invest in the
CountryBaskets Index Fund, Inc., or another Underlying GE Fund the shares of
which are the substantial equivalent of WEBS. Certain Underlying GE Funds may
invest in S&P Depositary Receipts, or "SPDRs." SPDRs are securities that
represent ownership in a long-term unit investment trust that holds a portfolio
of common stocks designed to track the performance of the S&P 500 Index. An
Underlying GE Fund investing in a SPDR would be entitled to the dividends that
accrue to the S&P 500 stocks in the underlying portfolio, less trust expenses.
When-Issued and Delayed-Delivery Securities: To secure prices or yields
deemed advantageous at a particular time, each 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 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
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"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 fund's when-issued or delayed-delivery
purchase commitments will be segregated with 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 a
fund's net asset value.
When an Underlying GE Fund engages in when-issued or delayed-delivery
securities transactions, it relies on the selling party to consummate the trade.
Failure of the seller to do so may result in the Underlying GE Funds incurring a
loss or missing an opportunity to obtain a price considered to be advantageous.
Zero Coupon Obligations: Certain Underlying GE Funds 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 these
Underlying GE Funds 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 Underlying GE Fund
otherwise would not have done so. To the extent these Underlying GE Funds are
required to liquidate thinly traded securities, the Underlying GE 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 these Underlying GE Funds to pay
distributions, each of those Underlying GE 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 GE High Yield Fund may invest up to 10% of its assets in zero
coupon Municipal Obligations. Zero coupon Municipal Obligations are generally
divided into two categories: "Pure Zero Obligations," which are those that pay
no interest for their entire life and "Zero/Fixed Obligations," which pay no
interest for some initial period and thereafter pay interest currently. In the
case of a Pure Zero Obligation, the failure to pay interest currently may result
from the obligation's having no stated interest rate, in which case the
obligation pays only
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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.
INVESTMENT RESTRICTIONS OF THE FUNDS
------------------------------------
The following policies and limitations supplement those described in
the Prospectuses and this SAI. Each Fund is subject to fundamental and
non-fundamental investment policies and limitations. Under the 1940 Act,
fundamental investment policies and limitations may not be changed without the
vote of a majority of the outstanding voting securities (as defined in the 1940
Act) of the Fund. Investment restrictions numbered 1 through 7 below have been
adopted by the Trust as fundamental policies and limitations of the Funds.
Investment restrictions 8 through 12 are non-fundamental policies or limitations
and may be changed by a vote of the Trust's Board of Trustees at any time.
Fundamental Policies and Limitations
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
(i) purchasing debt obligations, (ii) lending portfolio securities in
an amount not to exceed 30% of the fund's assets taken at market value,
and (iii) 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,
- 38 -
<PAGE>
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.
7. No Fund may invest in commodities, except that each Fund may engage in
transactions involving futures and options on futures, and forward
contracts.
Non-fundamental Policies and Limitations
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.
- 39 -
<PAGE>
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.
Notes to Policies and Limitations
With respect to investment restriction No. 9, investments by the Funds
in the 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.
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.
INVESTMENT RESTRICTIONS OF THE UNDERLYING GE FUNDS
--------------------------------------------------
The following policies and limitations supplement those described in
the Prospectuses and this SAI, and in the current prospectus and statement of
additional information for the GE Funds. Each Underlying GE Fund is subject to
fundamental and non-fundamental investment policies and limitations. Under the
1940 Act, fundamental investment policies and limitations may not be changed
without the vote of a majority of the outstanding voting securities (as defined
in the 1940 Act) of the fund. Investment restrictions numbered 1 through 10
below have been adopted by GE Funds as fundamental policies and limitations of
the funds. Investment restrictions 11 through 17 are non-fundamental policies or
limitations and may be changed by a vote of the Board of Trustees at any time.
Fundamental Policies and Limitations
1. No Underlying GE Fund may borrow money, except that GE Small-Cap Value
Equity Fund, GE Emerging Markets Fund and GE High Yield Fund may enter
- 40 -
<PAGE>
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 of 5% or more of an Underlying GE Fund's total
assets are outstanding, including reverse repurchase agreements, 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 (i) purchasing debt obligations, (ii) lending portfolio
securities in an amount not to exceed 30% of the Underlying GE Fund's
assets taken at market value, (iii) entering into repurchase agreements
(iv) 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 (v) entering into variable rate demand notes.
3. No Underlying GE Fund may purchase securities (other than Government
Securities) of any issuer if, as a result of the purchase, more than 5%
of the Underlying GE Fund's total assets would be invested in the
securities of the issuer, except that up to 25% of the value of the
total assets of each Underlying GE Fund 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 (i) this limitation is
not applicable to an Underlying GE Fund's investments in Government
Securities and (ii) up to 25% of the value of the assets of an
Underlying GE 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. For purposes
of this restriction, the term industry will be deemed to include (i)
the government of any one country other than the United States, but not
the U.S. Government and (ii) all supranational organizations.
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
- 41 -
<PAGE>
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 (i) invest in securities secured by real estate,
mortgages or interests in real estate or mortgages, (ii) purchase
securities issued by companies that invest or deal in real estate,
mortgages or interests in real estate or mortgages, (iii) engage in the
purchase and sale of real estate as necessary to provide it with an
office for the transaction of business or (iv) acquire real estate or
interests in real estate securing an issuer's obligations, in the event
of a default by that issuer.
8. No Underlying GE Fund may make short sales of securities or maintain a
short position, unless at all times when a short position is open, the
Underlying GE Fund owns an equal amount of the securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to,
the securities sold short.
9. No Underlying GE Fund may purchase securities on margin, except that an
Underlying GE Fund may obtain any short-term credits necessary for the
clearance of purchases and sales of securities. For purposes of this
restriction, the deposit or payment of initial or variation margin in
connection 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 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' current prospectus and statement of additional
information.
Non-fundamental Policies and Limitations
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 each Underlying GE Fund may purchase and sell covered put
and call options on securities and stock indexes and futures contracts
and options on futures contracts.
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.
- 42 -
<PAGE>
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.
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. 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, 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 GE Funds' Board
of Trustees based upon the trading markets for the securities.
17. No Underlying GE Fund may issue senior securities except as otherwise
permitted by the 1940 Act and as otherwise permitted herein.
Notes to Policies and Limitations
With respect to investment restriction No. 12, investments by the Underlying GE
Funds in the 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 No.
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.
- 43 -
<PAGE>
PORTFOLIO TRANSACTIONS AND TURNOVER
-----------------------------------
Portfolio Transactions
Decisions to buy and sell securities for each Fund and each Underlying
GE Fund are made by GE Asset Management, subject to review by the Trust's and GE
Funds' Board of Trustees, respectively.
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. Generally, no stated commissions are applicable to securities traded in
U.S. over-the-counter markets, but the prices of those securities include
undisclosed commissions or mark-ups. The cost of securities purchased from
underwriters include an underwriting commission or concession, and the prices at
which securities are purchased from and sold to dealers include a dealer's
mark-up or mark-down. Government Securities generally will be purchased on
behalf of a fund from underwriters or dealers, although certain newly issued
Government Securities may be purchased directly from the U.S. Treasury or from
the issuing agency or instrumentality.
In selecting brokers or dealers to execute securities transactions on
behalf of a Fund, the Investment Manager seeks the most favorable terms
available under the circumstances ("best execution"). In assessing the overall
terms available to ensure best execution for any transaction, the Investment
Manager 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 the Trust and GE
Asset Management relating to each Fund authorizes the Investment Manager, on
behalf of the 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 Fund and/or other accounts
over which the Investment Manager or its affiliates exercise investment
discretion. The fees under the investment advisory agreement relating to a Fund
will not be reduced by reason of the Fund's receiving brokerage and research
services. In addition, subject to the overall policy of best execution, the
investment manager may consider sales of Fund shares in selecting brokers or
dealers to execute securities transactions on behalf of a Fund. The Board
periodically reviews the commissions paid by a Fund to determine if the
commissions paid over representative periods of time were reasonable in relation
to the benefits inuring to the Fund. Over-the-counter purchases and sales on
behalf of the Funds will be transacted directly with principal market makers
except in those cases in which better prices and executions may be obtained
elsewhere. A Fund will not purchase any security, including Government
Securities, during the existence of any underwriting or selling group relating
to the security of which any affiliate of the Fund or the Investment Manager is
a member, except to the extent permitted under rules, interpretations or
exemptions of the SEC.
- 44 -
<PAGE>
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.
None of the GE Strategy Funds made payments to broker-dealers for
execution of portfolio transactions during the fiscal year ended September 30,
1999 or September 30, 1998. None of the GE Allocation Funds made payments to
broker-dealers for execution of portfolio transactions during their first fiscal
period ended September 30, 1999.
Portfolio Turnover
Each Fund may purchase or sell portfolio securities to: (i) accommodate
purchases and sales of its shares, (ii) change the percentages of its assets
invested in each of the Underlying GE Funds in response to market conditions,
and (iii) maintain or modify the allocation of its assets among the Underlying
GE Funds within the specified asset allocation ranges for that Fund. For the
fiscal period ended September 30, 1999, the actual portfolio turnover rates for
the Funds were:
Annual Portfolio Turnover Rate
Period Ended 9/30/99 Period Ended 9/30/98
- --------------------------------------------------------------------------------
GE Conservative Strategy Fund 71% 67%
GE Moderate Strategy Fund 41% 22%
GE Aggressive Strategy Fund 27% 28%
GE Conservative Allocation Fund 140% --
GE Moderate Allocation Fund 18% --
GE Aggressive Strategy Fund 10% --
For the fiscal period ended September 30, 1999, the actual portfolio
turnover rates for the Underlying GE Funds were:
Annual Portfolio Turnover Rate
Period Ended 9/30/99 Period Ended 9/30/98
- --------------------------------------------------------------------------------
GE U.S. Equity Fund 46% 29%
GE Small-Cap Value Equity Fund 182% --
GE International Equity Fund 51% 93%
GE Emerging Markets Fund 59% --
GE Fixed Income Fund 246% 219%
GE High Yield Fund 27% --
With regard to the Funds, higher turnover rates (in excess of 100%) may
result in higher transaction expenses being incurred by the Funds and
shareholders in those Funds
- 45 -
<PAGE>
indirectly bearing their proportionate share of those expenses. Similarly, with
regard to the Underlying GE Funds, higher turnover rates (in excess of 100%) may
result in higher transaction expenses being incurred by the funds and
shareholders (including the Funds) in those funds indirectly bearing their
proportionate share of those expenses. Such transaction expenses may include
brokerage and acquisition costs. Higher portfolio turnover rates also may cause
shareholders to incur increased taxes on their investments. Variations in
portfolio turnover rate may be due to fluctuations in shareholder purchase,
exchange and redemption transactions or market conditions, or the Investment
Adviser's outlook.
MANAGEMENT OF THE TRUST
-----------------------
Trustees and Officers
The names of the Trustees and executive officers of the Trust, their
addresses and their principal occupations during the past five years and their
other affiliations are shown below. The executive officers of the Trust are
employees of organizations that provide services to the Funds. The Trustees and
executive officers of the Trust also serve in such capacities for GE Funds. An
asterisk appears before the name of each Trustee who is an "interested person"
of the Trust as defined in the 1940 Act.
<TABLE>
<CAPTION>
Age and Principal
Positions Held Occupation(s)
Name and Address with Trust During Past Five Years
- ---------------- ---------- ----------------------
<S> <C> <C>
*Michael J. Cosgrove Chairman of the Age 50. President, GE Asset Management Services group of
3003 Summer Street Board and President GE Financial Assurance Holdings, Inc. ("GEFA"), an
Stamford, CT 06905 indirect wholly owned subsidiary of General Electric
Company ("GE"), since February 1997; Vice-President, GE Capital
Corporation, an indirect wholly owned subsidiary of GE, since December
1995; Executive Vice President - Mutual Funds of GE Asset Management and
GEIC, wholly-owned subsidiaries of GE that are registered as
investment advisers under the Investment Advisers Act of 1940, as
amended, since March 1993; Director of GE Asset Management and GEIC
since 1988; from 1988 until 1993, Mr. Cosgrove served as Executive Vice
President - Finance and Administration of GE Asset Management and GEIC;
since 1993, Mr. Cosgrove has served as Chairman of the Board, Chief
Executive Officer and President of GE Investment Distributors, Inc., a
registered broker-dealer; since 1998, Mr. Cosgrove has served as
Chairman of the Board and Chief Executive Officer of GE Retirement
Services, Inc.
*Alan M. Lewis Trustee and Age 53. Executive Vice President, General Counsel and
3003 Summer Street Executive Vice Secretary of GE Asset Management since 1988 and of GEIC
Stamford, CT 06905 President since October 1987.
</TABLE>
- 46 -
<PAGE>
<TABLE>
<S> <C> <C>
John R. Costantino Trustee Age 53. Managing Director, Walden Partners, Ltd.,
150 East 58th Street consultants and investors, since August 1992; President,
New York, NY 10055 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.
William J. Lucas Trustee Age 52. Vice President and Treasurer of Fairfield
Fairfield University University since 1983.
North Benson Road
Fairfield, CT 06430
Robert P. Quinn Trustee Age 63. Retired since 1983 from Salomon Brothers, Inc.;
45 Shinnecock Road Director, GP Financial Corp., a holding company, since
Quogue, NY 11959 1994; Director, The Greenpoint Savings Bank, a financial
institution, since 1987.
Michael Tansley Treasurer Age 35. Manager of Fund Administration at GE Asset
3003 Summer Street Management and GEIC since May 1998; from 1990 to May 1998,
Stamford, CT 06905 Mr. Tansley held various progressive positions leading to
senior manager in July 1996, in the Investment Company Services Group of
PricewaterhouseCoopers LLP (formerly Price Waterhouse LLP).
Matthew J. Simpson Secretary Age 38. Vice President, Associate General Counsel and
3003 Summer Street Assistant Secretary of GE Asset Management and GEIC since
Stamford, CT 06905 October 1992; attorney with the law firm of Baker &
McKenzie, April 1991 to October 1992; prior to April 1991 was an
attorney with the law firm of Spengler Carlson Gubar Brodsky &
Frischling.
</TABLE>
No employee of GE or any of its affiliates receives any compensation from the
Trust for acting as a Trustee or officer of the Trust. Each Trustee of the Trust
who is not a director, officer or employee of GE Asset Management, GE Investment
Distributors, Inc. (the "Distributor"), GE, or any affiliate of those companies,
receives an annual fee of $2,000 for services as Trustee.
- 47 -
<PAGE>
Trustees' Compensation*
(for the fiscal year ended September 30, 1999)
Total Compensation
Total Compensation from all Investment
Name of Trustee from the Trust Companies Managed by
GEIC or GE Asset Management
- -------------------------------------------------------------------------------
Michael J. Cosgrove None None+
Alan M. Lewis None None+
John R. Costantino $2,000 $25,000++
William J. Lucas $2,000 $25,000++
Robert P. Quinn $2,000 $25,000++
- ------------------------
* The Trustees are also reimbursed for expenses incurred in connection
with attendance at Board meetings.
+ As of September 30, 1999, Mr. Cosgrove served as Trustee or Director of
four investment companies advised by GE Asset Management and of eight
investment companies advised by GEIC. Mr. Lewis serves as Trustee of
three investment companies advised by GE Asset Management and of eight
investment companies advised by GEIC. They are considered to be
interested persons of each investment company advised by GE Asset
Management or GEIC, as defined under Section 2(a)(19) of the 1940 Act,
and accordingly, serve as Trustees thereof without compensation.
++ As of September 30, 1999, Messrs. Costantino, Lucas and Quinn served as
Trustees or Directors of four investment companies advised by GE Asset
Management.
Investment Adviser and Administrator
GE Asset Management Incorporated ("GE Asset Management"), 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. For the fiscal
period ended September 30, 1999, GE Conservative Strategy Fund paid $ 2,754.00,
GE Moderate Strategy Fund paid $ 63,478.00, and GE Aggressive Strategy Fund
paid $ 8,288.00 to GE Asset Management for investment advisory and
administration services. For the period January 5, 1998 (the GE Strategy Funds'
inception) through September 30, 1998, GE Conservative Strategy Fund paid
$ 991.00, GE Moderate Strategy Fund paid $ 40,509.00, and GE Aggressive
Strategy Fund paid $ 3,372.00 to GE Asset Management for investment advisory
and administration services. For the period December 31, 1998 (the GE
Allocation Funds' inception) through September 30, 1999, GE Conservative
Allocation Fund paid $ 681.00, GE Moderate Allocation Fund paid $ 6,291.00, and
GE Aggressive Strategy Fund paid $ 3,788.00 to GE Asset Management for
investment advisory and administration services.
- 48 -
<PAGE>
With respect to each Fund, pursuant to the agreement governing the
investment advisory and administration services provided by GE Asset Management,
out of its investment advisory and administration fee, GE Asset Management bears
all expenses of the Funds other than those costs specifically borne by the
Funds. Costs borne by GE Asset Management include: (i) custodial fees, (ii)
legal and accounting fees, (iii) printing costs and registration fees, (iv)
regulatory compliance and filing costs, (v) costs of shareholders' reports and
shareholder meetings and meetings of the officers or Board of Trustees; and
(vi) other costs not specifically borne by the GE Strategy Funds. Costs
specifically borne by the Funds are: (i) advisory and administration fees, (ii)
brokerage fees and commissions, (iii) interest, (iv) fees and expenses of the
Trustees who are not affiliated with GE Asset Management or its affiliates
(including counsel fees), (v) taxes payable by the Trust, (vi) transfer agency
costs (some of which may be borne by the Underlying GE Funds as sub-transfer
agency expenses of those funds), and (vii) any extraordinary expenses.
In addition, 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.
Investment Consultant
DiMeo, Schneider & Associates, L.L.C. (the "Investment Consultant" or "DS&A") is
located at 211 West Wacker Drive, Suite 500, Chicago, Illinois 60657, and serves
as investment consultant to the Trust's Board of Trustees and GE Asset
Management. 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. Out of its advisory and
administration fee, GE Asset Management pays the Investment Consultant fees for
investment consulting services provided by the Investment Consultant to the
Board of Trustees and GE Asset Management.
Custodian, Transfer Agent & Dividend Disbursing 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, and as dividend disbursing agent.
Under its custodian contract with the Trust, State Street is authorized to
appoint one or more banking institutions as sub-custodians 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
and dividend disbursing agent, State Street is responsible for processing
redemption requests and crediting dividends to the accounts of shareholders of
the Funds.
- 49 -
<PAGE>
Distributor
GE Investment Distributors, Inc. (the "Distributor"), located at 777 Long Ridge
Road, Building B, Stamford, Connecticut, 06927, serves as the distributor of
shares of the funds on a best efforts basis. The Distributor, an indirect
wholly-owned subsidiary of GE, also serves as Distributor for the GE Funds, GE
Institutional Funds, GE Investments Funds, Inc. and the Elfun Funds. GE Asset
Management 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.
Shareholder Servicing and Distribution Plans
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. Under the Plans, GE Funds will pay GE Asset Management, with
respect to Class A shares of an Underlying GE Fund, an annual shareholder
servicing and distribution fee equal to 0.25% of the value of the Underlying GE
Fund's average daily net assets attributable to Class A. Because each GE
Strategy Fund purchases Class A Shares of the Underlying GE Funds, each such
Fund will bear indirectly its proportionate share of these fees.
The service portion of this fee is used by GE Asset Management to
compensate itself and others, including the Distributor, for providing ongoing
servicing and/or maintenance of the accounts of shareholders of Class A shares
("Shareholder Services"). The distribution portion of this fee is used to
compensate GE Asset Management or to allow GE Asset Management to compensate
others, including the Distributor, for its expenses associated with activities
that are primarily intended to result in the sale of Class A shares of the
Underlying GE Funds ("Selling Services"). These service and distribution fees
will be calculated daily and paid monthly by the Underlying GE Funds.
Shareholder Services means all forms of shareholder liaison services,
including, among other things, providing shareholders of a Fund with: (i)
information on the Fund's and the Underlying GE Funds' investments; (ii) general
information regarding investing in mutual funds; (iii) periodic newsletters
containing materials relating to the Fund or the Underlying GE Funds or to
investments in general in mutual funds; (iv) periodic financial seminars
designed to assist in the education of shareholders with respect to mutual funds
generally and the Funds or the Underlying GE Funds specifically; (v) access to a
telephone inquiry center relating the Funds; and (vi) other similar services not
otherwise required to be provided by the Funds' custodian or transfer agent.
- 50 -
<PAGE>
Selling Services include, but are not limited to: (i) printing and
distributing to prospective investors in the Funds Prospectuses and SAIs used in
connection with sales of shares of the Funds; (ii) preparing (including
printing), and distributing sales literature and media advertisements relating
shares of the Funds; and (iii) distributing shares of the Funds. Service
providers that assist GE Asset Management in rendering Shareholder Services or
Selling Services or both ("Service Providers") will be compensated by GE Asset
Management as described above.
Payments under the Plans are not tied exclusively to the expenses for
shareholder servicing and distribution expenses actually incurred by GE Asset
Management or Service Providers, and the payments may exceed expenses actually
incurred by GE Asset Management or Service Providers. GE Fund's Board of
Trustees evaluates the appropriateness of the Plans and the payment terms on an
ongoing basis and in doing so considers all relevant factors.
PURCHASE, REDEMPTION AND EXCHANGE OF SHARES
-------------------------------------------
The GE Strategy Funds are offered to defined contribution plans that
are determined not to be affiliated plans with respect to GE Asset Management
and that seek services in connection with their investments in the Funds in
addition to investment advisory services. The GE Allocation Funds, on the other
hand, are offered to defined contribution plans that are determined to be
affiliated plans with respect to GE Asset Management or do not seek additional
services provided or paid by GE Asset Management or its affiliates in connection
with their investment in the Funds.
For each day on which a Fund's net asset value is calculated, a defined
contribution plan that has invested in a Fund (a "Plan") transmits to the Funds
any orders to purchase or sell shares of the Fund based on net contributions,
withdrawal requests or transfer requests from Plan participants. The Plan
purchases and redeems shares at the Fund's net asset value per share next
determined calculated as of the day that the Plan administrator receives the
order from Plan participants. Payment by the Fund of shares redeemed by the Plan
is made within seven days, except that redemption may be postponed when
permitted by applicable laws or regulations.
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<PAGE>
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 GE Asset Management 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 GE Asset Management under the general supervision and
responsibility of the Board of Trustees of the Trust.
DIVIDENDS, DISTRIBUTIONS AND TAXES
----------------------------------
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 net investment income are declared and paid annually. Written
confirmations relating to the automatic reinvestment of dividends will be sent
to shareholders within five days following the end of each fiscal year.
Distributions of any net realized long-term and short-term capital gains earned
by a Fund will be made annually. These dividends and distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. All expenses of the Funds are accrued
daily and deducted from net asset value before declaration of dividends to
shareholders.
Each Fund is subject to a 4% non-deductible excise tax measured with
respect to certain undistributed amounts of net investment income and capital
gains. If necessary to avoid the imposition of this tax, and if in the best
interests of the Fund's shareholders, the Trust will declare and pay dividends
of the Fund's net investment income and distributions of the Fund's net capital
gains more frequently than stated above.
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<PAGE>
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.
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 and elect treatment each
year as a "regulated investment company" under the Code. If a Fund (1) is a
regulated investment company and (2) distributes to its shareholders at least
90% of its net investment income (including for this purpose its net realized
short-term capital gains) and 90% of its tax-exempt interest income (reduced by
certain expenses), the Fund will not be liable for Federal income taxes to the
extent that its net investment income and its net realized long-term and
short-term capital gains, if any, are distributed to its shareholders. In
addition, in order to avoid a 4% excise tax, a Fund must declare, no later than
December 31 and distribute no later than the following January 31, at least 98%
of its taxable ordinary income earned during the calendar year and 98% of its
capital gain net income for the one year period ending on October 31 of such
calendar year. One requirement for qualification as a regulated investment
company is that each Fund must diversify its holdings so that, at the end of
each quarter, (i) at least 50% of the market value of the Fund's assets is
represented by cash and cash items, securities of other regulated investment
companies, U.S. government securities and other securities, with such other
securities limited for purposes of this calculation in respect of any one issuer
to an amount not greater than 5% of the value of the Fund's assets and not
greater than 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its total assets is invested in the securities
of any one issuer or of two or more issuers that are controlled by the Fund
(within the meaning of Section 851(b)(4)(B) of the Code) that are engaged in the
same or similar trades or businesses or related trades or businesses (other than
Government Securities or the securities of other regulated investment
companies).
The requirements for qualification as a regulated investment company
also include 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
- 53 -
<PAGE>
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. GE Funds seeks to monitor transactions of each Fund, 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.
If for any taxable year a Fund or an Underlying GE Fund fails to
qualify as a regulated investment company, all of its taxable income will be
subject to federal income tax at regular corporate rates (without any deduction
for distributions to its shareholders). In such event, dividend distributions,
including amounts derived from interest on long-term capital gains and
tax-exempt interest) would be taxable to shareholders to the extent of current
and accumulated earnings and profits, and would be eligible for the dividends
received deduction for corporations in the case of corporate shareholders.
If an Underlying GE Fund fails to qualify as a regulated investment
company, a Fund's ability to qualify could also be adversely affected.
Distributions from the Underlying GE Fund to a Fund would be taxable dividends
as described above and would be qualifying income for the recipient Fund.
However the Fund's investment in the Underlying GE Fund would be treated like an
investment in a regular corporation for purposes of the diversification
requirements, so that, for example, a Fund could be in violation of the
diversification requirement if more than 25% of its assets were invested in an
Underlying GE Fund that fails to qualify as a regulated investment company.
As a general rule, a shareholder's gain or loss on a sale or redemption
of shares of a Fund will be a long-term capital gain or loss if the shareholder
has held the shares as a capital
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<PAGE>
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.
The Fund's net realized long-term capital gains are distributed as
described in the Prospectus. The distributions ("capital gain dividends"), if
any, are taxable to a shareholder of a Fund as long-term capital gains,
regardless of how long a shareholder has held the shares, and will be designated
as capital gain dividends in a written notice mailed by the Trust to the
shareholders of the Fund after the close of the Fund's prior taxable year. If a
shareholder receives a capital gain dividend with respect to any share of a
Fund, and if the share is sold before it has been held by the shareholder for
six months or less, then any loss on the sale or exchange of the share, to the
extent of the capital gain dividend, will be treated as a long-term capital
loss. Investors considering buying shares of a fund on or just prior to the
record date for a taxable dividend 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
----------------------
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. 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. From time to time, the Trust may advertise an
"average annual total return" over various periods of time for each Fund. This
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<PAGE>
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. 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.
Additional information regarding the manner in which performance
figures are calculated is provided below.
Yield
The 30-day yield figure is calculated according to a formula prescribed
by the SEC. The formula can be expressed as follows:
6
Yield = 2[(a-b + 1) -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.
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.
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<PAGE>
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 for the Funds described in
the Prospectuses, are computed according to a formula prescribed by the SEC. The
formula can be expressed as follows:
n
P(1 + T) = 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 and
complete redemption of the hypothetical investment at the end
of the measuring period.
The average annual total return for the periods ended September 30,
1999 for each of the Funds was as follows:
One Year Since Inception Inception Date
-------- --------------- --------------
GE Conservative Stategy Fund 9.74% 10.60% 01/05/98
GE Moderate Strategy Fund 14.75% 14.54% 01/05/98
GE Aggressive Srrategy Fund 19.63% 18.24% 01/05/98
GE Conservative Allocation Fund 10.03% 10.03% 12/31/98
GE Moderate Allocation Fund 14.76% 14.76% 12/31/98
GE Aggressive Allocation Fund 20.22% 20.22% 12/31/98
Aggregate Total Return
The "aggregate total return" figures for the Funds 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
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<PAGE>
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.
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 Standard
& Poor's Composite Index of 500 stocks ("S&P 500 Index"), Russell 2000 Index
("Russell 2000"), Lehman Brothers Aggregate Bond Index ("LB Aggregate"), Lehman
Brothers Intermediate Government/Corporate Bond Index ("LB Int. Gov't/Corp"),
Morgan Stanley Capital International Europe, Australasia, Far East Index ("MSCI
EAFE"), Morgan Stanley Capital International Emerging Markets Free Index ("MSCI
EMF"), and the Dow Jones Industrial Average or (3) other appropriate indexes of
investment securities or with data developed by GE Asset Management derived from
those indexes. 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 Russell 2000 measures the performance of the smallest companies in
the Russell 3000 Index representing approximately 10% of the total market
capitalization in the Russell 3000 Index. 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 LB Int. Gov't/Corp is comprised of
the Government bonds and Corporate bonds portions of the LB Aggregate. The MSCI
EAFE is a composite of foreign securities traded in 20 developed markets
representing Europe, Australasia, New Zealand and the Far East. The MSCI EMF is
a composite of securities available to non-domestic investors traded in 25
emerging markets.
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.
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<PAGE>
PRINCIPAL SHAREHOLDERS
----------------------
The following persons are the only persons known by the Trust to hold
of record more than 5% of the outstanding shares of the funds as of January 15,
2000. State Street Bank and Trust Company is a Massachusetts trust for profit.
NAME AND ADDRESS OF RECORD OWNER AMOUNT OF OWNERSHIP
(In Shares) (PercenT)
- --------------------------------------------------------------------------------
GE Conservative Strategy Fund
- --------------------------------------------------------------------------------
State Street Bank & Trust Co TTEE 132,176 56.13%
FBO Promus Hotels
Conservative LifeStyle Fund
Master Trust Client Services - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
State Street Bank & Trust Co TTEE 50,851 21.59%
FBO Aggregate Industries Inc.
Conservative LifeStyle Fund
1 Enterprise Drive
N Quincy, MA 02171-2126
State Street Bank & Trust Co TTEE 28,794 12.21%
Atlantis Plastics Inc.
Conservative LifeStyle Fund
Master Trust Client Services - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
State Street Bank & Trust Co TTEE 13,699 5.82%
London Fog Industries
Conservative LifeStyle Fund
Master Trust Client Services - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
- --------------------------------------------------------------------------------
GE Moderate Strategy Fund
- --------------------------------------------------------------------------------
State Street Bank & Trust Co TTEE 2,330,901 75.23%
FBO Promus Hotels
Moderate LifeStyle Fund
Master Trust Client Services - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
State Street Bank & Trust Co TTEE 635,266 20.50%
FBO Aggregate Industries Inc.
Moderate Strategy LifeStyle Fund
1 Enterprise Drive
N Quincy, MA 02171-2126
- --------------------------------------------------------------------------------
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<PAGE>
NAME AND ADDRESS OF RECORD OWNER AMOUNT OF OWNERSHIP
(In Shares) (PercenT)
- --------------------------------------------------------------------------------
GE Aggressive Strategy Fund
- --------------------------------------------------------------------------------
State Street Bank & Trust Co TTEE 257,896 49.15%
FBO Promus Hotels
Aggressive LifeStyle Fund
Master Trust Client Services - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
State Street Bank & Trust Co TTEE 155,995 29.73%
FBO Aggregate Industries Inc.
Aggressive Strategy LifeStyle Fund
1 Enterprise Drive
N Quincy, MA 02171-2126
State Street Bank & Trust Co TTEE 47,664 9.08%
Atlantis Plastics Inc.
Aggressive Strategy LifeStyle Fund
Master Trust Client Services - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
State Street Bank & Trust Co TTEE 45,248 8.62%
Central Lewmar Inc.
Aggressive Strategy LifeStyle Fund
1 Enterprise Drive
N Quincy, MA 02171-2126
- --------------------------------------------------------------------------------
GE Conservative Allocation Fund
- --------------------------------------------------------------------------------
State Street Bank & Trust Co TTEE 53,094 62.69%
FBO Deepbeach & Co.
Master Trust Client Ser - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
General Electric Capital Assurance 10,244 12.10%
Attn. Jerry Fulps
601 Union Street Suite 1400
Seattle, WA 98101-2341
State Street Bank & Trust Co TTEE 6,719 7.93%
FBO GNA Savings Plan
Master Trust Client Ser - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
State Street Bank & Trust Co TTEE 4,337 5.12%
FBO GE Railcar Services
Master Trust Client Ser - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
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<PAGE>
NAME AND ADDRESS OF RECORD OWNER AMOUNT OF OWNERSHIP
(In Shares) (PercenT)
- --------------------------------------------------------------------------------
GE Moderate Allocation Fund
- --------------------------------------------------------------------------------
State Street Bank & Trust Co TTEE 381,980 50.05%
FBO GNA Savings Plan
Master Trust Client Ser - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
State Street Bank & Trust Co TTEE 228,492 29.94%
FBO Deepbeach & Co.
Master Trust Client Ser - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
State Street Bank & Trust Co TTEE 87,598 11.48%
FBO Deepboat & Co.
Master Trust Client Ser - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
- --------------------------------------------------------------------------------
GE Aggressive Allocation Fund
- --------------------------------------------------------------------------------
State Street Bank & Trust Co TTEE 380,468 58.37%
FBO Deepbeach & Co.
Master Trust Client Ser - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
State Street Bank & Trust Co TTEE 155,462 23.85%
FBO Deepboat & Co.
Master Trust Client Ser - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
State Street Bank & Trust Co TTEE 54,932 8.43%
FBO Granitebridge & Co.
Master Trust Client Ser - W6C
1 Enterprise Drive
N Quincy, MA 02171-2126
- -----------------------------------------------------------------------------
As of January 15, 2000, the current Trustees and officers of the Trust,
as a group, beneficially owned less than 1% of each Fund's outstanding shares.
State Street Bank and Trust Company is a Massachusetts trust. Certain
beneficial holders listed above that own more than 25% of the outstanding shares
of the referenced Funds may be deemed to control these Funds.
- 61 -
<PAGE>
THE FUNDS' HISTORY AND ADDITIONAL INFORMATION
---------------------------------------------
The Trust is an open-end management investment company registered
under the 1940 Act. 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.
The Declaration authorizes the Trust's Board of Trustees to create
separate series (i.e., Funds), and within each series separate classes, of an
----
unlimited number of shares of beneficial interest, par value $.001 per share.
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. The Board of Trustees may amend the Declaration of Trust
without the vote of shareholders in order to conform the provisions to tax or
regulatory requirements, or to make other changes which do not materially
affect the rights of shareholders.
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.
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 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
- 62 -
<PAGE>
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 Underlying GE Fund or, in certain limited instances,
the Fund will vote its shares in the manner indicated by a vote of holders of
shares of the Fund.
Counsel
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York
10019-6099, serves as counsel for the Trust.
Independent Accountants
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, MA 02110,
serves as independent accountants of the Trust.
FINANCIAL STATEMENTS
--------------------
The Annual Report for the GE LifeStyle Funds dated September 30, 1999,
which either accompanies this SAI or previously has been provided to the person
to whom this SAI is being sent, is incorporated herein by reference with respect
to all information other than the information set forth in the Letter to
Shareholders included in the Annual Report.
- 63 -
<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.
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
A-1
<PAGE>
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 -- 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
A-2
<PAGE>
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.
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.
A-3
<PAGE>
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.
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
A-4
<PAGE>
weakened capacity to pay interest and repay principal for bonds in this category
(even though they normally exhibit adequate protection parameters) than for
bonds in higher rated categories.
General Obligation Bonds -- Under certain adverse conditions, several
of the above factors could contribute to a lesser capacity for payment of debt
service. The difference between A and BBB ratings is that the latter shows more
than one fundamental weakness, or one very substantial fundamental weakness,
whereas, the former shows only one deficiency among the factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly being
subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.
BB, B, CCC and CC -- Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominately speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB includes
the lowest degree 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
A-5
<PAGE>
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.
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.
A-6
<PAGE>
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
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-7
<PAGE>
PART C
------
OTHER INFORMATION
Item 23. Exhibits:
Exhibit No. Description of Exhibit
----------- ----------------------
a Declaration of Trust(1)
b By-Laws(1)
c Inapplicable
d(1) Form of Investment Advisory and Administration Agreement(2)
d(2) Form of Investment Consulting Agreement(2)
e Form of Distribution Agreement(2)
f Inapplicable
g Form of Custodian Contract(2)
h(1) Form of Transfer Agency and Service Agreement(2)
h(2) Expense Limitation Agreement
i Opinion of Willkie Farr & Gallagher
j Consent of PricewaterhouseCoopers LLP
k Inapplicable
l Purchase Agreement(3)
m Inapplicable
n Inapplicable
- ---------------
1 Incorporated by reference to Registrant's Registration Statement on Form
N-1A, filed on July 10, 1996.
2 Incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to
its Registration Statement, filed on September 18, 1996.
3 Incorporated by reference to Registrant's Pre-Effective Amendment No. 2 to
its Registration Statement, filed on February 7, 1997
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant
Reference is made to "Principal Shareholders" in the Statement
of Additional Information forming Part B of this Registration Statement.
Item 25. 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 26. Business and Other Connections of Investment Adviser
Reference is made to "How the Funds Are Managed" in the
Prospectuses forming Part A, and "Management of the Trust" in the Statement of
Additional Information forming Part B, of this Registration Statement.
The list required by this Item 26 of officers and directors of
GEAM, 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 GEAM pursuant to the Investment Advisers Act of 1940, as
amended (SEC File No. 801-31947).
<PAGE>
The list required by this Item 26 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 27. Principal Underwriters
(a) GE Investment Distributors Inc. ("GEID") also serves as
distributor for GE Funds, GE Investments Funds, Inc., GE Institutional Funds,
Elfun Tax-Exempt Income Fund, Elfun Income Fund, Elfun International Equity
Fund, Elfun Money Market Fund, Elfun Trusts and Elfun Diversified Fund.
(b) The information required by this Item 27 with respect to
each director and officer of GEID is incorporated by reference to Schedule A of
Form BD filed by GEID pursuant to the Securities Exchange Act of 1934 (SEC File
No. 8-45710).
Item 28. 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 29. Management Services
Inapplicable.
Item 30. Undertakings
Inapplicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Amendment to the Registration Statement pursuant to Rule 485(b) under the
Securities Act and 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 26th day of January, 2000.
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.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
- --------- ----- ----
/s/ Michael J. Cosgrove President and January 26, 2000
- ----------------------- Chairman of the Baord
Michael J. Cosgrove (Chief Executive
Officer)
/s/ John R. Costantino Trustee* January 26, 2000
- ----------------------
John R. Costantino
/s/ Alan M. Lewis Trustee January 26, 2000
- -----------------
Alan M. Lewis
/s/ William J. Lucas Trustee* January 26, 2000
- --------------------
William J. Lucas
/s/ Robert P. Quinn Trustee* January 26, 2000
- -------------------
Robert P. Quinn
/s/ Michael Tansley Treasurer (Chief January 26, 2000
- ------------------- Financial and
Michael Tansley Accounting Officer)
</TABLE>
* Signature affixed by Matthew J. Simpson pursuant to a power of attorney
dated December 9, 1998 and filed herewith.
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director and/or Trustee of GE Funds, GE
Institutional Funds, GE Lifestyles Funds (sic) and GE Investments Funds, Inc.
plus any other investment company for which GE Investment Management, Inc. or an
affiliate acts as investment adviser and for which the undersigned individual
serves as Director and/or Trustee (collectively, the "Funds"), hereby constitute
and appoint Michael J. Cosgrove, Matthew J. Simpson, Jeanne M. LaPorta and Marc
R. Bryant, each of them singly, my true and lawful attorneys-in-fact, with full
power and substitution, and with full power to each of them, to sign for me and
in my name in the appropriate capacities, all Registration Statements of the
Funds on Forms N-1A and N-8A or any successor(s) thereto, any and all subsequent
Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said
Registration Statements, any Registration Statements on Form N-14, and any
supplements or other instruments in connection therewith, and generally to do
all such things in my name necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
and all related requirements of the Securities and Exchange Commission. I hereby
ratify and confirm all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof. This power of attorney is effective for
all documents filed on or after the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney as of the 9th day of December, 1998.
/s/JOHN R. COSTANTINO
--------------------------------
John R. Costantino
/s/WILLIAM J. LUCAS
--------------------------------
William J. Lucas
/s/ROBERT P. QUINN
--------------------------------
Robert P. Quinn
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Sequence
----------- ---------------------- --------
h(2) Expense Limitation Agreement
i Opinion and Consent of Willkie Farr & Gallagher
j Consent of PricewaterhouseCoopers LLP
<PAGE>
GE LIFESTYLE FUNDS
EXPENSE LIMITATION AGREEMENT
AGREEMENT, dated as of December , 1999, among GE LifeStyle
Funds, a Massachusetts Business Trust, on behalf of its series portfolios listed
on Appendix A (the "Funds") and GE Investment Management Incorporated, a
Delaware Corporation ("GEIM").
WHEREAS, GEIM serves as investment adviser and administrator
to each of the Funds; and
WHEREAS, the parties to this Agreement have determined that it
is in their own interests to limit certain expenses that may be borne by each
Fund and desire to limit those expenses.
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth, the parties to this Agreement agree as follows:
Section 1 "Other Expense" Limitation.
If, in any fiscal year, "other expenses" of a Fund exceed applicable
expense limitations set forth in Appendix B, the excess expenses shall be borne
by GEIM.
For purposes of this Agreement, "other expenses" of a Fund includes
brokerage fees and commissions, interest, fees and expenses of the Fund's Board
of Trustees who are not affiliated with GEIM or its affiliates (including
counsel fees), taxes, transfer agency costs and any extraordinary expenses.
Section 2 Amendment.
The provisions of this Agreement may be changed, waived or terminated
from time to time by the parties hereto. No provision of this Agreement may be
so changed, waived or terminated except by an instrument in writing signed by
the party against which such change, waiver or termination is sought.
<PAGE>
Section 3 Term.
This Agreement shall become effective as of the date of this agreement
and shall continue until 120 days after each Fund's current fiscal year end, and
thereafter shall continue automatically for successive annual periods, provided
such continuance is specifically approved at least annually by the Board of
Directors of the Fund and by a majority of the Board of Directors who are not
"interested persons" (as defined in the Investment Company Act of 1940) of any
party to this agreement.
Section 4 Governing Law.
This Agreement shall be governed in accordance with the laws of the
State of New York.
Section 5 Miscellaneous.
The parties hereto agree that this Agreement is for the benefit and
enjoyment of the parties, and that this Agreement confers no right upon any
shareholder of the Fund to enforce any provision of this Agreement.
**********************************
(signature page to follow)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized corporate officers
and their corporate seals to be hereunto affixed, as of the day and year first
above written.
GE Investment Management Incorporated
By:___________________________________
Name: Alan M. Lewis
Title: Executive Vice President
GE LifeStyle Funds
By:___________________________________
Name: Michael J. Cosgrove
Title: Chairman of the Board and President
<PAGE>
Appendix A
Series Portfolios of GE Funds (the "Funds")
GE Conservative Strategy Fund
GE Moderate Strategy Fund
GE Aggressive Strategy Fund
GE Conservative Allocation Fund
GE Moderate Allocation Fund
GE Aggressive Allocation Fund
<PAGE>
Appendix B
Expense Limitations on "Other Expenses"
---------------------------------------
(as a percentage of average net assets)
- --------------------------------------------------------------------------------
GE Conservative Strategy Fund
0.00%
- --------------------------------------------------------------------------------
GE Moderate Strategy Fund
0.00%
- --------------------------------------------------------------------------------
GE Aggressive Strategy Fund
0.00%
- --------------------------------------------------------------------------------
GE Conservative Allocation Fund
0.00%
- --------------------------------------------------------------------------------
GE Moderate Allocation Fund
0.00%
- --------------------------------------------------------------------------------
GE Aggressive Allocation Fund
0.00%
- --------------------------------------------------------------------------------
<PAGE>
January 21, 2000
GE LifeStyle Funds
3003 Summer Street
Stamford, Connecticut 06905
Ladies and Gentlemen:
We have acted as counsel to GE LifeStyle Funds (the "Fund"), a business trust
organized under the laws of The Commonwealth of Massachusetts, in connection
with the preparation of Post-Effective Amendment No. 5 to the Trust's
Registration Statement on Form N-1A under the Securities Act of 1933, as amended
(SEC File No. 333-07905), and Amendment No. 7 under the Investment Company Act
of 1940 (SEC File No. 811-07701), as amended (the "Registration Statement")
filed with the Securities and Exchange Commission covering the offer and sale of
an indefinite number of shares of beneficial interest of the Fund.
We have examined copies of the Fund's Declaration of Trust, (the "Declaration"),
the Instrument Evidencing Establishment and Designation of Series of Shares of
Beneficial Interest, the Fund's By-Laws, and the Fund's Registration Statement.
We have also examined such other records, documents, papers, statutes and
authorities as we have deemed necessary to form a basis for the opinion
hereinafter expressed.
In our examination of material, we have assumed the genuineness of all
signatures and the conformity to original documents of all copies submitted to
us. As to various questions of fact material to our opinion, we have relied upon
statements and certificates of officers and representatives of the Fund and
others.
Based upon the foregoing, we are of the opinion that the shares of beneficial
interest of the Fund (collectively, the "Shares"), when issued and sold in
accordance with the Declaration will be legally issued, fully paid and
non-assessable shares of beneficial interest of the Fund,
<PAGE>
Ge LifeStyle Funds
January 21, 2000
Page 2
except that shareholders of the Fund may under certain circumstances be held
personally liable for its obligations.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the reference to us in the statement of additional
information included as part of the Registration Statement and to the filing of
this opinion as an exhibit to any application made by or on behalf of the Fund
or any distributor or dealer in connection with the registration or
qualification of the Fund or the Shares under the securities laws of any state
or other jurisdiction.
We are members of the Bar of the State of New York and do not hold ourselves out
as being conversant with the laws of any jurisdiction other than those of the
United States of America and the State of New York. We note that we are not
licensed to practice law in The Commonwealth of Massachusetts, and to the extent
that any opinion expressed herein involves the law of The Commonwealth of
Massachusetts, such opinion should be understood to be based solely upon the
opinion of Bingham Dana LLP, a copy of which is attached to this opinion.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE>
January 21, 2000
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
Re: GE Lifestyle Funds
Ladies and Gentlemen:
We have acted as special Massachusetts counsel for GE Lifestyle Funds
(the "Trust"), a Massachusetts business trust created under a written
Declaration of Trust dated June 21, 1996, as amended from time to time.
In connection with this opinion, we have examined the following described
documents:
(a) a certificate of the Secretary of State of the Commonwealth of
Massachusetts as to the existence of the Trust;
(b) a copy, as filed with the Secretary of State of the Commonwealth of
Massachusetts of the Trust's Declaration of Trust and all amendments thereto,
including instruments establishing and designating series of shares and
establishing and designating classes of shares (the "Declaration of Trust"); and
(c) A certificate executed by an appropriate officer of the Trust
certifying as to the Trust's Declaration of Trust and By-Laws and certain votes
of the Trustees of the Trust authorizing the issuance of an indefinite number of
shares of beneficial interest of such Trust (the "Shares").
In such examination, we have assumed the genuineness of all signatures,
the conformity to the originals of all of the documents reviewed by us as
copies, the authenticity and completeness of all original documents reviewed by
us in original or copy form and the legal competence of each individual
executing any document.
<PAGE>
Wilkie Farr & Gallagher
January 21, 2000
Page 2
This opinion is based entirely on our review of the documents listed
above. We have made no other review or investigation of any kind whatsoever, and
we have assumed, without independent inquiry, the accuracy of the information
set forth in such documents.
This opinion is limited solely to the laws of the Commonwealth of
Massachusetts (other than the Massachusetts Uniform Securities Act, as to which
we express no opinion) as applied by courts in such Commonwealth.
We understand that all of the foregoing assumptions and limitations are
acceptable to you.
Based upon and subject to the foregoing, please be advised that it is our
opinion that:
1. The Trust is duly organized and existing under the Trust's Declaration
of Trust and the laws of the Commonwealth of Massachusetts as a voluntary
association with transferable shares of beneficial interest commonly referred to
as a "Massachusetts business trust."
2. The Shares, when issued and sold in accordance with the Declaration of
Trust, will be legally issued, fully paid and non-assessable, except that
shareholders of the Trust may under certain circumstances be held personally
liable for the obligations of the Trust.
We understand that Willkie Farr & Gallagher will rely on this opinion in
order to prepare an opinion to the Trust, which will be filed with the
Securities and Exchange Commission. We hereby consent to such use and filing of
this opinion.
Very truly yours,
/s/ Bingham Dana LLP
BINGHAM DANA LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting part of this Post-Effective
Amendment No. 5 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated November 12, 1999, relating to the financial
statements and financial highlights appearing in the September 30, 1999 Annual
Reports to the Shareholders of the GE LifeStyle Funds, which are also
incorporated by reference into the Registration Statement. We also consent to
the reference to us under the heading "Independent Accountants" in such
Statement of Additional Information and to the reference to us under the heading
"Financial Highlights" in such Prospectuses.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 24, 2000
