<PAGE>
As filed with the Securities and Exchange Commission
on April 29, 1996
Securities Act File No. 33-76032
Investment Company Act File No. 811-8392
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 2 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 3 [X]
(Check appropriate box or boxes)
VARIABLE INVESTMENT TRUST
..............................................................................
(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
Alan M. Lewis, Esq.
Executive Vice President, General Counsel & Secretary
c/o GE Investment Management Incorporated
3003 Summer Street
Stamford, Connecticut 06905
.........................................
(Name and Address of Agent for Service)
Copies to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4669
Page 1 of __ Pages
Exhibit Index at Page __
<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
(check appropriate box):
immediately upon filing pursuant to paragraph (b) X
---
on (date) pursuant to paragraph (b) ___
60 days after filing pursuant to paragraph (a)(1) ___
on (date) pursuant to paragraph (a)(1) of Rule 485 ___
75 days after filing pursuant to paragraph (a)(2) ___
on (date) 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. ___
An indefinite number of Registrant's shares of beneficial interest have been
registered pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Rule 24f-2 Notice for Registrant's fiscal year ended December 31,
1995 was filed on February 29, 1996.
<PAGE>
VARIABLE INVESTMENT TRUST
FORM N-1A
CROSS REFERENCE SHEET
-------------------------------
<TABLE>
<CAPTION>
Part A
Item No. Prospectus Heading
- -------- -------------------
<S> <C> <C>
1. Cover Page........................... Cover Page
2. Synopsis............................. Not applicable
3. Condensed Financial
Information........................ Not applicable
4. General Description of
Registration....................... Cover Page; General
Information; Investment
Objectives and Management
Policies; Additional Matters;
Further Information:
Certain Investment
Techniques and Strategies
5. Management of the Fund............... Investment Objectives and
Management Policies;
Management of the Trust;
Further Information:
Certain Investment
Techniques and Strategies
5A. Management's Discussion of
Fund Performance .................. Not applicable
6. Capital Stock and Other
Securities......................... Dividends;
Distributions and
Taxes; Additional
Matters
7. Purchase of Securities
Being offered...................... Purchase of Shares;
Net Asset Value;
8. Redemption or Repurchase............. Redemption of Shares
9. Legal Proceedings.................... Not applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Part B Heading in Statement of
Item No. Additional Information
- -------- ----------------------
<S> <C> <C>
10. Cover Page........................... Cover Page
11. Table of Contents.................... Contents
12. General Information and History The Portfolios'
Performances
13. Investment Objectives and
Policies........................... Investment Objectives
and Management Policies;
Further Information:
Certain Investment
Techniques and Strategies
14. Management of the Trust.............. Management of the Trust
15. Control Persons and Principal
Holders of Securities.............. Principal Stockholders;
Management of the Trust
See Prospectus--
Additional Matters
16. Investment Advisory and
Other Services..................... Management of the Trust
17. Brokerage Allocation
and Other Practices................ Investment Restrictions;
Management of the Funds
18. Capital Stock and Other
Securities......................... Redemption of Shares
19. Purchase, Redemption and Pricing
of Securities Being Offered........ Purchase of Shares;
Redemption of Shares;
Net Asset Value
20. Tax Status........................... Taxation
21. Underwriters......................... Not Applicable
22. Calculation of Performance
Data............................... The Portfolios' Performances
23. Financial Statements................. Independent Accountants;
Financial Statements
</TABLE>
ii
<PAGE>
Part C
- ------
Information required to be included in Part C is set forth after the
appropriate item, so numbered, in Part C to this Registration Statement.
iii
<PAGE>
[LOGO APPEARS HERE] VARIABLE INVESTMENT TRUST
Variable Investment Trust (the "Trust") is an open-end management investment
company that offers a selection of diversified managed investment funds (each a
"Portfolio" and collectively the "Portfolios"), each having a distinct invest-
ment objective that it seeks by following distinct investment policies. This
Prospectus describes the following four Portfolios currently offered by the
Trust:
. GE INTERNATIONAL EQUITY PORTFOLIO'S investment objective is long-term
growth of capital which the Portfolio seeks to achieve by investing pri-
marily in foreign equity securities.
. GE U.S. EQUITY PORTFOLIO'S investment objective is long-term growth of
capital which the Portfolio seeks to achieve through investment primarily
in equity securities of U.S. companies.
. GE FIXED INCOME PORTFOLIO'S investment objective is to seek maximum in-
come consistent with prudent investment management and the preservation
of capital, which objective the Portfolio seeks to achieve by investing
in fixed income securities.
. GE MONEY MARKET PORTFOLIO'S investment objective is to seek a high level
of current income consistent with the preservation of capital and mainte-
nance of liquidity, which objective the Portfolio seeks to achieve by in-
vesting in a defined group of short-term, U.S. dollar denominated money
market instruments.
Shares of the Portfolios are offered only to insurance company separate ac-
counts that fund certain variable contracts. The information contained in this
Prospectus should be read together with the prospectus for the variable con-
tracts.
This Prospectus briefly sets forth certain information about the Portfolios and
the Trust that you ought to know before allocating premiums or cash value from
variable contracts to the Portfolios. Investors are encouraged to read this
Prospectus carefully and retain it for future reference.
AN INVESTMENT IN GE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. ADDITIONALLY, NO ASSURANCE CAN BE GIVEN THAT GE MONEY MAR-
KET PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS WITH OR OBLIGATIONS OF ANY
FINANCIAL INSTITUTION, ARE NOT GUARANTEED OR ENDORSED BY ANY FINANCIAL INSTITU-
TION OR ITS AFFILIATES, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
Additional information about the Portfolios and the Trust, contained in a
Statement of Additional Information dated the same date as this Prospectus, has
been filed with the Securities and Exchange Commission (the "SEC") and is
available upon request and without charge by calling the Trust at the telephone
number listed below or by contacting the Trust at the address listed below. The
Statement of Additional Information is incorporated in its entirety by refer-
ence into this Prospectus.
GE INVESTMENT MANAGEMENT INCORPORATED
Investment Adviser and Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PROSPECTUS
April 29, 1996
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information. 2
Investment
Objectives and
Management
Policies........... 3
Management of the
Trust.............. 19
Purchase of Shares.. 22
Redemption of
Shares............. 22
Exchange Privilege.. 22
Net Asset Value..... 23
Dividends,
Distributions and
Taxes.............. 23
Custodian and
Transfer Agent..... 25
The Portfolios'
Performances....... 25
Further Information:
Certain Investment
Techniques and
Strategies......... 27
Additional Matters.. 32
</TABLE>
3003 Summer Street
Stamford, Connecticut 06905
(203)326-4040
Variable Investment Trust--1
- --------------------------------------------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS--
- -------------------------------------------------------------------------------
The tables below, which have been audited by the Trust's independent accoun-
tants, Price Waterhouse LLP, whose report thereon appears in the Trust's An-
nual Report dated December 31, 1995 (the "Annual Report"), set forth selected
financial data for a Portfolio share outstanding throughout the period pre-
sented. The following information should be read in conjunction with the Fi-
nancial Statements and Notes to the Financial Statements which are incorpo-
rated by reference into the Statement of Additional Information. The Portfo-
lios' total returns presented below do not reflect cost of insurance company
separate account charges. Further information about the performance of the
Portfolios is contained in the Annual Report, copies of which may be obtained
without charge by calling the GNA Variable Annuity Service Center at 1-800-
455-0870 or by writing to the Center at 300 Berwyn Park, Berwyn, Pennsylvania
19312-0031.
Selected data based on a share outstanding for the period January 3,
(commencement of operations) to December 31, 1995
<TABLE>
<CAPTION>
GE U.S. GE FIXED GE MONEY
GE INTERNATIONAL EQUITY INCOME MARKET
EQUITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $15.00 $15.00 $12.00 $ 1.00
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income......... 0.21 0.46 0.82 0.05
Net realized and unrealized
gains on investments......... 2.45 4.87 1.13 0.01
------ ------ ------ ------
TOTAL INCOME FROM INVESTMENT
OPERATIONS..................... 2.66 5.33 1.95 0.06
------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net investment income......... 0.14 0.47 0.84 0.06
Net realized gains............ 0.15 0.59 0.58 0.00
------ ------ ------ ------
TOTAL DISTRIBUTIONS............. 0.29 1.06 1.42 0.06
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD.. $17.37 $19.27 $12.53 $ 1.00
====== ====== ====== ======
TOTAL RETURN(a)................. 17.74% 35.58% 16.83% 5.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)................... $6,364 $9,071 $3,271 $5,110
Ratio of net investment income
to average net assets*....... 0.88% 2.10% 6.52% 5.41%
Ratio of expenses to average
net assets*.................. 1.20% 0.80% 0.75% 0.50%
Ratio of expenses to average
net assets before voluntary
expense limitation*.......... 1.35% 1.03% 1.15% 0.87%
Portfolio turnover rate....... 60% 71% 253% N/A
</TABLE>
- --------
Notes to Financial Highlights
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains. Had the advisor not absorbed
a portion of expenses, total return would have been lower. Periods less
than one year are not annualized.
* Annualized for periods less than one year.
GENERAL INFORMATION
- -------------------------------------------------------------------------------
Shares of the Portfolios are offered only to insurance company separate ac-
counts that fund certain variable annuity contracts (the "Contracts"). Sepa-
rate accounts may purchase or redeem shares at net asset value without any
sales or redemption charge. Fees and charges imposed by the separate account,
however, will affect the actual return to the holder of a Contract. A separate
account may also impose
2--Variable Investment Trust
- -------------------------------------------------------------------------------
<PAGE>
certain restrictions or limitations on the allocation of purchase payments or
Contract value to the Portfolios, and the Portfolios may not be available in
connection with a particular Contract. Prospective investors should consult
the applicable Contract prospectus for information regarding fees and expenses
of the Contract and the separate account and any applicable restrictions or
limitations thereunder.
Shares of the Portfolios are offered to the separate accounts of insurance
companies, which may include insurance companies affiliated with GE Investment
Management Incorporated ("GEIM"), the investment adviser and administrator of
each Portfolio. The Trust may in the future offer shares of some or all of the
Portfolios to variable life insurance separate accounts. In that event, cer-
tain conflicts may at some point arise between variable annuity contract hold-
ers and variable life insurance policy holders which could adversely affect
the management of the Portfolios' investments.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
- -------------------------------------------------------------------------------
Set forth below is a description of the investment objective and policies of
each Portfolio. The investment objective of a Portfolio may not be changed
without the approval of the holders of a majority of the Portfolio's outstand-
ing voting securities as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"). Such a majority is defined in the 1940 Act as the
lesser of (1) 67% or more of the shares present at a Portfolio meeting, if the
holders of more than 50% of the outstanding shares of the Portfolio are pres-
ent or represented by proxy or (2) more than 50% of the outstanding shares of
the Portfolio. No assurance can be given that a Portfolio will be able to
achieve its investment objective.
GE INTERNATIONAL EQUITY PORTFOLIO
The investment objective of GE International Equity Portfolio (the "Interna-
tional Portfolio"), a diversified investment fund, is long-term growth of cap-
ital, which the Portfolio seeks to achieve by investing primarily in foreign
equity securities. The International Portfolio may invest in securities of
companies and governments located in developed and developing countries out-
side the United States. The International Portfolio may also invest in securi-
ties of foreign issuers in the form of depositary receipts. Investing in secu-
rities issued by foreign companies and governments involves considerations and
potential risks not typically associated with investing in securities issued
by the U.S. Government and U.S. corporations. A more complete description of
foreign securities and depositary receipts and the risks and special consider-
ations applicable to them is included below under "Risk Factors and Special
Considerations" and in "Further Information: Certain Investment Techniques and
Strategies." The International Portfolio intends to position itself broadly
among countries and under normal circumstances, at least 65% of the Portfo-
lio's assets will be invested in securities of issuers collectively having
their principal business activities in no fewer than three different coun-
tries. The percentage of the International Portfolio's assets invested in par-
ticular countries or regions of the world will vary depending on political and
economic conditions. An issuer's domicile or nationality will be determined by
reference to (a) the country in which the issuer derives at least 50% of its
revenues or profits from goods produced or sold, investments made or services
performed, or (b) the country in which the issuer has at least 50% of its as-
sets situated.
The International Portfolio, under normal conditions, invests at least 65% of
its assets in common stocks, preferred stocks and securities convertible into
common stock, including convertible debentures, convertible notes and common
stock purchase warrants or rights, issued by companies believed by GEIM to
have a potential for superior growth in sales and earnings. In most cases
these securities are traded on foreign or U.S. exchanges. The International
Portfolio will emphasize established companies, although it may invest in com-
panies of varying sizes as measured by assets, sales or capitalization. In ad-
dition, under normal market conditions, a portion of the International Portfo-
lio's total assets may be held
Variable Investment Trust--3
- -------------------------------------------------------------------------------
<PAGE>
in cash and/or invested in money market instruments of the types described be-
low under "Additional Investments--Money Market Instruments" for cash manage-
ment purposes, pending investment in accordance with the Portfolio's invest-
ment objective and policies and to meet operating expenses.
The International Portfolio may, under normal market conditions, invest up to
35% of its assets in notes, bonds and debentures issued by corporate or gov-
ernmental entities when GEIM determines that investing in those kinds of debt
securities is consistent with the Portfolio's investment objective of long-
term capital appreciation. GEIM believes that such a determination could be
made, for example, upon the International Portfolio's investing in the debt
securities of a company whose securities GEIM anticipates will increase in
value as a result of a development particularly or uniquely applicable to the
company, such as a liquidation, reorganization, recapitalization or merger,
material litigation, technological breakthrough or new management or manage-
ment policies. In addition, GEIM believes such a determination could be made
with respect to an investment by the International Portfolio in debt instru-
ments issued by a governmental entity upon GEIM's concluding that the value of
the instruments will increase as a result of improvements or changes in public
finances, monetary policies, external accounts, financial markets, exchange
rate policies or labor conditions of the country in which the governmental en-
tity is located.
The International Portfolio's investments in debt securities are limited to
those that are rated investment grade; up to 5% of the Portfolio's assets may
be invested in securities rated lower than investment grade. A security is
considered investment grade if it is rated at the time of purchase within the
four highest grades assigned by Standard & Poor's Ratings Group ("S&P") or by
Moody's Investors Service, Inc. ("Moody's") or has received an equivalent rat-
ing from another nationally recognized statistical rating organization
("NRSRO") or, if unrated, is deemed by GEIM to be of comparable quality. Risks
and special considerations applicable to certain investment grade obligations
and obligations rated below investment grade are described below under "Risk
Factors and Special Considerations."
In selecting investments on behalf of the International Portfolio, GEIM seeks
companies that are expected to grow faster than relevant markets and whose se-
curities are available at a price that does not fully reflect the potential
growth of those companies. GEIM typically focuses on companies that possess
one or more of a variety of characteristics, including strong earnings growth
relative to price-to-earnings and price-to-cash earnings ratios, low price-to-
book value, strong cash flow, presence in an industry experiencing strong
growth and high quality management.
Although, under normal circumstances, the International Portfolio invests in
securities of issuers located in a number of different countries outside the
United States as described above, during periods when GEIM believes there are
unstable market, economic, political or currency conditions abroad, the Port-
folio may adopt a temporary defensive position and (i) restrict the securities
markets in which its assets will be invested and invest all or a significant
portion of its assets in securities of the types described above issued by
companies incorporated in and/or having their principal activities in the
United States, or (ii) without limitation hold cash and/or invest in money
market instruments of the types described below under "Additional Invest-
ments--Money Market Instruments." Included among the money market instruments
in which the International Portfolio may invest are repurchase agreements, the
risks and special considerations of which are described below under "Risk Fac-
tors and Special Considerations--Repurchase and Reverse Repurchase Agree-
ments." To the extent that it holds cash or invests in money market instru-
ments, the International Portfolio may not achieve its investment objective of
long-term capital appreciation.
The International Portfolio, in addition to investing as described above, may
hold the following types of instruments: non-publicly traded securities, il-
liquid securities, securities
4--Variable Investment Trust
- -------------------------------------------------------------------------------
<PAGE>
that are not registered under the Securities Act of 1933, as amended (the
"1933 Act"), but that can be sold to "qualified institutional buyers" in ac-
cordance with Rule 144A under the 1933 Act (each, a "Rule 144A Security" and
collectively, "Rule 144A Securities"), and securities of other investment
funds. In addition, the International Portfolio may engage in the following
types of investment techniques and strategies: purchasing put and call options
on securities, writing put and call options on securities, purchasing put and
call options on securities indexes, entering into interest rate, financial and
stock or bond index futures contracts or related options that are traded on a
U.S. or foreign exchange or board of trade or in the over-the-counter market,
engaging in forward currency transactions, purchasing and writing put and call
options on foreign currencies, entering into securities transactions on a
when-issued or delayed-delivery basis, lending portfolio securities and sell-
ing securities short against the box. These other instruments, investment
techniques and strategies have risks and special considerations associated
with them that are described below under "Risk Factors and Special Considera-
tions" and in "Further Information: Certain Investment Techniques and Strate-
gies."
GE U.S. EQUITY PORTFOLIO
The investment objective of GE U.S. Equity Portfolio (the "U.S. Equity Portfo-
lio"), a diversified investment fund, is long-term growth of capital, which
objective the Portfolio seeks to achieve through investment primarily in eq-
uity securities of U.S. companies. In pursuing its objective, the U.S. Equity
Portfolio, under normal conditions, invests at least 65% of its assets in eq-
uity securities, consisting of common stocks and preferred stocks, and securi-
ties convertible into common stocks, including convertible bonds, convertible
debentures, convertible notes and warrants or rights issued by U.S. companies.
The equity securities issued by U.S. companies in which the U.S. Equity Port-
folio invests typically are traded on U.S. securities exchanges; those U.S.
equity securities held by the U.S. Equity Portfolio that are not exchange-
traded are non-publicly traded or traded in the U.S. over-the-counter market.
Up to 15% of the U.S. Equity Portfolio's assets may be invested in foreign se-
curities. The U.S. Equity Portfolio also may invest in securities of foreign
issuers in the form of depositary receipts. A more complete description of
foreign securities and depositary receipts and the risks and special consider-
ations applicable to them is included below under "Risk Factors and Special
Considerations" and in "Further Information: Certain Investment Techniques and
Strategies."
The U.S. Equity Portfolio may, under normal market conditions, invest up to
35% of its assets in notes, bonds and debentures issued by corporate or gov-
ernmental entities when GEIM determines that investing in these kinds of debt
securities is consistent with the Portfolio's investment objective of long-
term growth of capital. GEIM believes that such a determination could be made,
for example, upon the U.S. Equity Portfolio's investing in the debt securities
of a company whose securities GEIM anticipates will increase in value as a re-
sult of a development particularly or uniquely applicable to the company, such
as a liquidation, reorganization, recapitalization or merger, material litiga-
tion, technological breakthrough or new management or management policies. In
addition, GEIM believes such a determination could be made with respect to an
investment by the U.S. Equity Portfolio in debt instruments issued by a gov-
ernmental entity upon GEIM's concluding that the value of the instruments will
increase as a result of improvements or changes in public finances, monetary
policies, external accounts, financial markets, exchange rate policies or la-
bor conditions of the country in which the governmental entity is located.
During normal market conditions, a small portion of the U.S. Equity Portfo-
lio's total assets may be held in cash and/or invested in money market instru-
ments of the types described below under "Additional Investments--Money Market
Instruments" for cash management purposes, pending investment in accordance
with the Portfolio's investment objective and policies and to meet operating
expenses. During periods in which GEIM believes that in-
Variable Investment Trust--5
- -------------------------------------------------------------------------------
<PAGE>
vestment opportunities in the U.S. equity markets are diminished (due to ei-
ther fundamental changes in those markets or an anticipated general decline in
the value of U.S. equity securities), the U.S. Equity Portfolio may for tempo-
rary defensive purposes hold cash and/or invest in the same types of money
market instruments without limitation. Included among the money market instru-
ments in which the U.S. Equity Portfolio may invest are repurchase agreements,
the risks and special considerations of which are described below under "Risk
Factors and Special Considerations--Repurchase and Reverse Repurchase Agree-
ments." To the extent that it holds cash or invests in money market instru-
ments, the U.S. Equity Portfolio may not achieve its investment objective of
long-term growth of capital.
The U.S. Equity Portfolio's investments in debt securities are limited to
those that are rated investment grade, except that up to 5% of the Portfolio's
assets may be invested in securities rated lower than investment grade. Risks
and special considerations applicable to certain investment grade obligations
and obligations rated lower than investment grade are described below under
"Risk Factors and Special Considerations." A description of S&P and Moody's
ratings relevant to the U.S. Equity Portfolio's investments is included as an
Appendix to the Statement of Additional Information.
In managing the assets of the U.S. Equity Portfolio, GEIM uses a combination
of "value-oriented" and "growth-oriented" investing. Value-oriented investing
involves seeking securities that may have low price-to-earnings ratios, or
high yields, or that sell for less than intrinsic value as determined by GEIM,
or that appear attractive on a dividend discount model. These securities gen-
erally are sold from the U.S. Equity Portfolio's portfolio when their prices
approach targeted levels. Growth-oriented investing generally involves buying
securities with above average earnings growth rates at reasonable prices. The
U.S. Equity Portfolio holds these securities until GEIM determines that their
growth prospects diminish or that they have become overvalued when compared
with alternative investments.
In investing on behalf of the U.S. Equity Portfolio, GEIM seeks to produce a
portfolio that GEIM believes will have similar characteristics to the Standard
& Poor's 500 Composite Stock Price Index (the "S&P Index"), by virtue of
blending investments in both "value" and "growth" securities. Since the U.S.
Equity Portfolio's strategy seeks to combine the basic elements of companies
comprising the S&P Index, but is designed to select investments deemed to be
the most attractive within each category, GEIM believes that the strategy
should be capable of outperforming the U.S. equity market as reflected by the
S&P Index on a total return basis.
The U.S. Equity Portfolio, in addition to investing as described above, may
hold the following types of instruments: non-publicly traded securities, il-
liquid securities and Rule 144A Securities. In addition, the U.S. Equity Port-
folio may engage in the following types of investment techniques and strate-
gies: purchasing put and call options on securities, writing put and call op-
tions on securities, purchasing put and call options on securities indexes,
entering into interest rate, financial and stock or bond index futures con-
tracts or related options that are traded on a U.S. or foreign exchange or
board of trade or in the over-the-counter market, engaging in forward currency
transactions, purchasing and writing put and call options on foreign curren-
cies, entering into securities transactions on a when-issued or delayed-deliv-
ery basis and lending portfolio securities. These other instruments, invest-
ment techniques and strategies have risks and special considerations associ-
ated with them that are described below under "Risk Factors and Special Con-
siderations" and in "Further Information: Certain Investment Techniques and
Strategies."
GE FIXED INCOME PORTFOLIO
The investment objective of GE Fixed Income Portfolio (the "Income Portfo-
lio"), a diversified investment fund, is to seek maximum income consistent
with prudent investment manage-
6--Variable Investment Trust
- -------------------------------------------------------------------------------
<PAGE>
ment and the preservation of capital. Capital appreciation with respect to the
Income Portfolio's securities holdings may occur but is not an objective of
the Portfolio. In seeking to achieve its investment objective, the Income
Portfolio invests in the following types of fixed income instruments: securi-
ties issued or guaranteed by the U.S. Government or one of its agencies or in-
strumentalities ("Government Securities"); obligations of foreign governments
or their agencies or instrumentalities; bonds, debentures, notes and preferred
stocks issued by U.S. and foreign companies; zero coupon obligations, floating
and variable rate instruments; mortgage related securities, adjustable rate
mortgage related securities ("ARMs"), collateralized mortgage obligations
("CMOs") and government stripped mortgage related securities; asset-backed and
receivable-backed securities; and money market instruments. The Income Portfo-
lio may also invest in indexed securities, the value of which is linked to
currencies, interest rates, commodities, indexes or other financial indica-
tors. Mortgage related securities, ARMs, CMOs, government stripped mortgage
related securities, and asset-backed and receivable-backed securities, are
subject to several risks, including the prepayment of principal. Other risks
and special considerations applicable to these instruments are described in
"Further Information: Certain Investment Techniques and Strategies."
The Income Portfolio is subject to no limitation with respect to the maturi-
ties of the instruments in which it may invest; the weighted average maturity
of its portfolio securities is anticipated to be approximately five to 10
years. The Income Portfolio's investments in bonds are limited to those that
are rated within the six highest categories by S&P, Moody's or another NRSRO,
or if unrated, are deemed by GEIM to be of comparable quality. Risks and spe-
cial considerations applicable to certain investment grade obligations and ob-
ligations rated lower than investment grade are described below under "Risk
Factors and Special Considerations." A description of S&P and Moody's ratings
relevant to the Income Portfolio's investments is included as an Appendix to
the Statement of Additional Information.
The Income Portfolio will not purchase any obligation rated BBB by S&P or Baa
by Moody's if, as a result of the purchase, more than 25% of the Portfolio's
total assets would be invested in obligations rated in those categories or in
unrated obligations that are deemed by GEIM to be of comparable quality. In
addition, no obligation will be purchased by the Income Portfolio if, as a re-
sult of the purchase, more than 10% of the Portfolio's total assets would be
invested in obligations rated BB or B by S&P or Ba or B by Moody's or in
unrated obligations that GEIM deems to be of comparable quality.
Up to 35% of the Income Portfolio's total assets may be invested in obliga-
tions of foreign companies or foreign governments or their agencies and in-
strumentalities. Investments in foreign companies and agencies or instrumen-
talities of foreign governments made by the Income Portfolio usually will in-
volve currencies of foreign countries. Risks and special considerations appli-
cable to investing in foreign countries are described below under "Risk Fac-
tors and Special Considerations." Under normal market conditions, the Income
Portfolio may invest a substantial portion of its assets in money market in-
struments of the types described below under "Additional Investments--Money
Market Instruments" for cash management purposes, pending investment in accor-
dance with the Portfolio's investment objective and policies and to meet oper-
ating expenses. Moreover, when GEIM believes that economic and other market
conditions warrant, for temporary defensive purposes, the Income Portfolio may
hold cash or invest in such short-term money market instruments without limi-
tation.
The Income Portfolio, in addition to investing as described above, may hold
the following types of instruments: non-publicly traded securities, repurchase
agreements, illiquid securities, Rule 144A Securities, securities of suprana-
tional agencies and securities of other investment funds. In addition, the In-
come Portfolio may engage in the following types of
Variable Investment Trust--7
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<PAGE>
investment techniques and strategies: purchasing put and call options on secu-
rities, writing put and call options on securities, purchasing put and call
options on securities indexes, entering into interest rate, financial and bond
index futures contracts or related options that are traded on a U.S. or for-
eign exchange or board of trade or in the over-the-counter market, engaging in
forward currency transactions, purchasing and writing put and call options on
foreign currencies, entering into securities transactions on a when-issued or
delayed-delivery basis, entering into mortgage dollar rolls and lending port-
folio securities. These other instruments, investment techniques and strate-
gies have risks and special considerations associated with them that are de-
scribed below under "Risk Factors and Special Considerations" and in "Further
Information: Certain Investment Techniques and Strategies."
GE MONEY MARKET PORTFOLIO
The investment objective of GE Money Market Portfolio (the "Money Market Port-
folio"), a diversified investment fund, is to seek a high level of current in-
come consistent with the preservation of capital and the maintenance of li-
quidity. In seeking its objective, the Money Market Portfolio invests in the
following U.S. dollar denominated, short-term money market instruments: (1)
Government Securities; (2) debt obligations of banks, savings and loan insti-
tutions, insurance companies and mortgage bankers; (3) commercial paper and
notes, including those with floating or variable rates of interest; (4) debt
obligations of foreign branches of U.S. banks, U.S. branches of foreign banks
and foreign branches of foreign banks; (5) debt obligations issued or guaran-
teed by one or more foreign governments or any of their political subdivi-
sions, agencies or instrumentalities, including obligations of supranational
entities; (6) debt securities issued by foreign issuers; and (7) repurchase
agreements.
The Money Market Portfolio limits its investments to securities that the
Trust's Board of Trustees determines present minimal credit risk and that are
"Eligible Securities" at the time of acquisition by the Portfolio. "Eligible
Securities" as used in this Prospectus means securities rated by the "Requi-
site NRSROs" in one of the two highest short-term rating categories, consist-
ing of issuers that have received these ratings with respect to other short-
term debt securities and comparable unrated securities. "Requisite NRSROs"
means (1) any two NRSROs that have issued ratings with respect to a security
or class of debt obligations of an issuer or (2) one NRSRO, if only one NRSRO
has issued such a rating at the time that the Money Market Portfolio acquires
the security. Currently, six organizations are NRSROs: S&P, Moody's, Fitch In-
vestors Service, Inc., Duff and Phelps, Inc., IBCA Limited and its affiliate,
IBCA, Inc., and Thomson BankWatch Inc. A discussion of the ratings categories
is contained in the Appendix to the Statement of Additional Information. By
limiting its investments to Eligible Securities, the Money Market Portfolio
may not achieve as high a level of current income as a fund investing in low-
er-rated securities.
The Money Market Portfolio may not invest more than 5% of its total assets in
the securities of any one issuer, except for Government Securities and except
to the extent permitted under rules adopted by the SEC under the 1940 Act. In
addition, the Money Market Portfolio may not invest more than 5% of its total
assets in Eligible Securities that have not received the highest rating from
the Requisite NRSROs and comparable unrated securities ("Second Tier Securi-
ties"), and may not invest more than 1% of its total assets in the Second Tier
Securities of any one issuer. The Money Market Portfolio may invest more than
5% (but not more than 25%) of the then-current value of the Portfolio's total
assets in the securities of a single issuer for a period of up to three busi-
ness days, so long as (1) the securities either are rated by the Requisite
NRSROs in the highest short-term rating category or are securities of issuers
that have received such ratings with respect to other short-term debt securi-
ties or are comparable unrated securities and (2) the Portfolio does not make
more than one such investment at any one time. If the Money Market Portfolio
acquires securities that are unrated or that have been
8--Variable Investment Trust
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<PAGE>
rated by a single NRSRO, the acquisition must be approved or ratified by the
Trust's Board of Trustees. Determination of comparable quality is made by GEIM
in accordance with procedures established by the Board of Trustees. The Money
Market Portfolio invests only in instruments that have (or, pursuant to regu-
lations adopted by the SEC, are deemed to have) remaining maturities of 13
months or less at the date of purchase (except securities subject to repur-
chase agreements), determined in accordance with a rule promulgated by the
SEC. The Money Market Portfolio will maintain a dollar-weighted average port-
folio maturity of 90 days or less. The assets of the Money Market Portfolio
are valued on the basis of amortized cost, as described below under "Net Asset
Value."
The Money Market Portfolio, in addition to investing as described above, may
hold Rule 144A Securities. In addition, the Money Market Portfolio may engage
in the following types of investment techniques and strategies: entering into
reverse repurchase agreements, entering into securities transactions on a
when-issued or delayed-delivery basis and lending portfolio securities. These
other instruments, investment techniques and strategies have risks and special
considerations associated with them that are described below under "Risk Fac-
tors and Special Considerations" and in "Further Information: Certain Invest-
ment Techniques and Strategies."
ADDITIONAL INVESTMENTS
Some or all of the Portfolios may invest in the types of instruments and en-
gage in the types of strategies described in detail below. These instruments
and strategies may be subject to the risks and special considerations de-
scribed below under "Risk Factors and Special Considerations."
The Trust's annual report for the year ended December 31, 1995 contains infor-
mation regarding relevant market conditions and investment strategies and
techniques pursued by GEIM during such year and is available to shareholders
without charge upon request by calling the GNA Variable Annuity Service Center
at 1-800-455-0870 or by writing to the Center at 300 Berwyn Park, Berwyn,
Pennsylvania 19312-0031.
MONEY MARKET INSTRUMENTS. Each Portfolio, other than the Money Market Portfo-
lio, may invest only in the following types of money market instruments: Gov-
ernment Securities; obligations issued or guaranteed by foreign governments or
by any of their political subdivisions, authorities, agencies or instrumental-
ities; bank obligations (including certificates of deposit, time deposits and
bankers' acceptances of foreign or domestic banks, domestic savings and loan
associations and other banking institutions having total assets in excess of
$500 million); commercial paper; and repurchase agreements.
Each of the Portfolios may invest in the following types of Government Securi-
ties: debt obligations of varying maturities issued by the U.S. Treasury or
issued or guaranteed by the Federal Housing Administration, Farmers Home Ad-
ministration, Export-Import Bank of the United States, Small Business Adminis-
tration, Government National Mortgage Association ("GNMA"), General Services
Administration, Central Bank for Cooperatives, Federal Farm Credit Banks, Fed-
eral Home Loan Banks, Federal Home Loan Mortgage Corporation ("FHLMC"), Fed-
eral Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage
Association ("FNMA"), Federal Deposit Insurance Corporation, Maritime Adminis-
tration, Tennessee Valley Authority, District of Columbia Armory Board, Stu-
dent Loan Marketing Association and Resolution Trust Corporation. Direct obli-
gations of the U.S. Treasury include a variety of securities that differ in
their interest rates, maturities and dates of issuance. Certain of the Govern-
ment Securities that may be held by the Portfolios 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 Portfolios 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 obli-
gated by law
Variable Investment Trust--9
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<PAGE>
to provide support to an instrumentality that it sponsors, a Portfolio will
invest in obligations issued by an instrumentality of the U.S. Government,
only if GEIM determines that the instrumentality's credit risk does not make
its securities unsuitable for investment by the Portfolio.
Each Portfolio, other than the Money Market Portfolio, may invest in money
market instruments issued or guaranteed by foreign governments or by any of
their political subdivisions, authorities, agencies or instrumentalities. The
International Portfolio and the U.S. Equity Portfolio may invest in these in-
struments only if they are rated AAA or AA by S&P or Aaa or Aa by Moody's or
have received an equivalent rating from another NRSRO, or if unrated, are
deemed by GEIM to be of equivalent quality. The Income Portfolio may invest in
such money market instruments if they are rated no lower than B by S&P or
Moody's or have received an equivalent rating from another NRSRO, or if
unrated, are deemed by GEIM to be of equivalent quality. Commercial paper held
by such Portfolios, other than the Money Market Portfolio may be rated no
lower than A-2 by S&P or Prime-2 by Moody's or the equivalent from another
NRSRO, or if unrated, must be issued by an issuer having an outstanding
unsecured debt issue then rated within the three highest categories. A de-
scription of the rating systems of Moody's and S&P is contained in an Appendix
to the Statement of Additional Information. At no time will the investments of
a Portfolio, other than the Money Market Portfolio, in bank obligations, in-
cluding time deposits, exceed 25% of the value of the Portfolio's assets.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS. Each Portfolio may engage in re-
purchase agreement transactions with respect to instruments in which the Port-
folio is authorized to invest. The Portfolios may engage in repurchase agree-
ment transactions with certain member banks of the Federal Reserve System and
with certain dealers listed on the Federal Reserve Bank of New York's list of
reporting dealers. Under the terms of a typical repurchase agreement, which is
deemed a loan for purposes of the 1940 Act, a Portfolio would acquire an un-
derlying obligation for a relatively short period (usually from one to seven
days) subject to an obligation of the seller to repurchase, and the Portfolio
to resell, the obligation at an agreed-upon price and time, thereby determin-
ing the yield during the Portfolio's holding period. This arrangement results
in a fixed rate of return that is not subject to market fluctuations during
the Portfolio's holding period. The value of the securities underlying a re-
purchase agreement of a Portfolio are monitored on an ongoing basis by GEIM to
ensure that the value is at least equal at all times to the total amount of
the repurchase obligation, including interest. GEIM also monitors, on an ongo-
ing basis to evaluate potential risks, the creditworthiness of those banks and
dealers with which a Portfolio enters into repurchase agreements.
The Money Market Portfolio may engage in reverse repurchase agreements, sub-
ject to its investment restrictions. A reverse repurchase agreement, which is
considered a borrowing by the Money Market Portfolio, involves a sale by the
Portfolio of securities that it holds concurrently with an agreement by the
Portfolio to repurchase the same securities at an agreed-upon price and date.
The Money Market Portfolio 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 Portfolio's securities is
considered to be disadvantageous. Cash, Government Securities or other liquid,
high-grade debt obligations equal in value to the Money Market Portfolio's ob-
ligations with respect to reverse repurchase agreements are segregated and
maintained with the Trust's custodian or designated sub-custodian.
NON-PUBLICLY TRADED AND ILLIQUID SECURITIES. The U.S. Equity Portfolio, the
International Portfolio and the Income Portfolio may each invest up to 10% of
its assets in non-publicly traded securities. Non-publicly traded securities
are securities that are subject to contractual or legal restrictions on trans-
fer, excluding for purposes of this restriction, Rule 144A Securities that
have been determined to be liquid by the Trust's Board of Trustees
10--Variable Investment Trust
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<PAGE>
based upon the trading markets for the securities. In addition, each Portfo-
lio, other than the Money Market Portfolio, may invest up to 15% of its assets
in "illiquid securities"; the Money Market Portfolio may not, under any cir-
cumstance, invest in illiquid securities. In no event, however, will any Port-
folio's investments in illiquid and non-publicly traded securities, in the ag-
gregate, exceed 15% of its assets. Illiquid securities are securities that
cannot be disposed of by a Portfolio within seven days in the ordinary course
of business at approximately the amount at which the Portfolio has valued the
securities. Illiquid securities that are held by a Portfolio take the form of
options traded over-the-counter, repurchase agreements maturing in more than
seven days, certain mortgage related securities and securities subject to
restrictions on resale that GEIM has determined are not liquid under guide-
lines established by the Trust's Board of Trustees.
INDEXED SECURITIES. The Income Portfolio may invest in indexed securities, the
value of which is linked to currencies, interest rates, commodities, indexes
or other financial indicators ("reference instruments"). The interest rate or
(unlike most fixed income securities) the principal amount payable at maturity
of an indexed security may be increased or decreased, depending on changes in
the value of the reference instrument. Indexed securities may be positively or
negatively indexed, so that appreciation of the reference instrument may pro-
duce an increase or a decrease in the interest rate or value at maturity of
the security. In addition, the change in the interest rate or value at matu-
rity of the security may be some multiple of the change in value of the refer-
ence instrument. Thus, in addition to the credit risk of the security's issu-
er, the Income Portfolio will bear the market risk of the reference instru-
ment.
PURCHASING PUT AND CALL OPTIONS ON SECURITIES. Each Portfolio, other than the
Money Market Portfolio, may purchase put and call options that are traded on a
U.S. or foreign securities exchange or in the over-the-counter market. A Port-
folio 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 un-
derlying security or at a later time. By buying a put, a Portfolio 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 securi-
ty, however, will be partially offset by the amount of the premium paid for
the put option and any related transaction costs. A Portfolio may utilize up
to 10% of its assets to purchase call options on portfolio securities. Call
options may be purchased by a Portfolio in order to acquire the underlying se-
curities for a price that avoids any additional cost that would result from a
substantial increase in the market value of a security. A Portfolio may also
purchase call options to increase its return at a time when the call is ex-
pected to increase in value due to anticipated appreciation of the underlying
security. Prior to their expirations, put and call options may be sold by a
Portfolio in closing sale transactions, which are sales by the Portfolio,
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 re-
ceived 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 Portfolio. In addition, the
premiums paid by a Portfolio in purchasing options on securities, options on
securities indexes, options on foreign currencies and options on futures con-
tracts will not exceed 20% of the Portfolio's net assets.
COVERED OPTION WRITING. Each Portfolio, other than the Money Market Portfolio,
may write covered put and call options on securities. A Portfolio will realize
fees (referred to as "premiums") for granting the rights evidenced by the op-
tions. 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 op-
tion embodies the right of its purchaser to compel the writer of the option to
Variable Investment Trust--11
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<PAGE>
sell to the option holder an underlying security at a specified price at any
time during the option period.
The Portfolios with option-writing authority write only covered options. A put
or call option written by a Portfolio will be deemed covered in any manner
permitted under the 1940 Act or the rules and regulations thereunder or any
other method determined by the SEC to be permissible. See "Strategies Avail-
able to Some But Not All Portfolios--Covered Option Writing" in the Statement
of Additional Information for specific situations where put and call options
will be deemed to be covered by a Portfolio.
A Portfolio 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 op-
tion's expiration). To effect a closing purchase transaction, a Portfolio
would purchase, prior to the holder's exercise of an option that the Portfolio
has written, an option of the same series as that on which the Portfolio de-
sires to terminate its obligation. The obligation of a Portfolio under an op-
tion that it has written would be terminated by a closing purchase transac-
tion, but the Portfolio would not be deemed to own an option as the result of
the transaction. To facilitate closing purchase transactions, the Portfolios
with option-writing authority will ordinarily write options only if a second-
ary market for the options exists on a U.S. or foreign securities exchange or
in the over-the-counter market.
Option writing for a Portfolio may be limited by position and exercise limits
established by U.S. securities exchanges and the National Association of Secu-
rities 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 put and call options to generate current in-
come, a Portfolio may enter into options transactions as hedges to reduce in-
vestment risk, generally by making an investment expected to move in the oppo-
site direction of a portfolio position. A hedge is designed to offset a loss
on a portfolio position with a gain on the hedge position; at the same time,
however, a properly correlated hedge will result in a gain on the portfolio
position's being offset by a loss on the hedge position. No Portfolio will en-
ter into a transaction involving options for speculative purposes.
SECURITIES INDEX OPTIONS. In seeking to hedge all or a portion of its invest-
ments, a Portfolio, other than the Money Market Portfolio, may purchase and
write put and call options on securities indexes listed on U.S. or foreign se-
curities exchanges or traded in the over-the-counter market, which indexes in-
clude securities held in its portfolio. The Portfolios with such option writ-
ing authority may write only covered options. A Portfolio may also use securi-
ties index options as a means of participating in a securities market without
making direct purchases of securities. No Portfolio will enter into a transac-
tion involving securities index options for speculative purposes.
A securities index measures the movement of a certain group of securities by
assigning relative values to the securities included in the index. Options on
securities indexes are generally similar to options on specific securities.
Unlike options on securities, however, options on securities indexes do not
involve the delivery of an underlying security; the option in the case of an
option on a securities index represents the holder's right to obtain from the
writer in cash a fixed multiple of the amount by which the exercise price ex-
ceeds (in the case of a call) or is less than (in the case of a put) the clos-
ing value of the underlying securities index on the exercise date.
A securities index option written by a Portfolio will be deemed covered in any
manner permitted under the 1940 Act or the rules and regulations thereunder or
any other method determined by the SEC to be permissible. See "Strategies
Available to Some But Not All Portfolios--Covered Option Writing" in the
Statement of Additional Information for spe-
12--Variable Investment Trust
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<PAGE>
cific situations where securities index options will be deemed to be covered
by a Portfolio. If the Portfolio has written a securities index option, it may
terminate its obligation by effecting a closing purchase transaction, which is
accomplished by purchasing an option of the same series as the option previ-
ously written.
FUTURES AND OPTIONS ON FUTURES. Each Portfolio, other than the Money Market
Portfolio, 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 ex-
change or board of trade or in the over-the-counter market. If entered into,
these transactions will be made solely for the purpose of hedging against the
effects of changes in the value of portfolio securities due to anticipated
changes in interest rates and/or market conditions, for duration management,
or when the transactions are economically appropriate to the reduction of
risks inherent in the management of the Portfolio involved. No Portfolio will
enter into a transaction involving futures and options on futures for specula-
tive purposes.
A Portfolio may not enter into futures and options contracts for which aggre-
gate initial margin deposits and premiums paid for unexpired options exceed 5%
of the fair market value of the Portfolio's total assets, after taking into
account unrealized losses or profits on futures contracts or options on
futures contracts into which it has entered. The current view of the SEC staff
is that a Fund's long and short positions in futures contracts as well as put
and call options on futures written by it must be collateralized with cash or
certain liquid assets segregated with the Trust's custodian or a designated
sub-custodian or "covered" in a manner similar to that for covered options on
securities (see "Strategies Available to Some But Not All Portfolios--Covered
Option Writing" in the Statement of Additional Information) and designed to
eliminate any potential leveraging.
An interest rate futures contract provides for the future sale by one party
and the purchase by the other party of a specified amount of a particular fi-
nancial instrument (debt security) at a specified price, date, time and place.
Financial futures contracts are contracts that obligate the holder to deliver
(in the case of a futures contract that is sold) or receive (in the case of a
futures contract that is purchased) at a future date a specified quantity of a
financial instrument, specified securities, or the cash value of a securities
index. A municipal bond index futures contract is based on an index of long-
term, tax-exempt municipal bonds and a corporate bond index futures contract
is based on an index of corporate bonds. Stock index futures contracts are
based on indexes that reflect the market value of common stock of the compa-
nies included in the indexes. An index futures contract is an agreement pursu-
ant to which two parties agree to take or make delivery of an amount of cash
equal to the difference between the value of the index at the close of the
last trading day of the contract and the price at which the index contract was
originally written. An option on an interest rate or index futures contract
generally gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract at a specified exercise price at any
time prior to the expiration date of the option.
FORWARD CURRENCY TRANSACTIONS. The International Portfolio, the U.S. Equity
Portfolio and the Income Portfolio may each hold currencies to meet settlement
requirements for foreign securities and may engage in currency exchange trans-
actions 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 Portfolio's securities are or may be denominated. No
Portfolio will enter into forward currency transactions for speculative pur-
poses. 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 a Portfolio enters into the contract.
Forward currency contracts (1) are traded in a market conducted directly be-
tween currency traders
Variable Investment Trust--13
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<PAGE>
(typically, commercial banks or other financial institutions) and their cus-
tomers, (2) generally have no deposit requirements and (3) are typically con-
summated without payment of any commissions. A Portfolio, however, may enter
into forward currency contracts requiring deposits or involving the payment of
commissions. To assure that a Portfolio's forward currency contracts are not
used to achieve investment leverage, cash or readily marketable securities
will be segregated with the Trust's custodian or a designated sub-custodian in
an amount at all times equal to or exceeding the Portfolio's commitment with
respect to the contracts.
Upon maturity of a forward currency contract, a Portfolio may (1) pay for and
receive the underlying currency, (2) negotiate with the dealer to roll over
the contract into a new forward currency contract with a new future settlement
date or (3) negotiate with the dealer to terminate the forward contract into
an offset with the currency trader providing for the Portfolio's paying or re-
ceiving the difference between the exchange rate fixed in the contract and the
then current exchange rate. The Trust may also be able to negotiate such an
offset on behalf of a Portfolio prior to maturity of the original forward con-
tract. No assurance can be given that new forward contracts or offsets will
always be available to a Portfolio.
In hedging a specific portfolio position, a Portfolio may enter into a forward
contract with respect to either the currency in which the position is denomi-
nated or another currency deemed appropriate by GEIM. A Portfolio's exposure
with respect to forward currency contracts is limited to the amount of the
Portfolio's aggregate investments in instruments denominated in foreign cur-
rencies.
OPTIONS ON FOREIGN CURRENCIES. The International Portfolio, the U.S. Equity
Portfolio and the Income Portfolio may each 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 Portfo-
lio. The Portfolios with such option writing authority may write only covered
options. No Portfolio will enter into a transaction involving options on for-
eign currencies for speculative purposes. Options on foreign currencies to be
written or purchased by a Portfolio are traded on U.S. or foreign exchanges or
in the over-the-counter market. The Trust will limit the premiums paid on a
Portfolio's options on foreign currencies to 5% of the value of the Portfo-
lio's total assets.
INVESTMENT RESTRICTIONS
The Trust has adopted certain fundamental investment restrictions with respect
to each Portfolio that may not be changed without approval of a majority of
the Portfolio's outstanding voting securities (as defined in the 1940 Act).
Included among those fundamental restrictions are those listed below.
1. No Portfolio may borrow money, except that the Money Market Portfolio may
enter into reverse repurchase agreements, and except that each Portfolio may
borrow from banks for temporary or emergency (not leveraging) purposes, in-
cluding the meeting of redemption requests and cash payments of dividends and
distributions that might otherwise require the untimely disposition of securi-
ties, in an amount not to exceed 33 1/3% of the value of the Portfolio's total
assets (including the amount borrowed) valued at market less liabilities (not
including the amount borrowed) at the time the borrowing is made. Whenever
borrowings, including reverse repurchase agreements, of 5% or more of a Port-
folio's total assets are outstanding, the Portfolio will not make any addi-
tional investments.
2. No Portfolio may lend its assets or money to other persons, except through
(a) purchasing debt obligations, (b) lending portfolio securities in an amount
not to exceed 30% of the Portfolio's assets taken at market value, (c) enter-
ing into repurchase agreements, (d) trading in financial futures contracts,
index futures contracts, securities indexes and options on financial futures
contracts, options on index futures contracts, options on securities and op-
tions on securities indexes and (e) entering into variable rate demand notes.
14--Variable Investment Trust
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<PAGE>
3. No Portfolio may purchase securities (other than Government Securities) of
any issuer if, as a result of the purchase, more than 5% of the Portfolio'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 Portfolio, other than the
Money Market Portfolio, may be invested without regard to this limitation. All
securities of a foreign government and its agencies will be treated as a sin-
gle issuer for purposes of this restriction.
4. No Portfolio may purchase more than 10% of the voting securities of any one
issuer, or more than 10% of the outstanding securities of any class of issuer,
except that (a) this limitation is not applicable to a Portfolio's investments
in Government Securities and (b) up to 25% of the value of the assets of a
Portfolio, other than the Money Market Portfolio, may be invested without re-
gard 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 Portfolio 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 (a) the government of any country
other than the United States, but not the U.S. Government and (b) all suprana-
tional organizations. In addition, securities held by the Money Market Portfo-
lio that are issued by domestic banks are excluded from this restriction. For
purposes of this restriction, the Trust may use the industry classifications
reflected by the S&P 500 Composite Stock Price Index, if applicable at the
time of determination. For all other portfolio holdings, the Trust may use the
Directory of Companies Required to File Annual Reports with the SEC and
Bloomberg Inc. In addition, the Trust may select its own industry classifica-
tions, provided such classifications are reasonable.
Certain other investment restrictions adopted by the Trust with respect to the
Portfolios are described in the Statement of Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investing in the Portfolios involves risk factors and special considerations,
such as those described below:
GENERAL. GEIM's principal officers, directors, and portfolio managers serve in
similar capacities with respect to General Electric Investment Corporation
("GEIC"), which like GEIM is a wholly-owned subsidiary of General Electric
Company ("GE"). GEIM and GEIC collectively provide investment management serv-
ices to various institutional accounts with total assets, as of December 31,
1995, in excess of $52.3 billion. An investment in shares of any Portfolio,
however, should not be considered to be a complete investment program.
DEBT INSTRUMENTS. A debt instrument held by a Portfolio will be affected by
general changes in interest rates that will in turn result in increases or de-
creases in the market value of those obligations. The market value of debt in-
struments held by a Portfolio can be expected to vary inversely to changes in
prevailing interest rates. In periods of declining interest rates, the yield
of a Portfolio holding a significant amount of debt instruments will tend to
be somewhat higher than prevailing market rates, and in periods of rising in-
terest rates, the Portfolio's yield will tend to be somewhat lower. In addi-
tion, when interest rates are falling, money received by such a Portfolio from
the continuous sale of its shares will likely be invested in portfolio instru-
ments producing lower yields than the balance of its portfolio, thereby reduc-
ing the Portfolio's current yield. In periods of rising interest rates, the
opposite result can be expected to occur.
CERTAIN INVESTMENT GRADE OBLIGATIONS. Although obligations rated BBB by S&P or
Baa by Moody's are considered investment grade, they may be viewed as being
subject to greater risks than other investment grade obligations. Obligations
rated BBB by S&P are regarded as having only an adequate capacity to pay prin-
cipal and interest and those rated Baa by Moody's are considered medium-grade
obligations that lack outstanding investment characteristics and have specula-
tive characteristics as well.
Variable Investment Trust--15
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<PAGE>
LOW-RATED SECURITIES. Certain Portfolios are authorized to invest in securi-
ties rated lower than investment grade (sometimes referred to as "junk
bonds"). Low-rated and comparable unrated securities (collectively referred to
as "low-rated" securities) likely have quality and protective characteristics
that, in the judgment of a rating organization, are outweighed by large uncer-
tainties or major risk exposures to adverse conditions, and are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. Securities in the
lowest rating categories may be in default or may present substantial risks of
default.
Although the market values of low-rated securities tend to react less to fluc-
tuations in interest rate levels than the market values of higher-rated secu-
rities, the market values of certain low-rated securities tend to be more sen-
sitive to individual corporate developments and changes in economic conditions
than higher-rated securities. In addition, low-rated securities generally
present a higher degree of credit risk. Issuers of low-rated securities are
often highly leveraged and may not have more traditional methods of financing
available to them, so that their ability to service their debt obligations
during an economic downturn or during sustained periods of rising interest
rates may be impaired. The risk of loss due to default by these issuers is
significantly greater because low-rated securities generally are unsecured and
frequently are subordinated to the prior payment of senior indebtedness. A
Portfolio may incur additional expenses to the extent that it is required to
seek recovery upon a default in the payment of principal or interest on its
portfolio holdings. The existence of limited markets for low-rated securities
may diminish the Trust's ability to obtain accurate market quotations for pur-
poses of valuing the securities held by a Portfolio and calculating the Port-
folio's net asset value.
NON-PUBLICLY TRADED AND ILLIQUID SECURITIES. Non-publicly traded securities
may be less liquid than publicly traded securities. Although these securities
may be resold in privately negotiated transactions, the prices realized from
these sales could be less than those originally paid by a Portfolio. In addi-
tion, companies whose securities are not publicly traded are not subject to
the disclosure and other investor protection requirements that may be applica-
ble if their securities were publicly traded. A Portfolio's investments in il-
liquid securities are subject to the risk that should the Portfolio desire to
sell any of these securities when a ready buyer is not available at a price
that GEIM deems representative of their value, the value of the Portfolio's
net assets could be adversely affected.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS. A Portfolio entering into a re-
purchase agreement will bear a risk of loss in the event that the other party
to the transaction defaults on its obligations and the Portfolio is delayed or
prevented from exercising its rights to dispose of the underlying securities.
The Portfolio will be, in particular, subject to the risk of a possible de-
cline in the value of the underlying securities during the period in which the
Portfolio seeks to assert its right to them, the risk of incurring expenses
associated with asserting those rights and the risk of losing all or a part of
the income from the agreement.
A reverse repurchase agreement involves the risk that the market value of the
securities retained by the Money Market Portfolio may decline below the price
of the securities the Portfolio has sold but is obligated to repurchase under
the agreement. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, the Money Market Portfo-
lio's use of the proceeds of the agreement may be restricted pending a deter-
mination by the party, or its trustee or receiver, whether to enforce the
Portfolio's obligation to repurchase the securities.
WARRANTS. Because a warrant, which is a security permitting, but not obligat-
ing, 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,
16--Variable Investment Trust
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<PAGE>
and because a warrant does not represent any rights to the assets of the issu-
er, 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 a Port-
folio in warrants valued at the lower of cost or market, may not exceed 5% of
the value of the Portfolio's net assets. Included within that amount, but not
to exceed 2% of the value of the Portfolio's net assets, may be warrants that
are not listed on the New York Stock Exchange, Inc. ("NYSE") or the American
Stock Exchange. Warrants acquired by a Portfolio in units or attached to secu-
rities may be deemed to be without value.
INVESTMENT IN FOREIGN SECURITIES. Investing in securities issued by foreign
companies and governments involves considerations and potential risks not typ-
ically associated with investing in obligations issued by the U.S. Government
and U.S. corporations. Less information may be available about foreign compa-
nies than about U.S. companies, and foreign companies generally are not sub-
ject 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 eco-
nomic or monetary policy (in the United States or abroad) or changed circum-
stances in dealings between nations. Costs are also incurred in connection
with conversions between various currencies. In addition, foreign brokerage
commissions are generally higher than those charged in the United States and
foreign securities markets may be less liquid, more volatile and less subject
to governmental supervision than in the United States. Investments in foreign
countries could be affected by other factors not present in the United States,
including expropriation, confiscatory taxation, lack of uniform accounting and
auditing standards, limitations on the use or removal of funds or other assets
(including the withholding of dividends), and potential difficulties in en-
forcing contractual obligations, and could be subject to extended clearance
and settlement periods.
CURRENCY EXCHANGE RATES. A Portfolio's share value may change significantly
when the currencies, other than the U.S. dollar, in which the Portfolio's in-
vestments are denominated, strengthen or weaken against the U.S. dollar. Cur-
rency exchange rates generally are determined by the forces of supply and de-
mand in the foreign exchange markets and the relative merits of investments in
different countries as seen from an international perspective. Currency ex-
change rates can also be affected unpredictably by intervention by U.S. or
foreign governments or central banks or by currency controls or political de-
velopments in the United States or abroad.
INVESTING IN DEVELOPING COUNTRIES. Investing in securities issued by companies
located in developing countries involves not only the risks described above
with respect to investing in foreign securities, but also other risks, includ-
ing 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 coun-
tries 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 proper-
ty. The typically small size of the markets for securities issued by companies
located in developing countries and the possibility of a low or nonexistent
volume of trading in those securities may also result in a lack of liquidity
and in price volatility of those securities.
COVERED OPTION WRITING. Upon the exercise of a put option written by a Portfo-
lio, the Portfolio may suffer a loss equal to the difference between the price
at which the Portfolio is required to purchase the underlying security
Variable Investment Trust--17
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<PAGE>
and its market value at the time of the option exercise, less the premium re-
ceived for writing the option. Upon the exercise of a call option written by a
Portfolio, the Portfolio may suffer a loss equal to the excess of the
security's market value at the time of the option's exercise over the Portfo-
lio's acquisition cost of the security, less the premium received for writing
the option. In addition, no assurance can be given that a Portfolio will be
able to effect closing purchase transactions at a desired time. The ability of
a Portfolio to engage in closing transactions with respect to options depends
on the existence of a liquid secondary market. Although a Portfolio will gen-
erally purchase or write securities options only if a liquid secondary market
appears to exist for the option purchased or sold, no such secondary market
may exist or the market may cease to exist.
A Portfolio will engage in hedging transactions only when deemed advisable by
GEIM. Successful use by a Portfolio of options will depend on GEIM's ability
to predict correctly movements in the direction of the securities underlying
the option used as a hedge. Losses incurred in hedging transactions and the
costs of these transactions will affect a Portfolio's performance.
SECURITIES INDEX OPTIONS. Securities index options are subject to position and
exercise limits and other regulations imposed by the exchange on which they
are traded. The ability of a Portfolio to engage in closing purchase transac-
tions with respect to securities index options depends on the existence of a
liquid secondary market. Although a Portfolio will generally purchase or write
securities index options only if a liquid secondary market for the options
purchased or sold appears to exist, no such secondary market may exist, or the
market may cease to exist at some future date, for some options. No assurance
can be given that a closing purchase transaction can be effected when GEIM de-
sires that a Portfolio engage in such a transaction.
FUTURES AND OPTIONS ON FUTURES. The use of futures contracts and options on
futures contracts as a hedging device involves several risks. No assurance can
be given that a correlation will exist between price movements in the under-
lying securities or index and price movements in the securities that are the
subject of the hedge. Positions in futures contracts and options on futures
contracts may be closed out only on the exchange or board of trade on which
they were entered, and no assurance can be given that an active market will
exist for a particular contract or option at any particular time. Losses in-
curred in hedging transactions and the costs of these transactions will affect
a Portfolio's performance.
FORWARD CURRENCY TRANSACTIONS. In entering into forward currency contracts, a
Portfolio will be subject to a number of risks and special considerations. The
market for forward currency contracts, for example, may be limited with re-
spect to certain currencies. The existence of a limited market may in turn re-
strict the Portfolio's ability to hedge against the risk of devaluation of
currencies in which the Portfolio holds a substantial quantity of securities.
The successful use of forward currency contracts as a hedging technique draws
upon GEIM's special skills and experience with respect to those instruments
and will usually depend upon GEIM's ability to forecast interest rate and cur-
rency exchange rate movements correctly. Should interest or exchange rates
move in an unexpected manner, a Portfolio may not achieve the anticipated ben-
efits of forward currency contracts or may realize losses and thus be in a
less advantageous position than if those strategies had not been used. Many
forward currency contracts are subject to no daily price fluctuation limits so
that adverse market movements could continue with respect to those contracts
to an unlimited extent over a period of time. In addition, the correlation be-
tween movements in the prices of those contracts and movements in the prices
of the currencies hedged or used for cover will not be perfect.
The Trust's ability to dispose of a Portfolio's positions in forward currency
contracts depends on the availability of active markets in those instruments,
and GEIM cannot now predict the amount of trading interest that may exist in
the future in forward currency con-
18--Variable Investment Trust
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<PAGE>
tracts. Forward currency contracts may be closed out only by the parties en-
tering into an offsetting contract. As a result, no assurance can be given
that a Portfolio will be able to utilize these contracts effectively for the
intended purposes.
OPTIONS ON FOREIGN CURRENCIES. Like the writing of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge,
up to the amount of the premium received; a Portfolio could also be required,
with respect to any option it has written, to purchase or sell foreign curren-
cies 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 Portfolio's position, the Portfolio could forfeit the entire amount of
the premium plus related transaction costs.
INSTRUMENTS AND STRATEGIES INVOLVING SPECIAL RISKS. Certain instruments in
which the Portfolios can invest and certain investment strategies that the
Portfolios may employ could expose the Portfolios to various risks and special
considerations. The instruments presenting risks to a Portfolio that holds the
instruments are: Rule 144A Securities, depositary receipts, securities of su-
pranational agencies, securities of other investment funds, floating and vari-
able rate instruments, participation interests, zero coupon obligations, cus-
todial receipts, mortgage related securities, government stripped mortgage re-
lated securities, and asset-backed and receivable-backed securities. Among the
risks that some, but not all of these instruments involve are lack of liquid
secondary markets and the risk of prepayment of principal. The investment
strategies involving special risks to some or all of the Portfolios are: en-
gaging in when-issued or delayed-delivery securities transactions, lending
portfolio securities and selling securities short against the box. Among the
risks that some, but not all, of these strategies involve are increased expo-
sure to fluctuations in market value of the securities and certain credit
risks. See "Further Information: Certain Investment Techniques and Strategies"
for a more complete description of these instruments and strategies.
PORTFOLIO TRANSACTIONS AND TURNOVER
All orders for transactions in securities, options, futures contracts and op-
tions on future contracts on behalf of the Portfolios will be placed by GEIM
with broker-dealers that it selects, including affiliated brokers. A Portfolio
may use a GE-affiliated broker in connection with a purchase or sale of secu-
rities if, in the judgment of GEIM, the use of such a GE-affiliated broker is
likely to result in price and execution at least as favorable to the Portfolio
as those obtainable through other qualified broker-dealers, and if, in the
transaction, the affiliated broker charges the Portfolio a fair and reasonable
rate consistent with that payable by the Portfolio to other broker-dealers on
comparable transactions. The same standard applies to the use of a GE-affili-
ated broker as a commodities broker in connection with entering into futures
contracts and options on futures contracts.
The Trust cannot predict precisely the turnover rate for any Portfolio, but
expects that the annual turnover rate will generally not exceed 50% for the
International Portfolio, 50% for the U.S. Equity Portfolio and 300% for the
Income Portfolio. The portfolio turnover rate for the Money Market Portfolio
is expected to be zero for regulatory purposes. For the period from January 3
(commencement of operation) through December 31, 1995, the actual portfolio
turnover rates of the Portfolios were: the International Portfolio--60%, the
U.S. Equity Portfolio--71%, and the Income Portfolio--253%. A 100% annual
turnover rate would occur if all of a Portfolio's securities were replaced one
time during a period of one year. Higher portfolio turnover rates can result
in corresponding increases in brokerage commissions. GEIM does not consider
portfolio turnover rate a limiting factor in making investment decisions on
behalf of any Portfolio consistent with the Portfolio's investment objective
and policies.
Variable Investment Trust--19
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<PAGE>
MANAGEMENT OF THE TRUST
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BOARD OF TRUSTEES
Overall responsibility for management and supervision of the Portfolios rests
with the Trust's Board of Trustees. The Trustees approve all significant
agreements between the Trust and the persons and companies that furnish serv-
ices to the Portfolios, including agreements with the Portfolios' investment
adviser and administrator, custodian and transfer agent. The day-to-day opera-
tions of the Portfolios have been delegated to GEIM. The Statement of Addi-
tional Information contains background information regarding each Trustee and
executive officer of the Trust.
INVESTMENT ADVISER AND ADMINISTRATOR
GEIM, located at 3003 Summer Street, P.O. Box 7900, Stamford, Connecticut
06904-7900, serves as the investment adviser and administrator of each Portfo-
lio. GEIM, which was formed under the laws of Delaware in 1988, is a wholly-
owned subsidiary of GE and is a registered investment adviser under the In-
vestment Advisers Act of 1940, as amended.
GEIM has served as the investment adviser of the GE Funds, a family of ten mu-
tual funds (two of which are not presently being offered) separate from the
Trust and its Portfolios since their inception in 1993 and other institutional
accounts, including PaineWebber Global Equity Fund, a series of Mitchell
Hutchins/Kidder Peabody Investment Trust, since its inception in 1991, the
Global Growth Portfolio of PaineWebber Series Trust and Global Small Cap Fund
Inc. since March, 1995. GEIM's principal officers and directors serve in simi-
lar capacities with respect to GEIC, which like GEIM is a wholly-owned subsid-
iary of GE, and which currently acts as the investment adviser of Elfun Global
Fund, Elfun Trusts, Elfun Income Fund, Elfun Money Market Fund, Elfun Tax-Ex-
empt Income Fund and Elfun Diversified Fund (collectively, the "Elfun Funds").
The first Elfun Fund, Elfun Trusts, was established in 1935. Investment in the
Elfun Funds is generally limited to regular and senior members of the Elfun
Society, whose regular members are selected from active employees of GE and/or
its majority-owned subsidiaries, and whose senior Society members are former
members who have retired from those companies. In addition, under the General
Electric Savings and Security Program, GEIC serves as investment adviser to
the GE S&S Program Mutual Fund and GE S&S Program Long Term Interest Fund.
GEIC also serves as the investment adviser to the General Electric Company
Pension Trust. Through GEIM and GEIC and their predecessors, GE has more than
60 years of investment management experience. GEIM and GEIC collectively pro-
vide investment management services to various institutional accounts with to-
tal assets, as of December 31, 1995, in excess of $52.3 billion, of which
roughly $10 billion is invested in mutual funds.
As a Portfolio's investment adviser, GEIM, subject to the supervision and di-
rection of the Trust's Board of Trustees, manages the Portfolio in accordance
with its stated investment objective and policies, makes investment decisions
for the Portfolio and places purchase and sale orders for its portfolio trans-
actions. The Portfolios pay GEIM fees for advisory services provided by GEIM
to the Portfolios that are accrued daily and paid monthly at the following an-
nual rates of the value of the Portfolios' average daily net assets: the In-
ternational Portfolio--.80%, the U.S. Equity Portfolio--.50%, the Income Port-
folio--.45% and the Money Market Portfolio--.25%. The fee paid by the Interna-
tional Portfolio is higher than investment management fees paid by most other
mutual funds.
As a Portfolio's administrator, GEIM furnishes the Trust with statistical and
research data, clerical help and accounting, data processing, bookkeeping, in-
ternal auditing services and certain other services required by the Trust;
prepares reports to the shareholders of the Portfolio; and assists in the
preparation of tax returns and reports to and filings with the SEC and state
securities law authorities. GEIM also pays the salaries of all personnel em-
ployed by both it and the Trust and provides each Portfolio with investment
offi-
20--Variable Investment Trust
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<PAGE>
cers who are authorized by the Board of Trustees to execute purchases and
sales of securities on behalf of the Portfolio. Each Portfolio pays GEIM fees
for administrative services provided by GEIM to the Portfolio that are accrued
daily and paid monthly at an annual rate of .05% of the value of the Portfo-
lios' average daily net assets. GEIM may delegate to others all or a part of
its responsibilities as administrator.
Although investment decisions for each Portfolio are made independently from
those of the other accounts managed by GEIM, investments of the type a Portfo-
lio may make may also be made by those other accounts. When a Portfolio and
one or more other accounts managed by GEIM are prepared to invest in, or de-
sire to dispose of, the same security, available investments or opportunities
for sales will be allocated in a manner believed by GEIM to be equitable to
each. In some cases, this procedure may adversely affect the price paid or re-
ceived by a Portfolio or the size of the position obtained or disposed of by a
Portfolio.
The agreements governing the investment advisory services furnished to the
Trust by GEIM provide that, if GEIM ceases to act as the investment adviser to
the Trust, at GEIM's request, the Trust's license to use the initials "GE"
will terminate and the Trust will change the name of the Portfolios to a name
not including the initials "GE."
PORTFOLIO MANAGEMENT
Eugene K. Bolton is responsible for the overall management of the domestic eq-
uity investment process at GEIM and GEIC (GEIM, GEIC and their predecessors
are collectively referred to as "GE Investments"). Mr. Bolton is specifically
responsible for selecting the Portfolio Managers for the U.S. Equity Portfo-
lio. He is also responsible for monitoring the investment strategies employed
by the Portfolio Managers of those Portfolios to ensure that they are consis-
tent with the Portfolios' investment objectives and policies. Mr. Bolton has
more than 11 years of investment experience and has held positions with GE In-
vestments since 1984. He is currently a Director and Executive Vice President
of GE Investments.
Christopher D. Brown is one of the five Portfolio Managers for the U.S. Equity
Portfolio and has served in that capacity since December 1995. He has ten
years of investment experience, and has held positions with GE Investments
since 1985. Mr. Brown is currently a Vice President of GE Investments.
David B. Carlson is one of the five Portfolio Managers for the U.S. Equity
Portfolio. He has more than 13 years of investment experience and has held po-
sitions with GE Investments since 1982. Mr. Carlson is currently a Senior Vice
President of GE Investments.
Peter J. Hathaway is one of the five Portfolio Managers for the U.S. Equity
Portfolio. He has more than 35 years of investment experience and has held po-
sitions with GE Investments since 1985. Mr. Hathaway is currently a Senior
Vice President of GE Investments.
A. John Kohlhepp is one of the five Portfolio Managers for the U.S. Equity
Portfolio. He has more than 36 years of investment experience and has held po-
sitions with GE Investments since 1968. Mr. Kohlhepp is currently a Senior
Vice President of GE Investments.
Ralph R. Layman is the Portfolio Manager of the International Portfolio. He
has more than 16 years of investment experience and has held positions with GE
Investments since 1991. From 1989 to 1991, Mr. Layman served as an Executive
Vice President, Partner and Portfolio Manager of Northern Capital Management,
and prior thereto, served as Vice President and Portfolio Manager of Templeton
Investment Counsel. Mr. Layman is currently an Executive Vice President of GE
Investments.
Robert A. MacDougall is the Portfolio Manager of the Income Portfolio. He has
more than 12 years of investment experience and has held positions with GE In-
vestments since 1986. Mr. MacDougall is currently a Senior Vice President of
GE Investments.
Paul C. Reinhardt is one of the five Portfolio Managers for the U.S. Equity
Portfolio. He has more than 14 years of investment experi-
Variable Investment Trust--21
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<PAGE>
ence and has held positions with GE Investments since 1982. Mr. Reinhardt is
currently a Senior Vice President of GE Investments.
GEIM investment personnel may engage in securities transactions for their own
accounts pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions.
EXPENSES OF THE PORTFOLIOS
Each Portfolio will bear its own expenses, which generally include all costs
not specifically borne by GEIM. Included among the Portfolios' expenses are: a
portion of the costs incurred in connection with the Trust's organization; in-
vestment advisory and administration fees; fees paid to members of the Trust's
Board of Trustees who are not affiliated with GEIM or any of its affiliates;
fees for necessary professional and brokerage services; fees for any pricing
service; the costs of custody, transfer agency and recordkeeping services; the
costs of regulatory compliance; a portion of the costs associated with main-
taining the Trust's legal existence; and the costs of corresponding with
shareholders of the Portfolios. GEIM intends to reduce or otherwise limit
these expenses, other than investment advisory and administration fees which
are discussed above under "Investment Adviser and Administrator," on an
annualized basis, to the following annual rate of the value of the Portfolio's
average daily net assets: the U.S. Equity Portfolio--.25%, the International
Portfolio--.35%, the Income Portfolio--.25% and the Money Market Portfolio--
.20%. In addition, the Trust's agreement with GEIM with respect to each Port-
folio provides that GEIM will reimburse the Portfolio to the extent required
by applicable state laws for certain expenses that are described in the State-
ment of Additional Information.
A detailed description of the fees and expenses involved in investing in the
Contracts and the Portfolios is included in the applicable Contract prospec-
tus.
PURCHASE OF SHARES
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GENERAL
Shares of the Portfolios are offered only to the insurance company separate
accounts that fund the Contracts, and may at any time be offered to separate
accounts of any insurer approved by the Trustees (collectively, the "Insur-
ers"). The shares are sold on a continuous basis and may be purchased by the
separate accounts without any sales charge at net asset value. Purchase orders
are submitted to the Portfolios based on premium payments properly furnished
to the Insurers by Contract owners. A purchase order will be processed at the
net asset value next determined with respect to the shares of the Portfolio
being purchased after the purchase order has been received and accepted by
State Street Bank and Trust Company ("State Street"), the Trust's custodian
and transfer agent. For a description of the manner of calculating a Portfo-
lio's net asset value, see "Net Asset Value."
Purchase orders for shares of a Portfolio will be accepted by the Trust only
on a day on which the Portfolio's net asset value is calculated. See "Net As-
set Value" below. The Trust may in its discretion reject any order for the
purchase of shares of a Portfolio. For the convenience of shareholders and in
the interest of economy, the Trust will not issue physical certificates repre-
senting shares in any Portfolio.
REDEMPTION OF SHARES
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REDEMPTIONS IN GENERAL
Shares of each Portfolio may be redeemed without charge on any day on which
the Portfolio's net asset value is calculated as described below under "Net
Asset Value." Redemption requests are submitted to the Portfolios based on
surrender or partial withdrawal requests properly furnished to the Insurers by
the Contract owners. Redemption requests received in proper form prior to the
close of regular trading on the NYSE will be effected at the net asset value
per share determined on that day. Redemption requests re-
22--Variable Investment Trust
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<PAGE>
ceived after the close of regular trading on the NYSE will be effected at the
net asset value as next determined. The Trust normally transmits redemption
proceeds within seven days after receipt of a redemption request.
Due to differences in tax treatment or other considerations, the interests of
various Contract owners might at some time be in conflict. The Trust currently
does not foresee any such conflict. If such a conflict were to occur, one or
more of the Insurers' separate accounts might be required to withdraw its in-
vestments in one or more of the Portfolios. This might force the affected
Portfolio or Portfolios to sell securities at disadvantageous prices or other-
wise adversely affect the Portfolio or Portfolios.
EXCHANGE PRIVILEGE
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Under an exchange privilege offered by the Trust, shares of each Portfolio may
be exchanged at their respective net asset values for shares of any of the
other Portfolios described in this Prospectus. Exchanges are treated as a re-
demption of shares of one Portfolio and a purchase of shares of another Port-
folio. The Trust may, upon 60 days' prior written notice, materially modify or
terminate the exchange privilege with respect to the Portfolios.
Shareholders exercising the exchange privilege should carefully review the
prospectus disclosure for the Portfolio they are considering investing in
prior to making an exchange.
NET ASSET VALUE
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Each Portfolio's net asset value per share, is calculated on each day, Monday
through Friday, except on days on which the NYSE is closed. The NYSE is cur-
rently scheduled to be closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on
the preceding Friday or subsequent Monday when one of these holidays falls on
a Saturday or Sunday, respectively.
Each Portfolio's net asset value per share is determined as of the close of
regular trading on the NYSE (currently 4:00 p.m., New York time). Net asset
value per share of a Portfolio is computed by dividing the value of the Port-
folio's net assets by the total number of its shares outstanding. In general,
a Portfolio's investments will be valued at market value or, in the absence of
market value, at fair value as determined by or under the direction of the
Trust's Board of Trustees. The Trust will seek to maintain the Money Market
Portfolio's net asset value at $1.00 per share for purposes of purchases and
redemptions, although no assurance can be given that the Trust will be able to
do so on a continuous basis.
Securities that are primarily traded on a foreign exchange generally will be
valued for purposes of calculating a Portfolio's net asset value at the pre-
ceding closing value of the securities on the exchange, except that, when an
occurrence subsequent to the time a value was so established is likely to have
changed that value, the fair market value of those securities will be deter-
mined by consideration of other factors by or under the direction of the Board
of Trustees. A security that is primarily traded on a domestic or foreign se-
curities exchange will be valued at the last sale price on that exchange or,
if no sales occurred during the day, at the current quoted bid price. An op-
tion that is written or purchased by a Portfolio generally will be valued at
the mean between the last asked and bid prices. Futures contracts are valued
at the settlement price established each day by the board of trade or exchange
on which they are principally traded. A settlement price may not be used if
the market makes a limit move with respect to a particular futures contract or
if the securities underlying the futures contract experience significant price
fluctuations after the determination of the settlement price. When a settle-
ment price cannot be used, futures contracts will be valued at their fair mar-
ket value as determined by or under the direction of the Board of Trustees.
Certain fixed income securities are valued by a dealer or by a pricing service
based upon a computerized matrix system which considers market transactions
and dealer supplied valuations.
Variable Investment Trust--23
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<PAGE>
All assets and liabilities of a Portfolio initially expressed in foreign cur-
rency values will be converted into U.S. dollar values at the mean between the
bid and offered quotations of the currencies against U.S. dollars as last
quoted by any recognized dealer. If the bid and offered quotations are not
available, the rate of exchange will be determined in good faith by the Board
of Trustees. In carrying out the Board's valuation policies, GEIM may consult
with an independent pricing service or services, retained by the Trust. Fur-
ther information regarding the Trust's valuation policies is contained in the
Statement of Additional Information.
All portfolio securities held by the Money Market Portfolio, and any short-
term investments of the other Portfolios that mature in 60 days or less, will
be valued on the basis of amortized cost (which involves valuing an investment
at its cost and, thereafter, assuming a constant amortization to maturity of
any discount or premium, regardless of the effect of fluctuating interest
rates on the market value of the investment) when the Trust's Board of Trust-
ees determines that amortized cost is fair value.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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DIVIDENDS AND DISTRIBUTIONS
Net investment income (that is, income other than long- and short-term capital
gains) and net realized long- and short-term capital gains are determined sep-
arately for each Portfolio. All dividends and capital gains distributions paid
by a Portfolio will be automatically invested, at net asset value, by the sep-
arate accounts in additional shares of the Portfolio. Dividends attributable
to the Income Portfolio and the Money Market Portfolio are declared daily and
paid monthly. Dividends attributable to the net investment income of the In-
ternational Portfolio and the U.S. Equity Portfolio are declared and paid an-
nually. These dividends and distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. If a separate account redeems all of its shares of the Income
Portfolio or the Money Market Portfolio at any time during a month, all divi-
dends to which the separate account is entitled will be paid to the separate
account along with the proceeds of its redemption. Written confirmations re-
lating to the automatic reinvestment of daily dividends will be sent to share-
holders within five days following the end of each quarter for the Income
Portfolio and within five days following the end of each month for the Money
Market Portfolio. Distributions of any net realized long-term and short-term
capital gains earned by a Portfolio will be made annually. All expenses of the
Income Portfolio and the Money Market Portfolio are accrued daily and deducted
before declaration of dividends to the separate accounts. Earnings of the In-
come Portfolio and the Money Market Portfolio for Saturdays, Sundays and holi-
days will be declared as dividends on the business day immediately preceding
the Saturday, Sunday or holiday.
Each Portfolio may be 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 Portfolio's shareholders, the Trust will declare and pay div-
idends of the Portfolio's net investment income and distributions of the Port-
folio's net capital gains more frequently than stated above.
TAXES
Each Portfolio is treated as a separate taxpayer with the result that, for
federal income tax purposes, the amounts of investment income and capital
gains earned are determined separately for each Portfolio (rather than on a
Trust-wide basis).
The Trust intends that each Portfolio qualify each year as a "regulated in-
vestment company" within the meaning of the Code. To qualify as a regulated
investment company, the Portfolio must, among other things: (a) derive at
least 90% of its gross income from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of stock or se-
curities, or foreign cur-
24--Variable Investment Trust
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<PAGE>
rencies, and other income (including, but not limited to, gains from options,
futures, or forward contracts) derived with respect to the Portfolio's busi-
ness of investing in such stock, securities or currencies; (b) derive less
than 30% of its gross income from the sale or other disposition of (i) stock
or securities held for less than three months, (ii) options, futures, or for-
ward contracts held for less than three months (other than options, futures,
or forward contracts on foreign currencies), and (iii) foreign currencies (or
options, futures, or forward contracts on foreign currencies) held for less
than three months, but only if such currencies (or options, futures, or for-
ward contracts) are not directly related to the Portfolio's principal business
of investing in stock or securities (or options and futures with respect to
stocks or securities); and (c) diversify its holdings so that, at the end of
each quarter, (i) at least 50% of the market value of the Portfolio's assets
is represented by cash and cash items, securities of other regulated invest-
ment 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 Portfolio'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 in-
vested in the securities of any one issuer or of two or more issuers that are
controlled by the Portfolio (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). As a regulated investment company and
provided certain distribution requirements are met, a Portfolio will not be
subject to federal income tax on its net investment income and net capital
gain that it distributes to the separate accounts, its shareholders.
Dividends paid by a Portfolio from taxable investment income and distributions
of short-term capital gains will be treated as ordinary income in the hands of
the shareholders for federal income tax purposes, whether received in cash or
reinvested in additional shares. Distributions of net long-term capital gains
will be treated as long-term capital gains in the hands of the shareholders,
if certain notice and designation requirements are satisfied, whether paid in
cash or reinvested in additional shares, regardless of the length of time the
investor has held shares of the Portfolio. The Trust has been informed by the
separate accounts that they should, for federal income tax purposes, be con-
sidered the shareholders of each of the Portfolios.
Shares of each Portfolio are offered only to insurance company accounts that
currently fund variable annuity contracts and that may, in the future, fund
variable life insurance contracts. Under the Code, no tax is imposed on an in-
surance company with respect to income of a qualifying separate account prop-
erly allocable to the value of eligible variable annuity or variable life in-
surance contracts. See the applicable Contract prospectus for a discussion of
the federal income tax status of (1) the separate accounts that purchase and
hold shares of a Portfolio and (2) the holders of Contracts funded through
those accounts.
To comply with regulations under Section 817(h) of the Code, each Portfolio
will be required to diversify its investments so that on the last day of each
calendar quarter no more than 55% of the value of its assets is represented by
any one investment, no more than 70% is represented by any two investments, no
more than 80% is represented by any three investments and no more than 90% is
represented by any four investments. Generally, all securities of the same is-
suer are treated as a single investment. For the purposes of Section 817(h) of
the Code, obligations of the U.S. Treasury and each U.S. Government instru-
mentality are treated as securities of separate issuers. Compliance with these
diversification rules will limit the ability of the Money Market Portfolio and
the Income Portfolio, in particular, to invest more than 55% of their assets
in direct obligations of the U.S. Treasury or to invest primarily in securi-
ties issued by a single agency or instrumentality of the U.S. Government.
Variable Investment Trust--25
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<PAGE>
CUSTODIAN AND TRANSFER AGENT
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State Street, located at 225 Franklin Street, Boston, Massachusetts 02101,
serves as the Trust's custodian and transfer agent, and is responsible for re-
ceiving acceptance orders for the purchase of shares and processing redemption
requests.
THE PORTFOLIOS' PERFORMANCES
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Certain information about the Portfolios' performances are set out below.
YIELD
The Trust may, from time to time, include the yield and effective yield of the
Money Market Portfolio in advertisements or reports to shareholders or pro-
spective investors. Current yield for the Money Market Portfolio will be based
upon income received by a hypothetical investment in a given seven-day period
(which period will be stated in the advertisement), and then "annualized"
(that is, assuming that the seven-day yield would be received for 52 weeks,
stated in terms of an annual percentage return on the investment). "Effective
yield" for the Money Market Portfolio will be calculated in a manner similar
to that used to calculate yield, but will reflect the compounding effect of
earnings on reinvested dividends. The current seven-day yield and effective
seven-day yield as of December 31, 1995 were 5.29% and 5.43%, respectively.
The Trust may, from time to time, advertise a 30-day "yield" for each of the
International Portfolio, the U.S. Equity Portfolio and the Income Portfolio.
The yield of a Portfolio refers to the income generated by an investment in
the Portfolio over the 30-day period identified in the advertisement and is
computed by dividing the net investment income per share earned by a Portfolio
during the period by the net asset value per share for the Portfolio 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 com-
pounded semi-annually. The annualized income is then shown as a percentage of
the Portfolio's net asset value. The 30-day yield for the period ended Decem-
ber 31, 1995 for the Income Portfolio was 6.25%.
TOTAL RETURN
From time to time, the Trust may advertise an "average annual total return"
over various periods of time for each of the International Portfolio, the U.S.
Equity Portfolio and the Income Portfolio. This total return figure shows an
average percentage change in value of an investment in the Portfolio from the
beginning date of the measuring period to the ending date of the period. The
figure reflects changes in the price of a Portfolio's shares and the reinvest-
ment of any income, dividends and/or capital gains distributions made by the
Portfolio during the period in shares of the same Portfolio. 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 Portfolio'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
Portfolio'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, repre-
senting the cumulative change in value of an investment in a Portfolio, for
the specific period (again reflecting changes in the Portfolio's share price
and the reinvestment of dividends and distributions). Aggregate total return
may be shown by means of schedules, charts or graphs, and may indicate subto-
tals of the various components of total return (that is, the change in value
of initial investment, income dividends and capital gains distributions). Re-
flecting compounding over a longer period of time, aggregate total return data
generally will be higher than average annual total return data, which reflects
compounding of return. The Portfolio's average total returns were as follows
for the period January 3 (commencement of operations) through December 31,
1995:
26--Variable Investment Trust
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<PAGE>
International Portfolio--17.74%; U.S. Equity Portfolio--35.58%; Income Portfo-
lio--16.83%; and Money Market Portfolio--5.72%.
The Trust may, in addition to quoting a Portfolio's average annual and aggre-
gate total returns, advertise the actual annual and annualized total return
performance data for various periods of time. Actual annual and annualized to-
tal returns may be shown by means of schedules, charts or graphs. Actual an-
nual or annualized total return data generally will be lower than average an-
nual total return data, which reflects compounding of return.
Yield and total return figures are based on historical earnings and are thus
not intended to indicate future performances. The Statement of Additional In-
formation describes the method used to determine a Portfolio's yield and total
return.
COMPARATIVE PERFORMANCE INFORMATION
In reports or other communications to shareholders of a Portfolio or in adver-
tising materials, the Trust may compare the Portfolio's performance with (1)
the performance of other mutual funds as listed in the rankings prepared by
Lipper Analytical Services, Inc. or similar independent services that monitor
the performance of mutual funds, (2) various unmanaged indexes, including the
Russell Index, S&P Index, and the Dow Jones Industrial Average or (3) other
appropriate indexes of investment securities or with data developed by GEIM
derived from those indexes. The performance information may also include eval-
uations of a Portfolio 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 com-
pare a Portfolio's performance to, or rank it within, a universe of mutual
funds with investment objectives and policies similar, but not necessarily
identical to, the Portfolio'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.
FURTHER INFORMATION: CERTAIN INVESTMENT TECHNIQUES AND STRATEGIES
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The Portfolios may engage in a number of investment techniques and strategies,
including those described below. No Portfolio is under any obligation to use
any of the techniques or strategies at any given time or under any particular
economic condition. In addition, no assurance can be given that the use of any
practice will have its intended result or that the use of any practice is, or
will be, available to any Portfolio.
STRATEGIES AVAILABLE TO ALL PORTFOLIOS
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. To secure prices or yields deemed
advantageous at a particular time, a Portfolio may purchase securities on a
when-issued or delayed-delivery basis, in which case, delivery of the securi-
ties occurs beyond the normal settlement period; no payment for or delivery of
the securities is made by, and no income accrues to, the Portfolio, however,
prior to the actual delivery or payment by the other party to the transaction.
Each Portfolio 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 a Portfolio may include securities pur-
chased on a "when, as and if issued" basis under which the issuance of the se-
curities depends on the occurrence of a subsequent event, such as approval of
a merger, corporate reorganization or debt restructuring. Cash, Government Se-
curities or other liquid, high-grade debt obligations in an amount equal to
the amount of each Portfolio's when-issued or delayed-delivery purchase com-
mitments will be segregated with the Trust's custodian, or with a designated
subcustodian, in order to avoid or limit any
Variable Investment Trust--27
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<PAGE>
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 a
Portfolio to risk because the securities may experience fluctuations in value
prior to their delivery. Purchasing securities on a when-issued or delayed-de-
livery 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 Portfolio's net asset
value.
LENDING PORTFOLIO SECURITIES. Each Portfolio is authorized to lend its portfo-
lio 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 Portfolio's
net assets taken at value. The Portfolio's loans of securities will be collat-
eralized by cash, letters of credit or Government Securities. Cash or instru-
ments collateralizing a Portfolio's loans of securities are segregated and
maintained at all times with the Trust's 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, a Portfolio 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 financial-
ly.
RULE 144A SECURITIES. Each of the Portfolios may purchase Rule 144A Securi-
ties. Certain Rule 144A Securities may be considered illiquid and therefore
subject to a Portfolio's limitation on the purchase of illiquid securities,
unless the Trust's Board of Trustees determines on an ongoing basis that an
adequate trading market exists for the Rule 144A Securities. A Portfolio's
purchase of Rule 144A Securities could have the effect of increasing the level
of illiquidity in the Portfolio to the extent that qualified institutional
buyers become uninterested for a time in purchasing Rule 144A Securities held
by the Portfolio. The Board of Trustees has established standards and proce-
dures for determining the liquidity of a Rule 144A Security and monitors
GEIM's implementation of the standards and procedures. The ability to sell to
qualified institutional buyers under Rule 144A is a recent development and
GEIM cannot predict how this market will develop.
STRATEGIES AVAILABLE TO SOME BUT NOT ALL PORTFOLIOS
DEPOSITARY RECEIPTS. The International Portfolio and the U.S. Equity Portfolio
may each invest in securities of foreign issuers in the form of American De-
positary Receipts ("ADRs"), which are U.S. dollar-denominated receipts typi-
cally issued by domestic banks or trust companies that represent the deposit
with those entities of securities of a foreign issuer, and European Depositary
Receipts ("EDRs"), which are sometimes referred to as Continental Depositary
Receipts ("CDRs"). ADRs are publicly traded on exchanges or over-the-counter
in the United States and are issued through "sponsored" or "unsponsored" ar-
rangements. In a sponsored ADR arrangement, the foreign issuer assumes the ob-
ligation to pay some or all of the depositary's transaction fees, whereas un-
der an unsponsored arrangement, the foreign issuer assumes no obligations and
the depositary's transaction fees are paid directly by the ADR holders. In ad-
dition, less information is available in the United States about an unspon-
sored ADR than about a sponsored ADR. The International Portfolio and the U.S.
Equity Portfolio may each invest in ADRs through both sponsored and
unsponsored arrangements. EDRs and CDRs are generally issued by foreign banks
and evidence ownership of either foreign or domestic securities.
SUPRANATIONAL AGENCIES. The Income Portfolio may invest up to 10% of its as-
sets in securities 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 coun-
tries; the European Community, which is a twelve-nation organization engaged
in coop-
28--Variable Investment Trust
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<PAGE>
erative 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 estab-
lished to lend funds, promote investment and provide technical assistance to
member nations in the Asian and Pacific regions. Securities of supranational
agencies are not considered Government Securities and are not supported, di-
rectly or indirectly, by the U.S. Government.
INVESTMENTS IN OTHER INVESTMENT FUNDS. The International Portfolio and the In-
come Portfolio may each invest in investment funds that invest principally in
securities in which the Portfolio is authorized to invest. Under the 1940 Act,
a Portfolio may invest a maximum of 10% of its total assets in the securities
of other investment companies. In addition, under the 1940 Act, not more than
5% of a Portfolio's total assets may be invested in the securities of any one
investment company, and the Portfolio may not own more than 3% of the securi-
ties of any investment company. To the extent a Portfolio invests in other in-
vestment companies, the Portfolio's shareholders will incur certain duplica-
tive fees and expenses, including investment advisory fees.
FLOATING AND VARIABLE RATE INSTRUMENTS. The Income Portfolio and the Money
Market Portfolio may each invest in floating and variable rate instruments.
Income securities may provide for floating or variable rate interest or divi-
dend 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, cur-
rency exchange rates or other commodities. The amount by which the rate paid
on an income security may increase or decrease or may be subject to periodic
or lifetime caps. Floating and variable rate income securities include securi-
ties 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 in-versely with changes in market rates of inter-
est generally will be larger than comparable changes in the value of an equal
principal amount of a fixed rate security having similar credit quality, re-
demption provisions and maturity.
ZERO COUPON OBLIGATIONS. The Income Portfolio may invest in zero coupon obli-
gations. Zero coupon securities generally pay no cash interest (or dividends
in the case of preferred stock) to their holders prior to maturity. According-
ly, 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 compa-
rable maturities and credit quality that pay cash interest (or dividends in
the case of preferred stock) on a current basis. Although the Income Portfolio
will receive no payments on its zero coupon securities, prior to their matu-
rity or disposition, it will be required for federal income tax purposes gen-
erally to include in its dividends each year an amount equal to the annual in-
come that accrues on its zero coupon securities. Such dividends will be paid
from the cash assets of the Portfolio, from borrowings or by liquidation of
portfolio securities, if necessary, at a time that the Portfolio otherwise
would not have done so. To the extent the Income Portfolio is required to liq-
uidate thinly traded securities, the Portfolio may be able to sell such secu-
rities 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 dis-
positions are used by the Income Portfolio to pay distributions, the Portfolio
will not be able to purchase additional income-producing securities with such
proceeds, and as a result its current income ultimately may be reduced.
MORTGAGE RELATED SECURITIES. The mortgage related securities in which the In-
come Portfolio will invest represent pools of mort-
Variable Investment Trust--29
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<PAGE>
gage 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 insti-
tutions, mortgage bankers and private mortgage insurance companies. Several
risks are associated with mortgage related securities generally. The monthly
cash inflow from the underlying loans, for example, may not be sufficient to
meet the monthly payment requirements of the mortgage related security. Pre-
payment 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 se-
curities remaining in the Income Portfolio. The occurrence of mortgage prepay-
ments 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 pre-
payment tends to decrease, thereby lengthening the average life of a pool of
mortgage related securities. Conversely, in periods of falling interest rates
the rate of prepayment tends to increase, thereby shortening the average life
of a pool. Reinvestment of prepayments may occur at higher or lower interest
rates than the original investment, thus affecting the yield of the Income
Portfolio. Because prepayments of principal generally occur when interest
rates are declining, the Income Portfolio 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 Portfo-
lio's yield. Thus, mortgage related securities may have less potential for
capital appreciation in periods of falling interest rates than other fixed in-
come securities of comparable maturity, although those other fixed income se-
curities may have a comparable risk of decline in market value in periods of
rising interest rates. To the extent that the Income Portfolio purchases mort-
gage related securities at a premium, unscheduled prepayments, which are made
at par, will result in a loss equal to any unamortized premium.
ARMs have interest rates that reset at periodic intervals, thereby allowing
the Income Portfolio to participate in increases in interest rates through pe-
riodic 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 in-
terest rates, the Income Portfolio generally will be able to reinvest these
amounts in securities with a higher current rate of return. The Income Portfo-
lio, however, will not 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 se-
curities in response to extreme movements in interest rates. As a result, dur-
ing periods of volatile interest rates, the Income Portfolio's net asset value
may fluctuate more than if it did not purchase ARMs. Moreover, during periods
of rising interest rates, changes in the coupon of the adjustable rate mort-
gages will slightly lag behind changes in market rates, creating the potential
for some principal loss for shareholders who redeem their shares of the Income
Portfolio before the interest rates on the underlying mortgages are adjusted
to reflect current market rates.
CMOs are obligations fully collateralized by a portfolio of mortgages or mort-
gage 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 re-
spect to the receipt of prepayments on the mortgages. Therefore, depending on
the type of CMOs in which the Income Portfolio invests, 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 securi-
30--Variable Investment Trust
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<PAGE>
ties are not readily marketable in the judgment of GEIM, the Income Portfolio
limits its investments in these securities, together with other illiquid in-
struments, to not more than 15% of the value of its net assets.
GOVERNMENT STRIPPED MORTGAGE RELATED SECURITIES. The Income Portfolio may in-
vest in government stripped mortgage related securities issued and guaranteed
by GNMA, FNMA or FHLMC. These securities represent beneficial ownership inter-
ests in either periodic principal distributions ("principal-only") or interest
distributions ("interest-only") on mortgage related certificates issued by
GNMA, FNMA or FHLMC. The certificates underlying the government stripped mort-
gage related securities represent all or part of the beneficial interest in
pools of mortgage loans. The Income Portfolio will invest in government
stripped mortgage related securities in order to enhance yield or to benefit
from anticipated appreciation in value of the securities at times when GEIM
believes that interest rates will remain stable or increase. In periods of
rising interest rates, the expected increase in the value of government
stripped mortgage related securities may offset all or a portion of any de-
cline in value of the securities held by the Income Portfolio.
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 govern-
ment stripped mortgage related securities are extremely sensitive to the pre-
payment experience on the mortgage loans underlying the certificates
collateralizing the securities. If a decline in the level of prevailing
interest rates results in a rate of principal prepayments higher than antici-
pated, distributions of principal will be accelerated, thereby reducing the
yield to maturity on interest-only government stripped mortgage related secu-
rities and increasing the yield to maturity on principal-only government
stripped mortgage related securities. Sufficiently high prepayment rates could
result in the Income Portfolio's not fully recovering its initial investment
in an interest-only government stripped mortgage related security. Under cur-
rent market conditions, the Income Portfolio expects that investments in gov-
ernment stripped mortgage related securities will consist primarily of
interest-only securities. The sensitivity of an interest-only security that
represents the interest portion of a particular class, as opposed to the in-
terest portion of an entire pool, to interest rate fluctuations, may be in-
creased because of the characteristics of the principal portion to which they
relate. Government stripped mortgage related securities are currently traded
in an over-the-counter market maintained by several large investment banking
firms. No assurance can be given that the Income Portfolio will be able to ef-
fect a trade of a government stripped mortgage related security at a desired
time. The Income Portfolio will acquire government stripped mortgage related
securities only if a secondary market for the securities exists at the time of
acquisition. Except for government stripped mortgage related securities based
on fixed rate FNMA and FHLMC mortgage certificates that meet certain liquidity
criteria established by the Trust's Board of Trustees, the Trust treats gov-
ernment stripped mortgage related securities as illiquid and will limit the
Income Portfolio's investments in these securities, together with other illiq-
uid investments, to not more than 15% of its net assets.
ASSET-BACKED AND RECEIVABLE-BACKED SECURITIES. The Income Portfolio may invest
in asset-backed and receivable-backed securities. To date, several types of
asset-backed and receivable-backed securities have been offered to investors
including "Certificates for Automobile Receivables" ("CARssm") and interests
in pools of credit card receivables. CARssm represent undivided fractional in-
terests in a trust, the assets of which consist of a pool of motor vehicle re-
tail installment sales contracts and security interests in the vehicles secur-
ing 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 finan-
cial institution unaffiliated with the trustee or originator of the trust.
Variable Investment Trust--31
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<PAGE>
An investor's return on CARssm may be affected by early prepayment of princi-
pal on the underlying vehicle sales contracts. If the letter of credit is ex-
hausted, the Income Portfolio may be prevented from realizing the full amount
due on a sales contract because of state law requirements and restrictions re-
lating 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 insol-
vency laws or other factors. As a result, certificate holders may experience
delays in payment if the letter of credit is exhausted. Consistent with the
Income Portfolio's investment objective and policies and subject to the review
and approval of the Trust's Board of Trustees, the Income Portfolio may also
invest in other types of asset-backed and receivable-backed securities.
MORTGAGE DOLLAR ROLLS. With respect to up to 10% of its total assets, the In-
come Portfolio may enter into mortgage "dollar rolls" in which the Portfolio
sells securities for delivery in the current month and simultaneously con-
tracts with the same counterparty to repurchase similar (same type, coupon and
maturity) but not identical securities on a specified future date. The Portfo-
lio loses the right to receive principal and interest paid on the securities
sold. However, the Portfolio 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 for-
ward purchase. Unless such benefits exceed the income, capital appreciation
and gain or loss due to mortgage prepayments that would have been realized on
the securities sold as part of the mortgage dollar roll, the use of this tech-
nique will diminish the investment performance of the Portfolio compared with
what such performance would have been without the use of mortgage dollar
rolls. The Portfolio will hold and maintain in a segregated account until the
settlement date cash or liquid, high grade debt securities in an amount equal
to the forward purchase price. The benefits derived from the use of mortgage
dollar rolls may depend upon GEIM's ability to predict correctly mortgage pre-
payments and interest rates. There is no assurance that mortgage dollar rolls
can be successfully employed.
For financial reporting and tax purposes, the Income Portfolio proposes to
treat mortgage dollar rolls as two separate transactions; one involving the
purchase of a security and a separate transaction involving a sale. The Port-
folio does not currently intend to enter into mortgage dollar rolls that are
accounted for as a financing.
SHORT SALES AGAINST THE BOX. The International Portfolio may sell securities
"short against the box." Whereas a short sale is the sale of a security the
International Portfolio does not own, a short sale is "against the box" if at
all times during which the short position is open, the Portfolio owns at least
an equal amount of the securities or securities convertible into, or exchange-
able without further consideration for, securities of the same issue as the
securities sold short. Short sales against the box are typically used by so-
phisticated investors to defer recognition of capital gains or losses.
ADDITIONAL MATTERS
- -------------------------------------------------------------------------------
The Trust was formed as a business trust pursuant to a Declaration of Trust,
as amended from time to time (the "Declaration"), under the laws of The Com-
monwealth of Massachusetts on February 25, 1994. The Declaration authorizes
the Trust's Board of Trustees to create separate series, of an unlimited num-
ber of shares of beneficial interest, par value $.001 per share.
When issued, shares of a Portfolio will be fully paid and non-assessable.
Shares are freely transferable and have no preemptive, subscription or conver-
sion rights. Certain aspects of the shares may be changed, upon notice to
Portfolio shareholders, to satisfy certain tax regulatory requirements, if the
change is deemed necessary by the Trust's Board of Trustees.
32--Variable Investment Trust
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<PAGE>
When matters are submitted for shareholder vote, each shareholder of each
Portfolio will have one vote for each full share held and proportionate, frac-
tional votes for fractional shares held. In general, shares of each Portfolio
vote by individual Portfolio on all matters except (1) a matter affecting the
interests of one or more of the Portfolios, in which case only shares of the
affected Portfolios would be entitled to vote, or (2) when the 1940 Act re-
quires that shares of the Portfolios be voted in the aggregate. Normally, no
meetings of shareholders of the Portfolios will be held for the purpose of
electing Trustees of the Trust unless and until such time as less than a ma-
jority of the Trustees holding office have been elected by shareholders of the
Trust, at which time the Trustees then in office will call a shareholders'
meeting for the election of Trustees. Shareholders of record of no less than
two-thirds of the outstanding shares of the Trust may remove a Trustee through
a declaration in writing or by vote cast in person or by proxy at a meeting
called for that purpose. A meeting will be called for the purpose of voting on
the removal of a Trustee at the written request of holders of 10% of the
Trust's outstanding shares. Shareholders who satisfy certain criteria will be
assisted by the Trust in communicating with other shareholders in seeking the
holding of the meeting.
An insurance company issuing a Contract that participates in the Portfolios
will vote shares in the applicable separate account as required by law and in-
terpretation thereof, as such may be amended or changed from time to time. In
accordance with current law and interpretations thereof, a participating in-
surance company is required to request voting instructions from Contract own-
ers and must vote shares in the applicable separate account in proportion to
the voting instructions received. For further discussion, please refer to the
prospectus for your Contract.
The Trust will send to each shareholder of each Portfolio a semiannual report
and an audited annual report, each of which includes a list of the investment
securities held by each Portfolio. Management's discussion of the performance
of the Portfolios will be included in the Portfolios' annual reports, which
will be furnished to shareholders free of charge.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN THE
STATEMENT OF ADDITIONAL INFORMATION INCORPORATED INTO THIS PROSPECTUS BY
REFERENCE IN CONNECTION WITH THE OFFERING OF SHARES OF VARIABLE INVESTMENT
TRUST, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY VARIABLE INVESTMENT TRUST.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO
ANY PERSON TO WHOM, AN OFFER MAY NOT LAWFULLY BE MADE.
Variable Investment Trust--33
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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 29, 1996
VARIABLE INVESTMENT TRUST
- -------------------------
3003 Summer Street, Stamford, Connecticut 06905
For information, call (203) 326-4040
GE U.S. Equity Portfolio
GE International Equity Portfolio
GE Fixed Income Portfolio
GE Money Market Portfolio
CONTENTS
--------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Objectives and Management Policies... 2
Investment Restrictions......................... 10
Management of the Trust......................... 15
Redemption of Shares............................ 18
Exchange Privilege.............................. 18
Net Asset Value................................. 19
Taxation........................................ 20
The Portfolios' Performances.................... 23
Additional Information.......................... 25
Counsel......................................... 26
Independent Accountants......................... 26
Financial Statements............................ 26
Appendix........................................ A-1
</TABLE>
This Statement of Additional Information supplements the information
contained in the current Prospectus of Variable Investment Trust (the "Trust")
dated April 29, 1996, and should be read in conjunction with the Prospectus.
Copies of the Prospectus may be obtained without charge by calling the Trust at
the telephone number listed above. This Statement of Additional Information,
although not a prospectus, is incorporated in its entirety by reference into the
Prospectus.
<PAGE>
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The Prospectus discusses the investment objectives and policies of the
following four managed investment funds (each a "Portfolio" and collectively the
"Portfolios") currently offered by the Trust: GE U.S. Equity Portfolio (the
"U.S. Equity Portfolio"), GE International Equity Portfolio (the "International
Portfolio"), GE Fixed Income Portfolio (the "Income Portfolio") and GE Money
Market Portfolio (the "Money Market Portfolio"). Supplemental information is
set out below concerning certain of the securities and other instruments in
which the Portfolios may invest, the investment policies and strategies that the
Portfolios may utilize and certain risks attendant to those investments,
policies and strategies.
STRATEGIES AVAILABLE TO ALL PORTFOLIOS
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. When a Portfolio engages
-------------------------------------------
in when-issued or delayed-delivery securities transactions, it relies on the
other party to consummate the trade. Failure of the seller to do so may result
in the Portfolio's incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
LENDING PORTFOLIO SECURITIES. A Portfolio will adhere to the
----------------------------
following conditions whenever its portfolio securities are loaned: (1) the
Portfolio must receive at least 100% cash collateral or equivalent securities
from the borrower; (2) the borrower must increase the collateral whenever the
market value of the securities loaned rises above the level of the collateral;
(3) the Portfolio must be able to terminate the loan at any time; (4) the
Portfolio must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities, and any
increase in market value; (5) the Portfolio may pay only reasonable custodian
fees in connection with the loan; and (6) voting rights on the loaned securities
may pass to the borrower except that, if a material event adversely affecting
the investment in the loaned securities occurs, the Trust's Board of Trustees
must terminate the loan and regain the right to vote the securities. From time
to time, a Portfolio 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 Portfolio and is acting as a "finder."
BANK OBLIGATIONS. Domestic commercial banks organized under Federal
----------------
law are supervised and examined by the U.S. Comptroller of the Currency and are
required to be members of the Federal Reserve System and to be insured by the
Federal Deposit Insurance Corporation ("FDIC"). Foreign branches of U.S. banks
and foreign banks are not regulated by U.S. banking authorities
2
<PAGE>
and generally are not bound by mandatory reserve requirements, loan limitations,
accounting, auditing and financial reporting standards comparable to U.S. banks.
Obligations of foreign branches of U.S. banks and foreign banks are subject to
the risks associated with investing in foreign securities generally. These
obligations entail risks that are different from those of investments in
obligations in domestic banks, including foreign economic and political
developments outside the United States, foreign governmental restrictions that
may adversely affect payment of principal and interest on the obligations,
foreign exchange controls and foreign withholding or other taxes on income.
A U.S. branch of a foreign bank may or may not be subject to reserve
requirements imposed by the Federal Reserve System or by the state in which the
branch is located if the branch is licensed in that state. In addition,
branches licensed by the Comptroller of the Currency and branches licensed by
certain states ("State Branches") may or may not be required to: (1) pledge to
the regulator by depositing assets with a designated bank within the state, an
amount of its assets equal to 5% of its total liabilities; and (2) maintain
assets within the state in an amount equal to a specified percentage of the
aggregate amount of liabilities of the foreign bank payable at or through all of
its agencies or branches within the state. The deposits of State Branches may
not necessarily be insured by the FDIC. In addition, less information may be
available to the public about a U.S. branch of a foreign bank than about a U.S.
bank.
RATINGS AS INVESTMENT CRITERIA. The ratings of nationally recognized
------------------------------
statistical rating organizations ("NRSROs") such as Standard & Poor's
Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's") represent the
opinions of those organizations as to the quality of securities that they rate.
Although these ratings, which are relative and subjective and are not absolute
standards of quality, are used by GEIM as initial criteria for the selection of
portfolio securities on behalf of the Portfolios, GEIM also relies upon its own
analysis to evaluate potential investments.
Subsequent to its purchase by a Portfolio, an issue of securities may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Portfolio. Although neither event will require the sale of the
securities by a Portfolio, other than the Money Market Portfolio, GEIM will
consider the event in its determination of whether the Portfolio should continue
to hold the securities. In the event of a lowering of the rating of a security
held by the Money Market Portfolio or a default by the issuer of the security,
the Portfolio will dispose of the security as soon as practicable,
3
<PAGE>
unless the Trust's Board of Trustees determines that disposal of the security
would not be in the best interests of the Portfolio. To the extent that a
NRSRO's ratings change as a result of a change in the NRSRO or its rating
system, the Portfolios will attempt to use comparable ratings as standards for
their investments in accordance with their investment objectives and policies.
STRATEGIES AVAILABLE TO SOME BUT NOT ALL PORTFOLIOS
COVERED OPTION WRITING. The Portfolios with option-writing authority
----------------------
will write only options that are covered. A call option written by a Portfolio
will be deemed covered (1) if the Portfolio owns the securities underlying the
call or has an absolute and immediate right to acquire those securities without
additional cash consideration upon conversion or exchange of other securities
held in its portfolio, (2) if the Portfolio holds a call at the same exercise
price for the same exercise period and on the same securities as the call
written, (3) in the case of a call option on a stock index, if the Fund owns a
portfolio of securities substantially replicating the movement of the index
underlying the call option, or (4) if, at the time the call is written, an
amount of cash, Government Securities or other liquid, high-grade debt
obligations, equal to the fluctuating market value of the optioned securities,
is segregated with the Trust's custodian or a designated sub-custodian. A put
option will be deemed covered (1) if, at the time the put is written, an amount
of cash, Government Securities or other liquid, high-grade debt obligations
having a value at least equal to the exercise price of the underlying securities
is segregated with the Trust's custodian or with a designated sub-custodian or
(2) if the Portfolio 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 Portfolio), 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 the
Trust's custodian or 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,
4
<PAGE>
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
a Portfolio 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 a Portfolio will normally have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively.
So long as the obligation of a Portfolio as the writer of an option
continues, the Portfolio may be assigned an exercise notice by the broker-dealer
through which the option was sold, requiring the Portfolio 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 Portfolio effects a closing purchase transaction. A
Portfolio 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, a Portfolio will be
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the Options Clearing Corporation (the "Clearing
Corporation") and of the securities exchange on which the option is written.
An option position may be closed out only if a secondary market exists
for an option of the same series on a recognized securities exchange or in the
over-the-counter market. In light of the need for a secondary market in which to
close an option position, the Portfolios are expected to purchase only call or
put options issued by the Clearing Corporation. GEIM expects that the
Portfolios will write options, other than those on Government Securities, only
on national securities exchanges. Options on Government Securities may be
written by the Portfolios in the over-the-counter market.
A Portfolio may realize a profit or loss upon entering into closing
transactions. When a Portfolio 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 Portfolio will incur
a loss if the cost of the closing purchase transaction exceeds the premium
received upon writing the original option. When a
5
<PAGE>
Portfolio has purchased an option and engages in a closing sale transaction,
whether the Portfolio 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 Portfolio initially paid for the original option plus the related
transaction costs.
STOCK INDEX OPTIONS. A Portfolio may purchase and write put and call
-------------------
options on stock indexes or stock index futures contracts that are traded on a
U.S. exchange or board of trade or a foreign exchange, to the extent permitted
under rules and interpretations of the Commodity Futures Trading Commission
("CFTC"), as a hedge against changes in market conditions and interest rates,
and for duration management, and may enter into closing transactions with
respect to those options to terminate existing positions. A stock index
fluctuates with changes in the market values of the stocks included in the
index. Stock index options may be based on a broad or narrow market index or on
an industry or market segment.
The delivery requirements of options on stock indexes differ from
options on stock. Unlike a stock option, which contemplates the right to take
or make delivery of stock at a specified price, an option on a stock index gives
the holder the right to receive a cash "exercise settlement amount" equal to (1)
the amount, if any, by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (2) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
The amount of cash received will be equal to the difference between the closing
price of the index and the exercise price of the option expressed in dollars
times a specified multiple. The writer of the option is obligated, in return
for the premium received, to make delivery of this amount. The writer may
offset its position in stock index options prior to expiration by entering into
a closing transaction on an exchange or it may allow the option to expire
unexercised.
The effectiveness of purchasing or writing stock index options as a
hedging technique will depend upon the extent to which price movements in the
portion of a securities portfolio being hedged correlate with price movements of
the stock index selected. Because the value of an index option depends upon
movements in the level of the index rather than the price of a particular stock,
whether a Portfolio realizes a gain or loss from the purchase or writing of
options on an index depends upon movements in the level of stock prices in the
stock market
6
<PAGE>
generally or, in the case of certain indexes, in an industry or market segment,
rather than movements in the price of a particular stock. As a result,
successful use by a Portfolio of options on stock indexes is subject to GEIM's
ability to predict correctly movements in the direction of the stock market
generally or of a particular industry. This ability contemplates different
skills and techniques from those used in predicting changes in the price of
individual stocks.
FUTURES CONTRACTS. No consideration is paid or received by a
-----------------
Portfolio 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 the
Trust's custodian or a designated sub-custodian. This amount, which is subject
to change by the exchange on which the contract is traded, is known as "initial
margin" and is in the nature of a performance bond or good faith deposit on the
contract that is returned to the Portfolio 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 Portfolio fails to meet
its contractual obligations. Subsequent payments, known as "variation margin,"
to and from the broker, will be made daily as the price of the securities
underlying the futures contract fluctuates, making the long and short positions
in the contract more or less valuable, a process known as "marking-to-market."
At any time prior to the expiration of a futures contract, a Portfolio may elect
to close a position by taking an opposite position, which will operate to
terminate the Portfolio's existing position in the contract.
Although the Trust intends that the Portfolios enter into futures
contracts only if an active market exists for the contracts, no assurance can be
given that an active market will exist for the contracts at any particular time.
Most U.S. futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades may be made on
that day at a price beyond that limit. Futures contract prices may move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses. In such a case, and in the event of
adverse price movements, a Portfolio 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.
7
<PAGE>
If a Portfolio has hedged against the possibility of an increase in
interest rates adversely affecting the value of securities held in its portfolio
and rates decrease instead, the Portfolio 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 Portfolio had insufficient cash, it may have to sell securities to meet
daily variation margins requirements at a time when it may be disadvantageous to
do so. These sales of securities may, but will not necessarily, be at increased
prices that reflect the decline in interest rates.
OPTIONS ON FUTURES CONTRACTS. An option on a futures contract, unlike
----------------------------
a direct investment in such a contract, gives the purchaser the right, in return
for the premium paid, to assume a position in the futures contract at a
specified exercise price at any time prior to the expiration date of the option.
Upon exercise of an option, the delivery of the futures position by the writer
of the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the option
on the futures contract. The potential loss related to the purchase of an
option on futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the price of the option to the purchaser is fixed
at the point of sale, no daily cash payments are made to reflect changes in the
value of the underlying contract. The value of the option, however, does change
daily and that change would be reflected in the net asset value of the Portfolio
holding the options.
FORWARD CURRENCY TRANSACTIONS. The cost to a Portfolio of engaging in
-----------------------------
currency transactions varies with factors such as the currency involved, the
length of the contract period and the market conditions then prevailing.
Because transactions in currency exchange are usually conducted on a principal
basis, no fees or commissions are involved. The use of forward currency
contracts does not eliminate fluctuations in the underlying prices of the
securities, but it does establish a rate of ex change that can be achieved in
the future. In addition, although forward currency contracts limit the risk of
loss due to a decline in the value of the hedged currency, at the same time,
they limit any potential gain that might result should the value of the currency
increase. If a devaluation is generally antici pated, a Portfolio may not be
able to sell currency at a price above the anticipated devaluation level. A
Portfolio will not enter into a currency transaction if, as a result, it will
fail to qualify as a regulated investment company under the Internal Revenue
Code of 1986, as amended (the "Code"), for a given year.
8
<PAGE>
OPTIONS ON FOREIGN CURRENCIES. Certain transactions involving options
-----------------------------
on foreign currencies are undertaken on con tract markets that are not regulated
by the CFTC. Options on foreign currencies traded on national securities
exchanges are within the jurisdiction of the Securities and Exchange Commission
(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 posi tions 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 a Portfolio
to liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options are
subject to the risks of the availability of a liquid secondary market as
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exercise and settlement of
exchange-traded foreign currency options must be made exclusively through the
Clearing Corporation, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the Clearing Corporation may,
if it determines that foreign governmental restrictions or taxes would prevent
the orderly settlement of foreign currency option exercises, or would result in
undue burdens on the Clearing Corporation or its clearing members, impose
special procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
Options on foreign currencies may be traded on foreign exchanges, to
the extent permitted by the CFTC. These transactions are subject to the risk of
governmental actions affecting trading in or the prices of foreign currencies or
securities. The value of these positions could also be adversely affected by
(1) other complex foreign political and economic factors, (2) lesser
availability of data on which to make trading decisions than in the United
States, (3) delays in a Portfolio's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States, (4)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the United States and (5) lesser trading volume.
MORTGAGE RELATED SECURITIES. The average maturity of
---------------------------
9
<PAGE>
pass-through pools of mortgage related securities in which the Income Portfolio
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 conven
tional 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. The Government National Mortgage
Association ("GNMA"), the principal U.S. guarantor of these securities, is a
wholly-owned U.S. Government corporation within the Department of Housing and
Urban Development. Government-related mortgage related securities are not
backed by the full faith and credit of the United States. Issuers include the
Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). FNMA is a government-sponsored corporation
owned entirely by private stockholders, which is subject to general regulation
by the Secretary of Housing and Urban Development. Pass-through securities
issued by FNMA are guaranteed as to timely payment of principal and interest by
FNMA. FHLMC is a corporate instrumentality of the United States, the stock of
which is owned by the Federal Home Loan Banks. Participation certificates
representing interests in mortgages from FHLMC's national portfolio are
guaranteed as to the timely payment of interest and ultimate collection of
principal by FHLMC.
Private, governmental or government-related entities may create
mortgage loan pools offering pass-through investments in addition to those
described above. The mortgages underlying these securities may be alternative
mortgage instruments, that is, mortgage instruments whose principal or interest
payments may vary or whose terms to maturity may be shorter than previously
customary. GEIM assesses new types of mortgage related securities as they are
developed and offered to determine their appropriateness for investment by the
Income Portfolio.
10
<PAGE>
INVESTMENT RESTRICTIONS
Investment restrictions numbered 1 through 10 below have been adopted
by the Trust as fundamental policies of the Portfolios. Under the Investment
Company Act of 1940, as amended (the "1940 Act"), a fundamental policy may not
be changed with respect to a Portfolio without the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Portfolio.
Investment restrictions 11 through 17 may be changed by a vote of the Board of
Trustees at any time.
1. No Portfolio may borrow money, except that the Money Market
Portfolio may enter into reverse repurchase agreements, and except that each
Portfolio 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 Portfolio's total assets (including the amount borrowed) valued at market
less liabilities (not including the amount borrowed) at the time the borrowing
is made. Whenever borrowings, including reverse repurchase agreements, of 5% or
more of a Portfolio's total assets are outstanding, the Portfolio will not make
any additional investments.
2. No Portfolio may lend its assets or money to other persons, except
through (a) purchasing debt obligations, (b) lending portfolio securities in an
amount not to exceed 30% of the Portfolio's assets taken at market value, (c)
entering into repurchase agreements (d) trading in financial futures contracts,
index futures contracts, securities indexes and options on financial futures
contracts, options on index futures contracts, options on securities and options
on securities indexes and (e) entering into variable rate demand notes.
3. No Portfolio may purchase securities (other than Government
Securities) of any issuer if, as a result of the purchase, more than 5% of the
Portfolio'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 Portfolio, other
than the Money Market Portfolio, 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 Portfolio may purchase more than 10% of the voting securities
of any one issuer, or more than 10% of the outstanding securities of any class
of issuer, except that (a) this limitation is not applicable to a Portfolio's
investments in Government Securities and (b) up to 25% of the value of the
assets of a Portfolio, other than the Money Market Portfolio, may
11
<PAGE>
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 Portfolio 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 (a) the government of
any country other than the United States, but not the U.S. Government and (b)
all supranational organizations. In addition, securities held by the Money
Market Portfolio that are issued by domestic banks are excluded from this
restriction.
6. No Portfolio may underwrite any issue of securities, except to the
extent that the sale of portfolio securities in accordance with the Portfolio's
investment objective, policies and limitations may be deemed to be an
underwriting, and except that the Portfolio may acquire securities under
circumstances in which, if the securities were sold, the Portfolio might be
deemed to be an underwriter for purposes of the Securities Act of 1933, as
amended.
7. No Portfolio 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 Portfolio may (a)
invest in securities secured by real estate, mortgages or interests in real
estate or mortgages, (b) purchase securities issued by companies that invest or
deal in real estate, mortgages or interests in real estate or mortgages, (c)
engage in the purchase and sale of real estate as necessary to provide it with
an office for the transaction of business or (d) acquire real estate or
interests in real estate securing an issuer's obligations, in the event of a
default by that issuer.
8. No Portfolio may make short sales of securities or maintain a
short position, unless at all times when a short position is open, the Portfolio
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 Portfolio may purchase securities on margin, except that a
Portfolio 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 a Portfolio.
12
<PAGE>
10. No Portfolio may invest in commodities, except that each
Portfolio (other than the Money Market Portfolio) 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 this Statement of Additional Information and in the Prospectus.
11. No Portfolio may purchase or sell put options, call options,
spreads or combinations of put options, call options and spreads, except that
(a) each Portfolio, other than the Money Market Portfolio, may purchase and sell
covered put and call options on securities and stock indexes and futures
contracts and options on futures contracts and (b) the Money Market Portfolio
may acquire "puts" and "unconditional puts" as defined in Rule 2a-7 under the
1940 Act.
12. No Portfolio 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
permitted under the 1940 Act, if as a result of the purchase (a) the Portfolio
would own any securities of an open-end investment company or more than 3% of
the total outstanding voting stock of any closed-end investment company or (b)
more than 5% of the value of the Portfolio's total assets would be invested in
securities of any one or more closed-end investment companies.
13. No Portfolio may invest in companies for the purpose of exercising
control or management.
14. No Portfolio may purchase securities (other than Government
Securities) if, as a result of the purchase, the Portfolio would then have more
than 5% of its total assets invested in securities of companies (including
predecessors) that have been in continuous operation for fewer than three years.
15. No Portfolio may purchase or retain securities of any company if,
to the knowledge of the Trust, any of the Trust's officers or Trustees or any
officer or director of GEIM individually owns more than 1/2 of 1% of the
outstanding securities of the company and together they own beneficially more
than 5% of the securities.
16. No Portfolio may purchase warrants (other than warrants acquired
by the Portfolio 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 Portfolio's net assets of which not
more than 2% of the value of the Portfolio's net assets may be
13
<PAGE>
invested in warrants not listed on the New York Stock Exchange, Inc. (the
"NYSE") or the American Stock Exchange. For purposes of this restriction,
warrants acquired by a Portfolio in units or attached to securities may be
deemed to be without value. The Money Market Portfolio may not invest in any
form of warrants.
17. No Portfolio may purchase illiquid securities if more than 15% of
the total assets of the Portfolio would be invested in illiquid securities; the
Money Market Portfolio will not purchase illiquid securities. For purposes of
this restriction, illiquid securities are securities that cannot be disposed of
by a Portfolio within seven days in the ordinary course of business at
approximately the amount at which the Portfolio has valued the securities.
18. No Portfolio may purchase restricted securities if more than 10%
of the total assets of the Portfolio 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
Securities Act of 1933, as amended, that have been determined to be liquid by
the Trust's Board of Trustees based upon the trading markets for the securities.
In no event, however, will any Portfolio's investment in illiquid and non-
publicly traded securities, in the aggregate, exceed 15% of its assets.
The Trust may make commitments more restrictive than the restrictions
listed above with respect to a Portfolio to permit the sale of shares of the
Portfolio in certain states. Should the Trust determine that any such commitment
is no longer in the best interests of a Portfolio and its shareholders, the
Trust will revoke the commitment by terminating the sale of shares of the
Portfolio in the state involved or may otherwise modify its commitment based on
a change in the state's restrictions. The percentage limitations in the
restrictions listed above apply at the time of purchases of securities. For
purposes of investment restriction number 5, the Trust 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, the Trust may use
Directory of Companies Required to File Annual Reports with the SEC and
Bloomberg Inc. In addition, the Trust may select its own industry
classifications, provided such classifications are reasonable.
PORTFOLIO TRANSACTIONS AND TURNOVER
Decisions to buy and sell securities for each Portfolio are made by
GEIM, subject to review by the Trust's Board of
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<PAGE>
Trustees. Transactions on domestic stock exchanges and some foreign stock
exchanges involve the payment of negotiated brokerage commissions. On exchanges
on which commissions are negotiated, the cost of transactions may vary among
different brokers. On most foreign exchanges, commissions are fixed. No stated
commission will be generally applicable to securities traded in U.S. over-the-
counter markets, but the prices of those securities include undisclosed
commissions or mark-ups. The cost of securities purchased from underwriters
include an underwriting commission or concession, and the prices at which
securities are purchased from and sold to dealers include a dealer's mark-up or
mark-down. Government Securities generally will be purchased on behalf of a
Portfolio 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.
Whenever GEIM deems it to be beneficial to a Portfolio, it may
aggregate the Portfolio's purchase, sale or other activities with those being
performed by GEIM for other customers. In selecting brokers or dealers to
execute securities transactions on behalf of a Portfolio, GEIM seeks the best
overall terms available. In assessing the best overall terms available for any
transaction, GEIM considers factors that it deems relevant, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on a
continuing basis. In addition, the investment advisory agreement between the
Trust and GEIM relating to each Portfolio authorizes GEIM, on behalf of the
Portfolio, 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 Portfolio and/or other accounts
over which GEIM or its affiliates exercise investment discretion. The fees
under the investment advisory agreement relating to a Portfolio will not be
reduced by reason of the Portfolio's receiving brokerage and research services.
The Trust's Board of Trustees periodically reviews the commissions paid by a
Portfolio to determine if the commissions paid over representative periods of
time were reasonable in relation to the benefits inuring to the Portfolio. Over-
the-counter purchases and sales on behalf of the Portfolios will be transacted
directly with principal market makers except in those cases in which better
prices and executions may be obtained elsewhere. A Portfolio 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
a Portfolio or GEIM is a member, except to the extent permitted under rules,
interpretations or exemptions of
15
<PAGE>
the SEC. All brokerage transaction commissions paid to affiliates will be fair
and reasonable to the shareholders.
The Money Market Portfolio may attempt to increase its yield by
trading to take advantage of short-term market variations, which trading would
result in the Portfolio'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 the Money Market
Portfolio will not result in the Portfolio's paying high brokerage commissions.
During the period ended December 31, 1995, the following commissions
were paid to broker-dealers for execution of portfolio transactions: U.S.
Equity Portfolio paid $17,532; and the International Portfolio paid $56,558. Of
such amounts, the following amounts were paid to a broker because of research
services provided during the respective year: U.S. Equity Portfolio paid
$3,612; and the International Portfolio paid $35,385. The Income Portfolio and
the Money Market Portfolio made no payments to broker-dealers for execution of
portfolio transactions during the 1995 fiscal year.
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 Portfolios. An asterisk
appears before the name of each Trustee who is an "interested person" of the
Trust, as defined in the 1940 Act.
16
<PAGE>
<TABLE>
<CAPTION>
Principal
Positions Held Occupation(s)
Name and Address with Trust During Past Five Years
- ---------------- --------------- ----------------------
<S> <C> <C>
*Michael J. Cosgrove Chairman of the Age 46. Executive Vice
3003 Summer Street Board and President President - Mutual Funds of
Stamford, CT 06905 GEIM and General Electric
Investment Corporation
("GEIC"), a wholly-owned
subsidiary of General
Electric Company ("GE") that
is registered as an
investment adviser under the
Investment Advisers Act of
1940, as amended, since March
1993 (responsibilities
include general management of
all mutual funds managed by
GEIM and GEIC) and Director
of GEIC and Executive Vice
President and Director of
GEIM since 1988; from 1988
until 1993, Mr. Cosgrove
served as Executive Vice
President-Finance and
Administration of GEIM and
GEIC.
*Alan M. Lewis Trustee and Age 49. Executive Vice
3003 Summer Street Executive Vice President, General Counsel
Stamford, CT 06905 President and Secretary of GEIM since
1988 and of GEIC since
October 1987.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Principal
Positions Held Occupation(s)
Name and Address with Trust During Past Five Years
- ---------------- --------------- ----------------------
<S> <C> <C>
John R. Costantino Trustee Age 49. Managing Director,
150 East 58th Street Walden Partners, Ltd.,
New York, NY 10055 consultants and investors,
since August 1992; President,
CMG Acquisition Corp., Inc.,
a holding company, since
1988; Vice Chairman,
Acoustiguide Holdings, Inc.,
a holding company, since
1989; President CMG/IKH,
Inc., a holding company,
since 1991; Director,
CrossLand Federal Savings
Bank, a financial
institution; Director,
Brooklyn Bankcorp, Inc., a
financial institution;
Director, IK Holdings, Inc.,
a holding company, since
1991; Director, I. Kleinfeld
& Son, Inc., a retailer,
since 1991; Director, High
Performance Appliances, Inc.,
a distributor of kitchen
appliances ("HPA"), since
1991; Director, HPA Hong
Kong, Ltd., a service
subsidiary of HPA, since
1991; Director, Lancit Media
Productions, Ltd., a
children's and family
television film and videotape
production company, since
1995; Partner, Costantino
Melamede-Greenberg Investment
Partners, a general
investment partnership, from
September 1987 through August
1992.
William J. Lucas Trustee Age 48. Vice President and
Fairfield University Treasurer of Fairfield
North Benson Road University since 1983.
Fairfield, CT 06430
Robert P. Quinn Trustee Age 60. Retired since 1983
67 Dune Road from Salomon Brothers Inc.;
West Hampton Beach, Director, GP Financial Corp.,
NY 11978 a holding company, since
1994; Director, The
Greenpoint Savings Bank, a
financial institution, since
1987.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION> Principal
Positions Held Occupation(s)
Name and Address with Trust During Past Five Years
- ---------------- --------------- ----------------------
<S> <C> <C>
*Jeffrey A. Groh Treasurer Age 33. Treasurer and
3003 Summer Street Controller of GEIC since
Stamford, CT 06905 August 1994; prior to August,
1994, was a Senior Manager in
Investment Company Services
Group and certified public
accountant with Price
Waterhouse.
*Matthew J. Simpson Secretary Age 35. Vice President,
3003 Summer Street Associate General Counsel and
Stamford, CT 06905 Assistant Secretary of GEIM
and GEIC since October 1992;
attorney with the law firm of
Baker & McKenzie, April 1991
to October 1992; prior to
April 1991 was an attorney
with the law firm of Spengler
Carlson Gubar Brodsky &
Frischling.
</TABLE>
No employee of GE or any of its affiliates receives any compen sation from the
Trust for acting as a Trustee or officer of the Trust. Each Trustee of the
Trust who is not a director, officer or employee of GEIM, GE, or any affiliate
of those companies, receives an annual fee of $5,000 and $500 for each meeting
of the Trust's Board of Trustees attended by the Trustee for services as Trustee
and is reimbursed for expenses incurred in connection with attendance at Board
meetings.
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<PAGE>
Trustees Compensation
(for the period from commencement of operations
through December 31, 1995)
<TABLE>
<CAPTION>
Total Total Compensation from
Compensation from all Investment Companies
Name of Trustee the Trust Managed by GEIC or GEIM
- --------------- --------- ------------------------
<S> <C> <C>
Michael J. Cosgrove None None+
Alan M. Lewis None None+
John R. Costantino $7,000 $17,000++
William J. Lucas $7,000 $17,000++
Robert P. Quinn $7,000 $17,000++
</TABLE>
_______________________
+ Messrs. Cosgrove and Lewis serve as Trustees of two investment companies
advised by GEIM and of eight investment companies advised by GEIC. They are
considered to be interested persons of each investment company advised by
GEIM or GEIC, as defined under Section 2(a)(19) of the 1940 Act, and
accordingly, serve as Trustees thereof without compensation.
++ Messrs. Costantino, Lucas and Quinn serve as Trustees of two investment
companies advised by GEIM and the compensation is for their services as
Trustees of both companies.
INVESTMENT ADVISER AND ADMINISTRATOR
GEIM, located at 3003 Summer Street, P.O. Box 7900, Stamford,
Connecticut 06904-7900, a wholly-owned subsidiary of GE, bears all expenses in
connection with the performance of its services as each Portfolio's investment
adviser and administrator. For the period ended December 31, 1995, the
International Portfolio, the Equity Portfolio, the Income Portfolio and the
Money Market Portfolio paid $77,057, $53,162, $22,614 and $15,595, respectively,
for investment advisory and administration services. Pursuant to state
securities laws, GEIM has agreed that, if in any fiscal year of a Portfolio, the
aggregate expenses of a Portfolio (including management fees, but excluding
interest, taxes, brokerage fees, and, with the prior written consent of the
necessary state securities commissions, extraordinary expenses) exceed the
expense limitation of any state having jurisdiction over the Trust, GEIM will
reimburse the Trust up to the amount of the Portfolio's investment advisory
fees. As of the date of this Statement of Additional Information, the most
restrictive state expense limitation applicable to the Portfolios requires
reimbursement of expenses in any year that a Portfolio's expenses, subject to
the limitation, exceed 2-1/2% of the first $30 million of the average
20
<PAGE>
daily value of the Portfolio's net assets, 2% of the next $70 million of the
average daily value of the Portfolio's net assets and 1-1/2% of the remaining
average daily value of the Portfolio's net assets.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street") is located at 225
Franklin Street, Boston, Massachusetts 02101 and serves as custodian and
transfer agent of the Portfolios' investments. Under its custodian contract
with the Trust, State Street is authorized to appoint one or more banking
institutions as subcustodians of assets owned by each Portfolio. For its
custody services, State Street receives monthly fees charged to the Portfolios
based upon the month-end, aggregate net asset value of the Portfolios, plus
certain charges for securities transactions. The assets of the Trust are held
under bank custodianship in accordance with the 1940 Act. As transfer agent,
State Street is responsible for processing redemption requests and crediting
dividends to the accounts of shareholders of the Portfolios.
REDEMPTION OF SHARES
Information on how to redeem shares of a Portfolio is included in the
Prospectus. The right of redemption of shares of a Portfolio may be suspended
or the date of payment postponed (1) for any periods during which the NYSE is
closed (other than for customary weekend and holiday closings), (2) when trading
in the markets the Portfolio normally utilizes is restricted, or an emergency,
as defined by the rules and regulations of the SEC, exists, making disposal of a
Portfolio's investments or determination of its net asset value not reasonably
practicable or (3) for such other periods as the SEC by order may permit for the
protection of the Portfolio's shareholders. The separate accounts' policies on
when or whether to buy or redeem shares of a Portfolio are described in the
prospectus relating to the applicable variable annuity contract.
EXCHANGE PRIVILEGE
The exchange privilege described in the Prospectus enables a separate
account to exchange its shares in a Portfolio for shares in another Portfolio
having a different investment objectives and policies, as described herein.
Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange are redeemed at the then-current net asset value
and the proceeds are immediately invested in shares of the Portfolio being
acquired. The Trust reserves the
21
<PAGE>
right to reject any exchange request.
NET ASSET VALUE
The Trust will not calculate net asset value on certain holidays. On
those days, securities held by a Portfolio may nevertheless be actively traded,
and the value of the Portfolio's shares could be significantly affected.
Because of the need to obtain prices as of the close of trading on
various exchanges throughout the world, the calculation of the net asset value
of a Portfolio may not take place contemporaneously with the determination of
the prices of many of their portfolio securities used in the calculation. A
security that is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for the security.
All assets and liabilities of the Portfolios initially expressed in foreign
currency values will be converted into U.S. dollar values at the mean between
the bid and offered quotations of the currencies against U.S. dollars as last
quoted by any recognized dealer. If these quotations are not available, the
rate of exchange will be determined in good faith by the Trust's Board of
Trustees. In carrying out the Board's valuation policies, GEIM may consult with
one or more independent pricing services ("Pricing Service") retained by the
Trust.
Certain fixed income securities are valued by a dealer or by a pricing
service based upon a computerized matrix system, which considers market
transactions and dealer supplied valuations. Futures contracts are valued at
the settlement price established each day by the board of trade or exchange on
which they are principally traded.
The valuation of the portfolio securities of the Money Market
Portfolio is based upon amortized cost, which does not take into account
unrealized capital gains or losses. Amortized cost valuation involves initially
valuing an instrument 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 instrument. Although this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Money Market Portfolio would receive if it sold the instrument.
The use of the amortized cost method of valuing the portfolio
securities of the Money Market Portfolio is permitted by a rule adopted by the
SEC. Under this rule, the Money Market Portfolio must maintain a dollar-
weighted average portfolio
22
<PAGE>
maturity of 90 days or less, purchase only instruments having remaining
maturities of 13 months or less, and invest only in "eligible securities" as
defined in the rule, which are determined by GEIM to present minimal credit
risks. Pursuant to the rule, GEIM has established procedures designed to
stabilize, to the extent reasonably possible, the Portfolio's price per share as
computed for the purpose of sales and redemptions at $1.00. These procedures
include review of the Money Market Portfolio's holdings at such intervals as
GEIM may deem appropriate, to determine whether the Portfolio's net asset value
calculated by using available market quotations or market equivalents deviates
from $1.00 per share based on amortized cost.
The rule regarding amortized cost valuation provides that the extent
of any deviation between the Money Market Portfolio's net asset value based upon
available market quotations or market equivalents and the $1.00 per share net
asset value based on amortized cost must be examined by the Trust's Board of
Trustees. In the event the Board of Trustees determines that a deviation exists
that may result in material dilution or other unfair results to investors or
existing shareholders of the Money Market Portfolio, the Board of Trustees must,
in accordance with the rule, cause the Portfolio to take such corrective action
as the Board of Trustees regards as necessary and appropriate, including:
selling instruments held by the Portfolio prior to their maturity to realize
capital gains or losses or to shorten average portfolio maturity; withholding
dividends or paying distributions from capital or capital gains; redeeming
shares in kind; or establishing a net asset value per share by using available
market quotations.
TAXATION
Set forth below is a summary of certain Federal income tax
considerations generally affecting the Portfolios 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.
Shares of the Portfolios are currently offered only to insurance
company separate accounts that fund certain variable annuity contracts (the
"Contracts"). See the applicable Contract prospectus for a discussion of the
special taxation of insurance companies with respect to such accounts and of
Contract holders.
Each Portfolio will be treated as a separate entity for federal income
tax purposes. Each Portfolio's net investment income and capital gains
distributions are determined separately
23
<PAGE>
from any other series that the Trust may designate.
REGULATED INVESTMENT COMPANY STATUS
The Trust intends that each Portfolio will qualify separately each
year as a "regulated investment company" under the Code. If a Portfolio (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 Portfolio 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 Portfolio 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 period ending on October 31 of such calendar
year and all undistributed income from prior years.
The requirements for qualifications as a regulated investment company
include two significant rules as to investment results. First, a Portfolio must
earn at least 90% of its gross income from dividends, interest, payments with
respect to securities loans, gains from the disposition of stock or securities
(including gains from related investments in foreign currencies) and income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in such stocks, securities or currencies
(the "90% Test"). Second, a Portfolio must earn less than 30% of its gross
income from short-term (less than three months) gains on the sale of certain
investments (the "30% Test").
The 30% Test will restrict the extent to which a Portfolio may, among
other things: (1) sell or purchase put options on securities held for less than
three months or purchase put options on substantially identical securities
(unless the option and the security are acquired on the same day); (2) write
options that expire in less than three months; and (3) close options that were
written or purchased within the preceding three months. For purposes of the 30%
Test, a Portfolio's increases or decreases in value of short-term investment
positions that constitute certain designated hedging transactions may generally
be netted. The Trust does not expect that the 30% Test will significantly
affect the investment policies of any Portfolio.
A Portfolio'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 Portfolio (that is, may affect
whether gains or
24
<PAGE>
losses are ordinary or capital), accelerate recognition of income to the
Portfolio and defer losses of the Portfolio. These rules (1) could affect the
character, amount and timing of distributions to shareholders of a Portfolio,
(2) will require the Portfolio to "mark to market" certain types of the
positions in its portfolio (that is, treat them as if they were closed out) and
(3) may cause the Portfolio to recognize income without receiving cash with
which to make distributions in amounts necessary to satisfy the distribution
requirements for avoiding income and excise taxes described above and in the
Prospectus. The Trust seeks to monitor transactions of each Portfolio, will seek
to make the appropriate tax elections on behalf of the Portfolio and seeks to
make the appropriate entries in the Portfolio's books and records when the
Portfolio acquires any option, futures contract or hedged investment, to
mitigate the effect of these rules and prevent disqualification of the Portfolio
as a regulated investment company.
SEGREGATED ASSET ACCOUNT
The Trust has been informed that each of the separate accounts intends
to qualify as a "segregated asset account" within the meaning of the Code. For
a separate account to qualify as a segregated asset account, the Portfolio in
which such separate account holds shares must meet the diversification
requirements of Section 817(h) of the Code and the regulations promulgated
thereunder. To meet those requirements, a Portfolio may not invest more than
certain specified percentages of its assets in the securities of any one, two,
three or four issuers. For these purposes, all obligations of the U.S. Treasury
and each U.S. Government instrumentality are treated as securities of separate
issuers.
Income on assets of a separate account qualified as a segregated asset
account whose underlying investments are adequately diversified will not be
taxable to Contract holders. However, in the event a separate account is not so
qualified, all annuities allocating any amount of premiums to such separate
account will not qualify as annuities for federal income tax purposes and the
holders of such annuities would be taxed on any income on the annuities during
the period of disqualification.
The Trust has undertaken to meet the diversification requirements of
Section 817(h) of the Code. This undertaking may limit the ability of a
particular Portfolio to make certain otherwise permitted investments. In
particular, the ability of the Money Market Portfolio and the Income Portfolio
to invest in U.S. Government securities may be materially limited by these
diversification requirements.
25
<PAGE>
THE PORTFOLIOS' PERFORMANCES
As noted in the Prospectus, the Trust, from time to time, may quote a
Portfolio's performance, in terms of its yield and/or total return, in reports
or other communications to shareholders of the Portfolio or in advertising
material. Additional information regarding the manner in which performance
figures are calculated is provided below.
YIELD
The yield for the Money Market Portfolio is computed by (1)
determining the net change in the value of a hypothetical preexisting account in
the Portfolio having a balance of one share at the beginning of a seven-
calendar-day period for which yield is to be quoted, (2) dividing the net change
by the value of the account at the beginning of the period to obtain the base
period return, and (3) annualizing the results (that is, multiplying the base
period return by 365/7). The net change in the value of the account reflects
the value of additional shares purchased with dividends declared on the original
share and any such additional shares, but does not include realized gains and
losses or unrealized appreciation and depreciation. In addition, the Money
Market Portfolio may calculate a compound effective annualized yield by adding
one to the base period return (calculated as described above), raising the sum
to a power equal to 365/7 and subtracting one.
The 30-day yield figure described in the Prospectus is calculated for
a Portfolio (other than the Money Market Portfolio) according to a formula
prescribed by the SEC. The formula can be expressed as follows:
Yield = 2[(a-b + 1)/6/-1]
/cd/
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
For the purpose of determining the interest earned
26
<PAGE>
(variable "a" in the formula) on debt obligations that were purchased by a
Portfolio at a discount or premium, the formula generally calls for amortization
of the discount or premium; the amortization schedule will be adjusted monthly
to reflect changes in the market values of the debt obligations.
Investors should recognize that, in periods of declining interest
rates, the yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the yield will tend to be somewhat
lower. In addition, when interest rates are falling, moneys received by a
Portfolio from the continuous sale of its shares will likely be invested in
portfolio instruments producing lower yields than the balance of its holdings,
thereby reducing the current yield of the Portfolio. In periods of rising
interest rates, the opposite result can be expected to occur.
Yield information is useful in reviewing the perfor mance of a
Portfolio, but because yields fluctuate, this information cannot necessarily be
used to compare an investment in shares of the Portfolio 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
Portfolio should remember that yield is a function of the kind and quality of
the instruments in the Portfolio's holdings, portfolio maturity, operating
expenses and market conditions.
AVERAGE ANNUAL TOTAL RETURN
The "average annual total return" figures described in the Prospectus,
are computed for a Portfolio (other than the Money Market Portfolio) according
to a formula prescribed by the SEC. The formula can be expressed as follows:
P(1 + T)/n/ = ERV
Where P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = Ending Redeemable Value of a hypothetical $1,000 investment made
at the beginning of a 1-, 5- or 10-year period at the end of a 1-,
5- or 10-year period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
The ERV assumes complete redemption of the hypothetical investment at
the end of the measuring period.
AGGREGATE TOTAL RETURN
27
<PAGE>
The "aggregate total return" figures described in the Prospectus
represent the cumulative change in the value of an investment in a Portfolio
(other than the Money Market Portfolio) for the specified period and are
computed by the following formula:
Aggregate Total Return = ERV - P
P
Where P = a hypothetical initial payment of $1,000; and
ERV = Ending Redeemable Value of a hypothetical $1,000 investment made
at the beginning of a 1-, 5- or 10-year period at the end of the
1-, 5- or 10-year period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
PRINCIPAL STOCKHOLDERS
Great Northern Insured Annuity Corporation ("GNA") is the only person
known to the Trust to be a control person of each of the Portfolios. So long as
GNA owns in excess of 25% of the amount of outstanding shares of a Portfolio it
will be deemed to be a control person; however, assuming no further investment
by GNA, an increase in the amount of assets of a Portfolio will result in a
diminution of its holdings. The following persons are the only persons known by
the Trust to hold beneficially more than 5% of the outstanding shares of any
class of the Funds as of March 31, 1996:
<TABLE>
<CAPTION>
Name and Address
of Record Amount of Percent of
Ownership Name of Portfolio Ownership Portfolio
- ---------------- ------------------ --------- ----------
<S> <C> <C> <C>
Great Northern International 387,630 shares 99.65%
Insured Annuity Portfolio
Corporation*
("GNA")
Two Union Square
Seattle, WA 98101
GNA* Equity Portfolio 633,533 shares 99.78%
Two Union Square
Seattle, WA 98101
GNA* Income Portfolio 348,822 shares 99.46%
Two Union Square
Seattle, WA
98101
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Name and Address
of Record Amount of Percent of
Ownership Name of Portfolio Ownership Portfolio
- ---------------- ------------------ --------- ----------
<S> <C> <C> <C>
GNA* Money Market 5,850,950 shares 99.64%
Two Union Square Portfolio
Seattle, WA
98101
</TABLE>
____________________
* The ownership interest of GNA is held in insurance separate accounts
established by GNA in connection with a variable annuity and modified
guaranteed annuity contract (the "Contract"). No person or entity
participating under the Contract is known to the Trust to be a control person
of any Portfolio.
ADDITIONAL INFORMATION
The Trust was organized as an unincorporated business trust under the
laws of The Commonwealth of Massachusetts pursuant to a Declaration of Trust
dated February 25, 1994, as amended from time to time (the "Declaration"). In
the interest of economy and convenience, certificates representing shares of a
Portfolio are not physically issued. State Street maintains a record of each
shareholder's ownership of shares of a Portfolio.
Massachusetts law provides that shareholders of the Portfolios could,
under certain circumstances be held personally liable for the obligations of the
Trust. The Declaration disclaims shareholder liability for acts or obligations
of the Trust, however, and requires that notice of the disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or a Trustee of the Trust. The Declaration provides for indemnification from
the property of a Portfolio for all losses and expenses of any shareholder of
the Portfolio held personally liable for the obligations of the Portfolio.
Thus, the risk of a shareholder of a Portfolio's incurring financial loss on
account of shareholder liability is limited to circumstances in which the
Portfolio 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 Portfolio, the shareholder paying the liability will be entitled to
reimbursement from the general assets of the Portfolio. The Trustees intend to
conduct the operations of the Trust and the Portfolios in such a way so as to
avoid, as far as practicable, ultimate liability of the shareholders for
liabilities of the Portfolios.
COUNSEL
Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York
10022, serves as counsel for the Trust.
29
<PAGE>
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountants of the Trust.
FINANCIAL STATEMENTS
The Annual Report, dated December 31, 1995, which either accompanies
this Statement of Additional Information or has previously been provided to the
person to whom this Statement of Additional Information is being sent, is
incorporated herein by reference.
30
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS
COMMERCIAL PAPER RATINGS
The rating A-1+ is the highest, and A-1 the second highest commercial
paper rating assigned by S&P. Paper rated A-1+ must have either the direct
credit support of an issuer or guarantor that possesses excellent long-term
operating and financial strength combined with strong liquidity characteristics
(typically, such issuers or guarantors would display credit quality
characteristics that would warrant a senior bond rating of AA or higher) or the
direct credit support of an issuer or guarantor that possesses above average
long-term fundamental operating and financing capabilities combined with ongoing
excellent liquidity characteristics. Paper rated A-1 must have the following
characteristics: liquidity ratios are adequate to meet cash requirements; long-
term senior debt is rated A or better; the issuer has access to at least two
additional channels of borrowing; basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; typically, the issuer's
industry is well established and the issuer has a strong position within the
industry; and the reliability and quality of management are unquestioned.
Capacity for timely payment on issues rated A-2 is satisfactory. However, the
relative degree of safety is not as high as issues designated "A-1."
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (a) evaluation of the management of the issuer; (b) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks that may be inherent in certain areas; (c) evaluation of
the issuer's products in relation to competition and customer acceptance; (d)
liquidity; (e) amount and quality of long-term debt; (f) trend of earnings over
a period of ten years; (g) financial strength of parent company and the
relationships that exist with the issue; and (h) recognition by the management
of obligations that may be present or may arise as a result of public interest
questions and preparations to meet the obligations.
Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This normally will
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
A-1
<PAGE>
Short-term obligations, including commercial paper, rated A-1+ by IBCA
Limited or its affiliate IBCA Inc. are obligations supported by the highest
capacity for timely repayment. Obligations rated A-1 have a very strong capacity
for timely repayment. Obligations rated A-2 have a strong capacity for timely
repayment, although that capacity may be susceptible to adverse changes in
business, economic and financial conditions.
Fitch Investors Services, Inc. employs the rating F-1+ to indicate
issues regarded as having the strongest degree of assurance of timely payment.
The rating F-1 reflects an assurance of timely payment only slightly less in
degree than issues rated F-1+, while the rating F-2 indicates a satisfactory
degree of assurance of timely payment although the margin of safety is not as
great as indicated by the F-1+ and F-1 categories.
Duff & Phelps Inc. employs the designation of Duff 1 with respect to
top grade commercial paper and bank money instruments. Duff 1+ indicates the
highest certainty of timely payment: short-term liquidity is clearly outstanding
and safety is just below risk-free U.S. Treasury short-term obligations. Duff
1-indicates high certainty of timely payment. Duff 2 indicates good certainty
of timely payment; liquidity factors and company fundamentals are sound.
Thompson BankWatch Inc. employs the rating TBW-1 to indicate issues
having a very high degree of likelihood of timely payment. TBW-2 indicates a
strong degree of safety regarding timely payment, however, the relative degree
of safety is not as high as for issues rated TBW-1. While the rating TBW-3
indicates issues that are more susceptible to adverse developments than
obligations with higher ratings, capacity to service principal and interest in a
timely fashion is considered adequate. The lowest rating category is TBW-4;
this rating is regarded as non-investment grade and, therefore, speculative.
Various NRSROs utilize rankings within ratings categories indicated by
a plus or minus sign. The Portfolios, 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
A-2
<PAGE>
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 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-3
<PAGE>
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.
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.
A-4
<PAGE>
VARIABLE INVESTMENT TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Financial Highlights**
(2) Schedule of Investments as of December 31, 1995**
(3) Statements of Assets and Liabilities as of December 31, 1995**
(4) Statement of Operations for the period January 3 (commencement of
operations) through December 31, 1995**
(5) Statement of Changes in Net Assets for the period January 3
(commencement of operations) through December 31, 1995
- ---------------
** Incorporated by reference to the Trust's Annual Report to shareholders for
the fiscal year ended December 31, 1995.
(b) Exhibits
--------
Exhibit
No. Description of Exhibit
--- ----------------------
1 Declaration of Trust*
2 By-Laws*
3 Inapplicable
4 Inapplicable
________________________
* Previously filed
C-1
<PAGE>
5 Investment Advisory Agreement*
6 Inapplicable
7 Inapplicable
8 Custodian Contract*
9(a) Transfer Agency Agreement and Service Agreement*
9(b) Administration Agreement*
10(a) Opinion of Willkie Farr & Gallagher, including consent*
11 Consent of Price Waterhouse
12 Inapplicable
13 Purchase Agreement*
14 Inapplicable
15 Inapplicable
16 Schedule of computation of performance data information
__________________________________
* Previously filed
Item 25. Persons Controlled by or Under Common Control with Registrant.
- -------- -------------------------------------------------------------
See Item 28
Item 26. Number of Holders of Securities
- -------- -------------------------------
Number of Record
Title of Class Holders as of March 29, 1996
-------------- ----------------------------
Shares 10
C-2
<PAGE>
Item 27. Indemnification
- -------- ---------------
Reference is made to Article IV of the Declaration of Trust of
Variable Investment Trust (the "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 the Registrant pursuant to the
provisions of Registrant's Declaration of Trust, or otherwise, the 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 the Registrant of expenses
incurred or paid by a Trustee, officer or controlling person of the 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, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
Reference is made to "Management of the Trust" in the Prospectus
forming Part A, and "The Management of the Trust" in the Statement of Additional
Information forming Part B, of this Registration Statement.
The list required by this Item 28 of officers and directors of GEIM,
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by those officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by GEIM pursuant to the Investment Advisers Act of 1940, as
amended (SEC File No. 801-31947).
Item 29. Principal Underwriters
- -------- ----------------------
Inapplicable.
Item 30. Location of Accounts and Records
- -------- --------------------------------
All accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the
C-3
<PAGE>
Investment Company Act of 1940, as amended (the "1940 Act"), and the rules
thereunder, are maintained at the offices of: Registrant located at 3003 Summer
Street, Stamford, Connecticut 06905; State Street Bank and Trust Company ("State
Street"), Registrant's custodian and transfer agent, located at 225 Franklin
Street, Boston, Massachusetts 02101; and Boston Financial Data Services, Inc., a
subsidiary of State Street, located at 2 Heritage Drive, Quincy, Massachusetts
02171.
Item 31. Management Services
- -------- -------------------
Inapplicable.
Item 32. Undertakings
- -------- ------------
(a) Registrant undertakes to call a meeting of the shareholders of
each Portfolio for the purpose of voting upon the question of removal of a
trustee or trustees of the Registrant when requested in writing to do so by the
holders of at least 10% of the Registrant's outstanding shares and, in
connection with the meeting, to comply with the provisions of Section 16(c) of
the 1940 Act relating to communications with the shareholders of certain common-
law trusts.
(b) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's annual report to shareholders,
covering fiscal year 1995, upon request and without charge.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Stamford, State of
Connecticut, on the 27th day of April, 1996.
By: /s/ Michael J. Cosgrove
--------------------------------
Michael J. Cosgrove
President and Chairman
of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to Registrant's Registration Statement on Form N-1A has been
signed below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
/s/ Michael J. Cosgrove President and Chairman April 27, 1996
- ----------------------- of the Board
Michael J. Cosgrove (Chief Executive Officer)
/s/ Alan M. Lewis Executive Vice President April 27, 1996
- ----------------------- and Trustee
Alan M. Lewis
/s/ John R. Costantino Trustee April 27, 1996
- -----------------------
John R. Costantino
/s/ William J. Lucas Trustee April 27, 1996
- -----------------------
William J. Lucas
/s/ Robert P. Quinn Trustee April 27, 1996
- -----------------------
Robert P. Quinn
/s/ Jeffrey A. Groh Treasurer April 27, 1996
- ----------------------- (Chief Financial and
Jeffrey A. Groh Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
1 Declaration of Trust*
2 By-Laws*
5 Investment Advisory Agreement*
8 Custodian Contract*
9(a) Transfer Agency and Service Agreement*
9(b) Administration Agreement*
10(a) Opinion of Willkie Farr & Gallagher,
including consent*
10(b) Opinion of Bingham, Dana & Gould,
including consent*
11 Consent of Price Waterhouse
13 Purchase Agreement*
16 Schedule of computation of performance
data information
__________________________
*Previously filed
<PAGE>
Exhibit 23(11)
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 2 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 8, 1996 relating to the financial statements and financial highlights
of Variable Investment Trust, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Financial Highlights" in the
Prospectus and "Independent Accountants" in the Statement of Additional
Information.
Price Waterhouse LLP
Boston, Massachusetts
April 26, 1996
<PAGE>
EXHIBIT 12(16)
<PAGE>
SCHEDULE OF COMPUTATION OF
PERFORMANCE DATA INFORMATION
<PAGE>
VIT GE INTERNATIONAL EQUITY
CALCULATION OF 1995 TOTAL RETURN
This method compares a fund's net asset value (NAV), at the beginning and end of
a period with the results being expressed as a percent change of the beginning
net asset value. The net asset value is adjusted to reflect the compounding
effect of reinvesting dividends as well as capital gains distributions, if any.
Dividends and distributions are reinvested on the ex-dividend date at the ex-
dividend NAV.
The following computation illustrates this methodology for 1995.
<TABLE>
<CAPTION>
Factual Data VIT GE INTERNATIONAL EQUITY
<S> <C>
1. Opening NAV 1/3/95 $ 15.00
2. Closing NAV 12/31/95 $ 17.37
3. Income Distributions:
Ex Date 12/28/95
Amount / Unit 0.291138484
NAV on ex-date 17.34
Income Sources
Ordinary Income 0.136936971
Long Term Capital Gains 0.154202513
Computation
= 17.37* (1+(2093719/19.21)) -15)
--------------------------------------------------------
15
= 0.177443
= 0.177443 or 17.74%
</TABLE>
<PAGE>
VIT U.S. EQUITY
CALCULATION OF 1995 TOTAL RETURN
This method compares a fund's net asset value (NAV), at the beginning and end of
a period with the results being expressed as a percent change of the beginning
net asset value. The net asset value is adjusted to reflect the compounding
effect of reinvesting dividends as well as capital gains distributions, if any.
Dividends and distributions are reinvested on the ex-dividend date at the ex-
dividend NAV.
The following computation illustrates this methodology for 1995.
<TABLE>
<CAPTION>
Factual Data VIT U.S. EQUITY
<S> <C>
1. Opening NAV 1/3/95 $ 15.00
2. Closing NAV 12/31/95 $ 19.27
3. Income Distributions:
Ex Date 12/28/95
Amount / Unit 1.063662976
NAV on ex-date 19.21
Income Sources
Ordinary Income 0.972928991
Long Term Capital Gains 0.090733985
Computation
= 19.27*(1+ (2093719 / 19.21)) -15)
--------------------------------------------------------
15
= 0.355799
= 0.355799 or 35.58%
</TABLE>
<PAGE>
VIT FIXED INCOME FUND
Year to Date percentage return equals
Ending Account Value -1
--------------------
Beginning Account Value
where
Beginning Account Value= the net asset value (NAV) at the
beginning of the year multiplied by 1000
"beginning units" (a hypothetical number
of Units.)
Ending Account Value = Ending Units x NAV at the end of the year
Ending Units Beginning units + number of units purchased
month 1 + number of units purchased month 2 ...
...continued through month 12.
Income Units Purchased
Each Month = Total Income Earned that Month
------------------------------
NAV at end of month
Income Earned = Income per unit multiplied by total number of
units through end of prior months.
See attached Return calculations for the Period ending December 31, 1995.
<PAGE>
VIT - FIXED INCOME
TOTAL RETURN FOR FISCAL YEAR ENDED DECEMBER 1995
<TABLE>
<CAPTION>
A B C D E F G H I J K L
Income Capital Capital Gain Income Current
Per Gains Reinvest. Unit Income Units Units Total Account Month YTD
Period Unit Unit Value Value Earned Purchased Purchase Units Value Return Return
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dec-94 0 12.00 1000.000 12000.00
Jan-95 0.0656 12.16 12.16 65.613 0.000 5.396 1005.396 12225.61 1.88% 1.88%
Feb-95 0.0628 12.32 12.32 63.139 0.000 5.125 1010.521 12449.61 1.83% 3.75%
Mar-95 0.0731 12.34 12.34 73.869 0.000 5.986 1016.507 12543.69 0.76% 4.53%
Apr-95 0.0697 12.42 12.42 70.851 0.000 5.705 1022.211 12695.87 1.21% 5.80%
May-95 0.0716 12.77 12.77 73.190 0.000 5.731 1027.943 13126.83 3.39% 9.39%
Jun-95 0.0698 12.79 12.79 71.750 0.000 5.610 1033.553 13219.14 0.70% 10.16%
Jul-95 0.0687 12.69 12.69 71.005 0.000 5.595 1039.148 -13186.79 -0.24% 9.89%
Aug-95 0.0685 12.76 12.76 71.182 0.000 5.578 1044.727 13330.71 1.09% 11.09%
Sep-95 0.0658 12.81 12.81 68.743 0.000 5.366 1050.093 13451.69 0.91% 12.10%
Oct-95 0.0677 12.90 12.90 71.091 0.000 5.511 1055.604 13617.29 1.23% 13.48%
Nov-95 0.0672 13.03 13.03 70.937 0.000 5.444 1061.048 13825.45 1.53% 15.21%
Dec-95 0.0248 0.5844 12.51 12.51 26.314 620.076 51.670 1112.718 13920.10 0.68% 16.00%
Dec-95 0.0693 12.53 12.53 77.111 0.000 6.154 1118.872 14019.47 0.71% 16.83%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
| Annual return for one year equals: |
| |
| (Ending Account Value - Beginning Account Value)/Beginning Account Value |
| |
|______________________________________________________________________________|
1) Input numbers for columns A,B,C,D,E
A = Month - Year
B = Income per unit
C = Capital Gains per unit
D = Capital Gain Reinvestment NAV
E = NAV per unit at Month End
2) F = I* * B, where I* is from prior month
3) G = I* *C/D, where I* is from prior month
4) H = F/E
5) I = I* + H+G, where I* is from prior month
6) J= E/I
7) K =(J-J*)/J*, where J* is from prior month
8) L = ((L* + 1)*(K + 1))-1, where L* is from prior month
<PAGE>
VIT MONEY MARKET FUND
Year to Date percentage return equals
Ending Account Value -1
--------------------
Beginning Account Value
where
Beginning Account Value= the net asset value (NAV) at the
beginning of the year multiplied by 1000
"beginning units" (a hypothetical number
of Units.)
Ending Account Value = Ending Units x NAV at the end of the year
Ending Units Beginning units + number of units purchased
month 1 + number of units purchased month 2 ...
...continued through month 12.
Income Units Purchased
Each Month = Total Income Earned that Month
------------------------------
NAV at end of month
Income Earned = Income per unit multiplied by total number of
units through end of prior months.
See attached Return calculations for the Period ending December 31, 1995.
<PAGE>
VIT MONEY MARKET
TOTAL RETURN FOR FISCAL YEAR ENDED DECEMBER 1995
<TABLE>
<CAPTION>
A B C D E F G H I J K L
Capital Capital Gain Income Current
Income per Gains Reinvest. Unit Income Units Units Total Account Month YTD
Period Unit Unit Value Value Earned Purchased Purchased Units Value Return Return
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dec-94 1 1000.000 1000.00
Jan-95 0.004030 1 1 4.030 0.000 4.030 1004.030 1004.03 0.40% 0.40%
Feb-95 0.004333 1 1 4.350 0.000 4.350 1008.380 1008.38 0.43% 0.84%
Mar-95 0.004794 1 1 4.834 0.000 4.834 1013.215 1013.21 0.48% 1.32%
Apr-95 0.004643 1 1 4.704 0.000 4.704 1017.919 1017.92 0.46% 1.79%
May-95 0.004797 1 1 4.883 0.000 4.883 1022.802 1022.80 0.48% 2.28%
Jun-95 0.004560 1 1 4.664 0.000 4.664 1027.466 1027.47 0.46% 2.75%
Jul-95 0.004621 1 1 4.748 0.000 4.748 1032.214 1032.21 0.46% 3.22%
Aug-95 0.004532 1 1 4.678 0.000 4.678 1036.892 1036.89 0.45% 3.69%
Sep-95 0.004351 1 1 4.512 0.000 4.512 1041.403 1041.40 0.44% 4.14%
Oct-95 0.004465 1 1 4.650 0.000 4.650 1046.053 1046.05 0.45% 4.61%
Nov-95 0.004316 1 1 4.515 0.000 4.515 1050.568 1050.57 0.43% 5.06%
Dec-95 0.004433 0.001841 1 1 4.657 1.934 6.591 1057.159 1057.16 0.63% 5.72%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
________________________________________________________________________________
| Annual return for one year equals: |
| |
| (Ending Account Value - Beginning Account Value)/Beginning Account Value |
| |
|______________________________________________________________________________|
1) Input numbers for columns A,B,C,D,E
A = Month - Year
B = Income per unit
C = Capital Gains per unit
D = Capital Gain Reinvestment NAV
E = NAV per unit at Month End
2) F = I* * B, where I* is from prior month
3) G = I* *C/D, where I* is from prior month
4) H = F/E
5) I = I* + H, where I* is from prior month
6) J= E/I
7) K =(J-J*)/J*, where J* is from prior month
8) L = ((L* + 1)*(K + 1))-1, where L* is from prior month
<PAGE>
VIT Money Market Fund
7 Day Yield and Effective 7 Day Yield as of December 31, 1995
<TABLE>
<CAPTION>
-----------------------------------------------------------------
A B C D E F
Daily Current Effective
Daily Shares Income Rate 7 Day 7 Day
Date Income Outstanding Per Share Yield Yield
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
25-Mar 754.69 5,800,701.01 0.00013010
26-Mar 756.60 5,853,491.52 0.00012926
27-Mar 763.74 5,853,491.52 0.00013048
28-Mar 760.48 5,872,388.56 0.00012950
29-Mar 764.50 5,872,388.56 0.00013019
30-Mar 764.50 5,872,388.56 0.00013019
31-Mar 764.50 5,872,388.56 0.00013019 4.74% 4.86%
-----------------------------------------------------------------
0.00090991
-----------------------------------------------------------------
</TABLE>
1) Input Numbers for columns A, B, C
2) D = B/C
3) E = ((Sum of Column C)/7 Days) *365 Days
4) F = ((1+ Sum of Column C)*(365/7))-1
