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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file
number 811-04041
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GE INVESTMENTS FUNDS, INC.
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(Exact name of registrant as specified in charter)
3001, SUMMER STREET,STAMFORD, CONNECTICUT, 06905
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(Address of principal executive offices) (Zip code)
GE ASSET MANAGEMENT INC,3001, SUMMER STREET,STAMFORD,CONNECTICUT, 06905
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(Name and address of agent for service)
Registrant"s telephone number, including area code: 800-242-0134
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Date of fiscal year end: 12/31/08
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Date of reporting period: : 06/30/09
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<page>
ITEM 1. REPORTS TO STOCKHOLDERS.
GE Investments Funds, Inc.
U.S. Equity Fund Letter from the Chairman
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[PHOTO OF MICHAEL J. COSGROVE]
MICHAEL J. COSGROVE
CHAIRMAN,
GE INVESTMENTS FUNDS, INC.
DEAR SHAREHOLDER:
Attached is the semi-annual report for the GE Investments Funds, Inc. -- U.S.
Equity Fund (the "Fund") for the six-month period ended June 30, 2009. The
report contains information about the performance of the Fund, and other Fund
specific data, along with portfolio manager commentary. We have provided you
with an overview of the investment markets, along with our investment outlook
for the coming months.
MARKET OVERVIEW
Despite investors' hopes that the new U.S. administration and Congress would
help stabilize the nation's financial crisis, asset values continued to fall in
the first quarter of 2009. Global equities experienced sharp price declines in
January and February as troubles in the United States continued to cast a cloud
over world markets. U.S. Treasury Secretary Geithner indicated that some U.S.
banks would need large amounts of assistance to survive and talks of stress
tests and bank nationalization spooked investors. The markets also booed
government plans to take a 36% stake in Citigroup even as the financial status
of institutions already on government life-support, such as AIG, remained
uncertain. Similarly, news of troubled automakers GM and Chrysler worried
international bondholders and shareholders alike. Financial services and small
cap stocks were hardest hit in the downswing as equity indexes broke the
November 2008 lows in February. Government debt issues also had a rough February
as U.S. and U.K. debt auctions saw weak support for long and non-inflation
indexed government securities. These poor showings were soon followed by a
warmer reception for shorter-dated debt.
U.S. stocks abruptly reversed course and posted three straight weeks of gains
through the end of March after the three largest U.S. banks announced they had
turned a profit. Equity indexes around the globe followed the U.S. path,
regaining much of their losses since January. In late March, the U.S. Treasury
Secretary unveiled his Public-Private Investment Partnership (PPIP) plan to
remove toxic assets from the balance sheets of the nation's banks, and the
markets seemed convinced of a financial sector backstop. Another policy move to
support the markets came on March 18th when the Federal Reserve announced that
it would buy $300 billion of 2- and 10-year Treasuries, increase its purchase
plan of agency mortgage-backed securities from $500 billion to $1.25 trillion,
double its purchases of agency debt to $200 billion and expand the eligible
collateral in the Term Asset-Backed Securities Loan Facility (TALF) program. In
response, the yield on the U.S. Treasury 10-year note fell 47 basis points to
2.53%, recording the largest one-day drop in over four decades.
The rebound in global equities continued into the second quarter, as markets
experienced strong gains in April and May, before tailing off into a flat June
as investors started to question the strength and timing of an economic
recovery. Despite a double-digit rally since mid-March, the S&P 500 Index ended
the second quarter approximately where it started at the beginning of 2009
(priced in the low 900s). Emerging markets equities continued to outperform
their developed peers during the second quarter. The MSCI Emerging Markets Index
gained 34.7%, its best quarterly return since data collection began in 1988.
Speculation persists that developing markets are better positioned to weather
the global recession given that their financial systems are generally better
capitalized and less leveraged than the developed countries.
During the second quarter, U.S. government stress tests concluded and the banks
that needed capital swiftly and successfully raised it. The Federal Reserve also
announced that it would allow 10 large banks to repay bailout funds from the
government's controversial Troubled Asset Relief Program. In this environment,
financial stocks enjoyed a notably strong quarter, bolstered by growing
speculation that the worst of the global banking crisis was over. However,
financial risks remain as the European Central Bank said that European banks
might need to write down an additional $283 billion by the end of next year. In
late June, The European Central Bank also injected (euro)442 billion ($621
billion) into Europe's banking system in one-year funds to spur lending and help
stabilize the economy.
[GE LOGO]
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
U.S. Equity Fund Letter from the Chairman (Continued)
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Against this backdrop, financial markets posted improved results for the six-
and 12-month periods ended June 30.
TOTAL RETURNS AS OF
JUNE 30, 2009 6-MONTH 12-MONTH
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U.S. equities (S&P 500 Index) 3.16 -26.21
Global equities (MSCI World Index) 6.35 -29.50
International equities
(MSCI EAFE Index) 7.95 -31.35
Emerging Markets equities
(MSCI EM Index) 36.01 -28.07
Small-cap U.S. equities
(Russell 2000 Index) 2.64 -25.01
Mid-cap U.S. equities
(Russell Mid Cap Index) 9.96 -30.36
U.S. fixed income (Barclays Capital
U.S. Aggregate Bond Index) 1.90 6.05
U.S. short-term government
fixed income (Barclays Capital
U.S. Treasury Bond Index 1-3 Year) 0.47 4.94
U.S. tax-exempt income
(Barclays Capital U.S. Municipal
Bond Index 10 year) 4.38 5.58
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OUTLOOK
Uncertainty will likely continue around the strength and timing of a U.S.
economic recovery. With unemployment at a 25-year high of 9.5%, and American
consumers having suffered a collapse in wealth of at least $15 trillion since
early 2007, it is hard to have much confidence in a consumer-driven recovery in
the short term. We believe the economy will work below its potential for many
quarters to come as deleveraging continues among consumers and global financial
institutions.
While equity markets have enjoyed a bounce off of the bottom over the first half
of the year, the positive earnings surprises in April and May came mostly from
productivity gains and cost containment programs. Earnings in the second quarter
will be heavily scrutinized for evidence that a real recovery is sustainable and
that restocking is giving way to growth in final demand. We believe companies
are going to have to show evidence of a top-line recovery -- increased demand
and improving fundamentals -- in order for stocks to work their way higher.
Given the economic headwinds we're facing, consolidation of the second quarter's
gains seems a real possibility.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. We encourage
long-term investors to maintain a diversified investment approach that is
consistent with their goals, time horizon and risk tolerance. While diversified
portfolios are not immune to market downturns, history suggests they can put you
in a position to benefit from the inevitable return to better times.
Thank you for investing with GE Investments Funds.
Sincerely,
/s/ Michael J. Cosgrove
Michael J. Cosgrove
CHAIRMAN, GE INVESTMENTS FUNDS, INC.
JUNE 2009
MIKE COSGROVE IS PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS &
INTERMEDIARY BUSINESS AT GE ASSET MANAGEMENT. MR. COSGROVE ALSO SERVES AS A
TRUSTEE OF THE GE PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM. PREVIOUSLY
CHIEF FINANCIAL OFFICER OF GE ASSET MANAGEMENT AND ASSISTANT TREASURER - GE
COMPANY, MIKE JOINED GE IN 1970 AND HELD A NUMBER OF MANAGERIAL POSITIONS IN
FINANCE AND SALES AT GE'S INTERNATIONAL OPERATION AND IN GE TRADING COMPANY.
MIKE HAS A B.S. IN ECONOMICS FROM FORDHAM UNIVERSITY AND AN M.B.A. FROM ST.
JOHN'S UNIVERSITY.
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GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC.
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
[SIDE BAR]
GE Investments Funds, Inc.
U.S. Equity Fund
Semi-Annual Report
JUNE 30, 2009
[GE LOGO]
GE Investments Funds, Inc.
U.S. Equity Fund Contents
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NOTES TO PERFORMANCE ................................................ 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS .......................... 2
NOTES TO SCHEDULE OF INVESTMENTS .................................... 10
FINANCIAL STATEMENTS
Financial Highlights ............................................. 11
Statement of Assets and Liabilities .............................. 12
Statement of Operations .......................................... 13
Statements of Changes in Net Assets .............................. 14
Notes to Financial Statements .................................... 15
ADDITIONAL INFORMATION .............................................. 22
INVESTMENT TEAM ..................................................... 25
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
Notes to Performance June 30, 2009 (unaudited)
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Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any. Total returns shown
are net of Fund expenses but do not reflect fees and charges associated with the
variable contracts such as administrative fees, account charges and surrender
charges, which, if reflected, would reduce the Fund's total returns for all
periods shown.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in a Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. An investment in a Fund is subject to risk, including
possible loss of principal invested.
The Standard & Poor's ("S&P") 500(R) Composite Price Index of stocks (S&P 500
Index) is an unmanaged index and does not reflect the actual cost of investing
in the instruments that comprise the index.
The S&P 500 Index is a market capitalization-weighted index of stocks of 500
large U.S. companies, which is widely used as a measure of large-cap stock
market performance. The results shown for the foregoing index assume the
reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer group average
return calculation is based on the blend of Morningstar peer categories, as
shown. Morningstar is an independent mutual fund rating service. A Fund's
performance may be compared to or ranked within a universe of mutual funds with
investment objectives and policies similar but not necessarily identical to the
Fund's.
(C)2009 Morningstar, Inc. All Rights Reserved. The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is no warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are responsible for any
damage or losses relating from any use of this information. Past performance is
no guarantee or future results.
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GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUND.
1
U.S. Equity Fund
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THE U.S. EQUITY FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES
THOMAS R. LINCOLN, PAUL C. REINHARDT, STEPHEN V. GELHAUS AND GEORGE A. BICHER.
EACH OF THE FOREGOING PORTFOLIO MANAGERS MANAGES (OR CO-MANAGES) ONE OF THREE
SUB-PORTFOLIOS, WHICH COMPRISE THE FUND. A SUB-PORTFOLIO REFERS TO THE PORTION
OF THE FUND'S ASSETS THAT ARE ALLOCATED TO, AND MANAGED BY, A PARTICULAR
PORTFOLIO MANAGER ON THE FUND'S PORTFOLIO MANAGEMENT TEAM. THE THREE
SUB-PORTFOLIOS ARE MANAGED INDEPENDENTLY OF EACH OTHER AND THE PORTFOLIO
MANAGERS HAVE FULL DISCRETION OVER THEIR SUB-PORTFOLIO. THE WEIGHTINGS TO EACH
SUB-PORTFOLIO IN THE U.S. EQUITY FUND, WHICH CAN BE CHANGED AT ANY TIME BUT
GENERALLY REMAIN STABLE FOR 18 TO 24 MONTHS, ARE DRIVEN BY THE OBJECTIVE OF
KEEPING THE FUND "STYLE NEUTRAL" SUCH THAT IT COMBINES GROWTH AND VALUE
INVESTMENT MANAGEMENT STYLES AND DOES NOT TEND TO FAVOR EITHER STYLE.
[PHOTO OF GEORGE A. BICHER]
GEORGE A. BICHER IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. MR. BICHER
IS DIRECTOR OF THE U.S. EQUITY RESEARCH TEAM AND A PORTFOLIO MANAGER FOR THE
U.S. EQUITY FUND. MR. BICHER HAS HELD THE POSITION OF EQUITY RESEARCH ANALYST
SINCE JOINING GE ASSET MANAGEMENT IN JUNE 2002. PRIOR TO JOINING GE ASSET
MANAGEMENT, HE SERVED IN A NUMBER OF POSITIONS AT DEUTSCHE BANC ALEX BROWN SINCE
1994.
[PHOTO OF STEPHEN V. GELHAUS]
STEPHEN V. GELHAUS IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A
MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE U.S. EQUITY FUND SINCE JANUARY
2002. MR. GELHAUS JOINED GE ASSET MANAGEMENT IN JUNE 1991 AND WAS A RESEARCH
ANALYST IN THE U.S. EQUITIES GROUP FROM 1995 THROUGH 2001.
[PHOTO OF THOMAS R. LINCOLN]
THOMAS R. LINCOLN IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN
A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE U.S. EQUITY FUND SINCE MAY
2007. MR. LINCOLN JOINED GE ASSET MANAGEMENT IN 1994 AS A FINANCIAL ANALYST IN
U.S. EQUITIES. MR. LINCOLN BECAME PART OF THE INVESTMENT MANAGEMENT TEAM FOR
U.S. EQUITIES AT GE ASSET MANAGEMENT IN 1997 AND A PORTFOLIO MANAGER FOR U.S.
EQUITIES IN 2003.
[PHOTO OF PAUL C. REINHARDT]
PAUL C. REINHARDT IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN
A PORTFOLIO MANAGER FOR THE U.S. EQUITY FUND SINCE JANUARY 2001. MR. REINHARDT
JOINED GE ASSET MANAGEMENT IN 1982 AS AN EQUITY ANALYST AND HAS BEEN A PORTFOLIO
MANAGER SINCE 1987.
Q. HOW DID THE U.S. EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND
MORNINGSTAR PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009?
For the six-month period ended June 30, 2009, the U.S. Equity Fund
returned 10.38% for the Class 1 shares and 10.15% for the Class 4 shares.
The S&P 500 Index, the Fund's benchmark, returned 3.16% and the Fund's
Morningstar peer group of 475 US Insurance Large Blend funds returned an
average of 5.31% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The U.S. equity markets almost made a round trip in the first half of
2009. Stocks fell sharply through early March against a backdrop of severe
global economic recession, but picked up again as clarity emerged in the
U.S. financial sector with the resolution of the government bank stress
tests and improving credit spreads. By the end of the period, the equity
rally lost momentum -- while the S&P 500 achieved a greater than 14%
return from March 31st to May 4th, it advanced just 1% in the next eight
weeks. June's returns were basically flat, reflecting investor uncertainty
on whether or not the fundamentals were in place for sustainable economic
growth.
Sector performance has been mixed, with only three S&P 500 sectors
achieving year-to-date gains: information technology (+25%), materials
(+14%) and consumer discretionary (+9%). The defensive health
2
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care sector was flat on a total return basis. Financials, although they
rallied almost 36% in the second quarter, are down 3% year-to-date.
Industrials (-6%) and telecom (-4%) have also lagged. In this environment,
growth outperformed value as evidenced by the returns of the Russell 1000
Growth (+11.5%) and Russell 1000 Value (-2.9%), and large caps beat small
caps -- although the smaller, lower quality companies led the market in
the second quarter's rally.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. A continued emphasis on quality large cap stocks benefited the Fund during
the period. Each underlying portfolio in this multi-style Fund added to
the Fund's outperformance versus the S&P 500, with notable stock selection
strength in the financials, energy and consumer staples sectors. Within
financials, several core holdings, including Goldman Sachs (+76%) and
State Street (+20%) enjoyed relief rallies after the government stress
tests verified their financial strength. Within energy, emphasizing
services companies like Transocean (+57%) at the expense of large
integrated oil companies (-6%) helped returns, and enabled the Fund's
energy holdings to return +15% versus a decline of 2% for the benchmark
sector. In consumer staples, underweighting selected household products
companies (e.g., Proctor & Gamble -4%) and the more defensive food
retailers helped performance as investors embraced risk assets during the
rally in the second half of the period. Overweighting technology as that
sector soared also enhanced performance, with particular strength in
communications equipment companies whose fundamentals have remained in
tact throughout the global slowdown. Research in Motion (+75%) and
Qualcomm (+27%) have benefited from growth in the market for smart phones.
In a period of strong Fund performance there were some stocks detracting
from results, including Apple (not owned but rallied 67%); Textron (-30%
overall but rallied 69% between March and the end of the period); Amgen
(-8% but awaiting possible news of potential blockbuster in osteoporosis
in the back half of this year); Comcast (-12% proving to be more cyclical
than we thought, with more competition from satellite and phone
companies); and insurance provider, Ace (-16%). Fortunately, other
holdings in the portfolio mitigated the effects of these detractors.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. We continued to seek large cap, quality companies that we felt had the
potential to survive and grow market share during this down-cycle. We
maintained a consistent emphasis on companies with strong balance sheets
and earnings stability, over more cyclical or leveraged opportunities. We
took advantage of price declines in leading financial stocks, increasing
our financial sector overweight by the end of the period. We took profits
in health care and the consumer sectors to fund this move. At June 30th,
technology remained the Fund's largest overweight, followed by financials.
Our largest underweights were in consumer staples and industrials at the
end of the period.
While we experienced the first leg of a rebound in the U.S. equity markets
during the period, investor expectations have also risen. We expect
volatility as the markets get whipsawed by economic data which generally
will not improve in a linear fashion. In our opinion, the majority of the
decline in corporate earnings expectations is behind us. We believe a
future market rally will be dominated by outperformance by market share
winners with the ability to meet or beat earnings expectations. Amid
rapidly changing market conditions we will maintain our bottom-up stock
selection approach with focus on a long-term investment horizon.
3
U.S. Equity Fund
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Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2009.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2009 - JUNE 30, 2009
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ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
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ACTUAL FUND RETURN**
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Class 1 1,000.00 1,103.83 4.54
Class 4 1,000.00 1,101.47 6.77
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HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
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Class 1 1,000.00 1,020.27 4.36
Class 4 1,000.00 1,018.18 6.51
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* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.87% FOR
CLASS 1 SHARES AND 1.30% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1,
2009 - JUNE 30, 2009), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE
PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE ONE-HALF YEAR PERIOD).
** ACTUAL FUND RETURNS FOR SIX-MONTH PERIOD ENDED JUNE 30, 2009 WERE AS
FOLLOWS: 10.38% FOR CLASS 1 SHARES, AND 10.15% FOR CLASS 4 SHARES.
4
U.S. Equity Fund (unaudited)
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CHANGE IN VALUE OF A $10,000 INVESTMENT
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CLASS 1 SHARES
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[LINE GRAPH]
U.S. Equity Fund S&P 500 Index
06/99 $10,000 $10,000
12/99 $10,481 $10,784
12/00 $10,419 $ 9,794
12/01 $ 9,536 $ 8,627
12/02 $ 7,699 $ 6,720
12/03 $ 9,491 $ 8,651
12/04 $10,266 $ 9,592
12/05 $10,524 $10,064
12/06 $12,221 $11,654
12/07 $13,200 $12,294
12/08 $ 8,441 $ 7,746
06/09 $ 9,317 $ 7,991
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AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2009
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CLASS 1 SHARES (Inception date: 1/3/95)
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SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS YEAR YEAR YEAR $10,000 INVESTMENT
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U.S. Equity Fund 10.38% -21.84% -0.76% -0.71% $9,317
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S&P 500 Index 3.16% -26.21% -2.24% -2.22% $7,991
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Morningstar peer group average* 5.31% -26.22% -2.14% -2.07%
=========================================================================================
CLASS 4 SHARES
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[LINE GRAPH]
U.S. Equity Fund S&P 500 Index
05/01/08 $10,000 $10,000
06/08 $ 9,304 $ 9,276
09/08 $ 8,627 $ 8,499
12/08 $ 6,575 $ 6,634
06/09 $ 7,242 $ 6,844
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TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 2009
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CLASS 4 SHARES (Inception date: 5/1/08)
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SIX ONE SINCE ENDING VALUE OF A
MONTHS YEAR INCEPTION $10,000 INVESTMENT
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U.S. Equity Fund 10.15% -22.16% -24.16% $7,242
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S&P 500 Index 3.16% -26.21% -27.75% $6,844
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Morningstar peer group average** 5.31% -26.22%
====================================================================================
INVESTMENT PROFILE
A Fund designed for investors who seek long-term growth of capital by investing
at least 80% of its net assets in equity securities of issuers that are tied
economically to the U.S. under normal circumstances.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Market Value of $37,748 (in thousands)
[PIE CHART]
Other Investments 0.0%***
Information Technology 21.7%
Financials 16.4%
Healthcare 13.8%
Energy 12.6%
Consumer Discretionary 9.0%
Consumer Staples 8.4%
Industrials 6.4%
Materials 3.7%
Short-Term 3.3%
Telecommunication Services 2.6%
Utilities 2.1%
TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Microsoft Corp. 3.74%
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PepsiCo, Inc. 3.09%
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State Street Corp. 2.98%
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Amgen Inc. 2.85%
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QUALCOMM Inc. 2.55%
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Cisco Systems, Inc. 2.34%
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The Goldman Sachs Group, Inc 2.34%
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Exxon Mobil Corp. 2.33%
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Transocean Ltd. 2.29%
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JPMorgan Chase & Co. 2.03%
================================================================================
* MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS
INDICATED IN THE LARGE BLEND PEER GROUP CONSISTING OF 475, 463, 323 AND
161 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS AND ONE YEAR PERIODS INDICATED IN THE LARGE
BLEND PEER GROUP CONSISTING OF 475 AND 463 UNDERLYING ANNUITY FUNDS,
RESPECTIVELY.
*** LESS THAN 0.01%.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
5
U.S. EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
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U.S. EQUITY FUND
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NUMBER
OF SHARES VALUE
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COMMON STOCK -- 95.0% +
- --------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 2.3%
CAE, Inc. .......................................... 23,978 $ 142,462
Hexcel Corp. ....................................... 6,687 63,727 (a)
Honeywell International Inc. ....................... 5,493 172,480
ITT Corp. .......................................... 5,264 234,248
Rockwell Collins, Inc. ............................. 2,860 119,348
United Technologies Corp. .......................... 2,603 135,252
867,517
AUTOMOBILES -- 0.1%
Toyota Motor Corp. ADR ............................. 343 25,907
BEVERAGES -- 3.9%
Molson Coors Brewing Co. (Class B) ................. 2,145 90,798
Pepsi Bottling Group, Inc. ......................... 6,770 229,097
PepsiCo, Inc. ...................................... 21,221 1,166,306 (d)
1,486,201
BIOTECHNOLOGY -- 4.6%
Amgen Inc. ......................................... 20,305 1,074,947 (a)
Gilead Sciences, Inc. .............................. 14,050 658,102 (a)
1,733,049
CAPITAL MARKETS -- 7.4%
Ameriprise Financial, Inc. ......................... 6,447 156,469
Morgan Stanley ..................................... 4,528 129,093
State Street Corp. ................................. 23,850 1,125,720 (c)
The Bank of New York Mellon Corp. .................. 9,057 265,461
The Charles Schwab Corp. ........................... 12,328 216,233
The Goldman Sachs Group, Inc ....................... 5,996 884,050
2,777,026
CHEMICALS -- 1.8%
Monsanto Co. ....................................... 5,579 414,743
Potash Corp of Saskatchewan Inc. ................... 1,192 110,916
Praxair, Inc. ...................................... 1,322 93,955
The Mosaic Company ................................. 1,146 50,768
670,382
COMMERCIAL BANKS -- 0.8%
SunTrust Banks, Inc. ............................... 6,858 112,814
US Bancorp ......................................... 4,052 72,612
Wells Fargo & Co. .................................. 4,767 115,647
301,073
- --------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 0.9%
Corrections Corporation
of America ...................................... 7,816 $ 132,794 (a)
Iron Mountain Inc. ................................. 7,186 206,597 (a)
339,391
COMMUNICATIONS EQUIPMENT -- 6.3%
Cisco Systems, Inc. ................................ 47,458 884,617 (a)
QUALCOMM Inc. ...................................... 21,257 960,816
Research In Motion Ltd. ............................ 7,228 513,549 (a)
2,358,982
COMPUTERS & PERIPHERALS -- 2.4%
Hewlett-Packard Co. ................................ 14,879 575,073
International Business
Machines Corp. ..................................... 3,146 328,505
903,578
DIVERSIFIED FINANCIAL SERVICES -- 4.3%
Bank of America Corp. .............................. 29,682 391,802
CME Group Inc. ..................................... 1,440 447,998
JPMorgan Chase & Co. ............................... 22,499 767,441
1,607,241
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.1%
AT&T Inc. .......................................... 10,726 266,434
Verizon Communications Inc. ........................ 5,434 166,987 (d)
433,421
ELECTRIC UTILITIES -- 1.3%
American Electric Power
Comapny Inc. .................................... 1,717 49,604
Edison International ............................... 6,482 203,924
Entergy Corp. ...................................... 715 55,427
FPL Group, Inc. .................................... 1,935 110,024
Northeast Utilities ................................ 3,282 73,221
492,200
ELECTRICAL EQUIPMENT -- 0.7%
ABB Ltd. ADR ....................................... 12,394 195,577
Emerson Electric Co. ............................... 2,290 74,196
269,773
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.6%
Corning Inc. ....................................... 13,341 214,256
ENERGY EQUIPMENT & SERVICES -- 4.9%
Halliburton Co. .................................... 8,104 167,753
National Oilwell Varco, Inc. ....................... 2,240 73,158 (a)
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements.
6
U.S. EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------------
Schlumberger Ltd. .................................. 13,920 $ 753,211
Transocean Ltd. .................................... 11,656 865,924 (a)
1,860,046
FOOD & STAPLES RETAILING -- 0.4%
Wal-Mart Stores, Inc. .............................. 3,159 153,022
FOOD PRODUCTS -- 1.7%
Archer-Daniels-Midland Co. ......................... 1,811 48,480
Kraft Foods Inc. (Class A) ......................... 9,385 237,816
McCormick & Company Inc. ........................... 8,245 268,210
Nestle S.A. ADR .................................... 2,383 89,648
644,154
HEALTHCARE EQUIPMENT & SUPPLIES -- 3.5%
Baxter International Inc. .......................... 933 49,412
Becton Dickinson & Co. ............................. 1,229 87,640
Boston Scientific Corp. ............................ 17,877 181,273 (a)
Covidien Plc ....................................... 13,365 500,386
Hologic, Inc. ...................................... 8,140 115,832 (a)
Medtronic, Inc. .................................... 5,252 183,242
ResMed, Inc. ....................................... 5,114 208,293 (a)
1,326,078
HEALTHCARE PROVIDERS & SERVICES -- 2.4%
Aetna Inc. ......................................... 3,453 86,498
Cardinal Health, Inc. .............................. 6,578 200,958
Express Scripts, Inc. .............................. 4,418 303,737 (a)
McKesson Corp. ..................................... 1,431 62,964
UnitedHealth Group, Inc. ........................... 10,592 264,588
918,745
HOTELS RESTAURANTS & LEISURE -- 0.4%
Carnival Corp. ..................................... 6,328 163,073
HOUSEHOLD PRODUCTS -- 0.7%
Clorox Co. ......................................... 769 42,933
Kimberly-Clark Corp. ............................... 1,907 99,984
The Procter & Gamble Co. ........................... 2,714 138,685
281,602
INDUSTRIAL CONGLOMERATES -- 0.3%
Textron, Inc. ...................................... 12,592 121,639
INSURANCE -- 3.2%
ACE Ltd. ........................................... 7,403 327,435
Aflac Inc. ......................................... 4,972 154,579
AON Corp. .......................................... 3,146 119,139
Chubb Corp. ........................................ 954 38,046
- --------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------------
MetLife, Inc. ...................................... 6,530 $ 195,965
PartnerRe Ltd. ..................................... 992 64,430
Principal Financial Group, Inc. .................... 762 14,356
Prudential Financial, Inc. ......................... 4,893 182,117
The Travelers Companies, Inc. ...................... 2,669 109,536
1,205,603
INTERNET SOFTWARE & SERVICES -- 1.2%
Baidu, Inc ADR ..................................... 594 178,847 (a)
Google Inc. (Class A) .............................. 681 287,103 (a)
465,950
IT SERVICES -- 3.2%
Affiliated Computer Services,
Inc. (Class A) .................................. 4,205 186,786 (a)
Cognizant Technology Solutions
Corp. (Class A) ................................. 6,230 166,341 (a)
Metavante Technologies, Inc. ....................... 2,208 57,099 (a)
Paychex, Inc. ...................................... 5,234 131,897
The Western Union Co. .............................. 38,250 627,300
Visa, Inc. (Class A) ............................... 851 52,983
1,222,406
LIFE SCIENCES TOOLS & SERVICES -- 0.9%
Life Technologies Corp. ............................ 3,698 154,281 (a)
Thermo Fisher Scientific, Inc. ..................... 4,531 184,729 (a)
339,010
MACHINERY -- 0.7%
Deere & Co. ........................................ 3,877 154,886
Eaton Corp. ........................................ 2,193 97,830
252,716
MEDIA -- 5.0%
Comcast Corp. (Class A) ............................ 34,090 480,669 (d)
Liberty Global, Inc. (Series C) .................... 7,022 111,018 (a)
Liberty Media Corp - Entertainment
(Series A) ...................................... 8,450 226,037 (a)
Omnicom Group Inc. ................................. 18,310 578,230
The Walt Disney Co. ................................ 4,052 94,533
Time Warner Inc. ................................... 14,682 369,840
Viacom, Inc. (Class B) ............................. 1,430 32,461 (a)
1,892,788
METALS & MINING -- 1.8%
Allegheny Technologies Inc. ........................ 7,755 270,882
Barrick Gold Corp. ................................. 2,860 95,953
Freeport-McMoRan Copper &
Gold Inc. ....................................... 6,136 307,475
674,310
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements.
7
U.S. EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------------
MULTILINE RETAIL -- 0.9%
Kohl's Corp. ....................................... 1,652 $ 70,623 (a)
Target Corp. ....................................... 7,077 279,329
349,952
MULTI-UTILITIES -- 0.8%
Dominion Resources, Inc. ........................... 8,702 290,821
OIL, GAS & CONSUMABLE FUELS -- 7.7%
Apache Corp. ....................................... 2,997 216,234
Chevron Corp. ...................................... 3,624 240,090
Devon Energy Corp. ................................. 4,203 229,063
Exxon Mobil Corp. .................................. 12,567 878,559 (d)
Hess Corp. ......................................... 859 46,171
Marathon Oil Corp. ................................. 18,960 571,265
Occidental Petroleum Corp. ......................... 4,735 311,610
Southwestern Energy Co. ............................ 5,506 213,908 (a)
Suncor Energy, Inc. ................................ 6,522 197,877
2,904,777
PAPER & FOREST PRODUCTS -- 0.2%
Weyerhaeuser Co. ................................... 1,907 58,030
PERSONAL PRODUCTS -- 0.4%
Alberto-Culver Co. ................................. 4,299 109,324
Avon Products, Inc. ................................ 954 24,594
The Estee Lauder Companies Inc.
(Class A) ....................................... 810 26,463
160,381
PHARMACEUTICALS -- 2.4%
Abbott Laboratories ................................ 3,952 185,902 (d)
Bristol-Myers Squibb Co. ........................... 18,302 371,714
Merck & Company Inc. ............................... 1,429 39,955
Pfizer Inc. ........................................ 4,386 65,790
Wyeth .............................................. 5,113 232,079
895,440
PROFESSIONAL SERVICES -- 0.1%
Monster Worldwide, Inc. ............................ 4,071 48,079 (a)
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.3%
CB Richard Ellis Group, Inc.
(Class A) ....................................... 11,213 104,954 (a)
ROAD & RAIL -- 0.5%
Union Pacific Corp. ................................ 3,696 192,414
- --------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.8%
Intel Corp. ........................................ 41,115 $ 680,453 (d)
Kla-Tencor Corp. ................................... 2,769 69,917
Lam Research Corp. ................................. 3,575 92,950 (a)
MEMC Electronic Materials, Inc. .................... 954 16,991 (a)
Microchip Technology Inc. .......................... 3,575 80,616
Taiwan Semiconductor
Manufacturing Company
Ltd. ADR ........................................ 3,338 31,411
Texas Instruments Inc. ............................. 4,052 86,308
1,058,646
SOFTWARE -- 4.8%
Intuit, Inc. ....................................... 9,772 275,180 (a)
Microsoft Corp. .................................... 59,367 1,411,154 (d)
Oracle Corp. ....................................... 5,723 122,587
1,808,921
SPECIALTY RETAIL -- 2.6%
Bed Bath & Beyond, Inc. ............................ 15,360 472,320 (a)
Lowe's Companies, Inc. ............................. 17,037 330,688
O'Reilly Automotive, Inc. .......................... 1,668 63,517 (a)
Staples, Inc. ...................................... 5,561 112,165
978,690
TOBACCO -- 1.2%
Altria Group, Inc. ................................. 1,430 23,438
Philip Morris International Inc. ................... 9,294 405,404
428,842
WIRELESS TELECOMMUNICATION SERVICES -- 1.5%
American Tower Corp. (Class A) ..................... 6,086 191,892 (a)
NII Holdings, Inc. ................................. 19,336 368,738 (a)
560,630
TOTAL COMMON STOCK
(COST $39,904,708) .............................. 35,841,716
- --------------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 1.7%
- --------------------------------------------------------------------------------------
Financial Select Sector SPDR Fund .................. 10,337 123,734 (f)
Industrial Select Sector SPDR Fund ................. 23,310 511,888 (f)
TOTAL EXCHANGE TRADED FUNDS
(COST $998,610) ................................. 635,622
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements.
8
U.S. EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------------
GEI Investment Fund
(COST $13,961) .............................................. $ 7,678 (e)
TOTAL INVESTMENTS IN SECURITIES
(COST $40,917,279) .......................................... 36,485,016
- --------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.4%
- --------------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class
0.28% ....................................................... 1,263,204 (b,g)
(COST $1,263,204)
TOTAL INVESTMENTS
(COST $42,180,483) .......................................... 37,748,220
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (0.1)% ............................................... (33,788)
-------------
NET ASSETS -- 100.0% ........................................... $ 37,714,432
=============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI U.S. Equity Fund had the following long futures contracts open at June
30, 2009 (unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------
S&P 500 Index
Futures September 2009 2 $457,750 $3,905
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements.
9
Notes to Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(d) At June 30, 2009, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(e) GEAM, the investment adviser of the Fund, serves as the investment adviser
of the GEI Investment Fund.
(f) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street
Bank & Trust Co., the Fund's custodian and accounting agent.
(g) GEAM, the investment adviser of the Fund, also serves as investment
adviser of the GE Funds - GE Money Market Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2009.
Abbreviations:
ADR American Depository Receipt
10
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
U.S. EQUITY FUND
------------------------------------------------------------------ -------------------------
CLASS 1 CLASS 4
------------------------------------------------------------------ -------------------------
6/30/09+ 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 6/30/09+ 12/31/08**
------------------------------------------------------------------ -------------------------
INCEPTION DATE ...................... -- -- -- -- -- 1/3/95 -- 5/1/08
Net asset value, beginning of
period ........................... $ 22.44 $ 36.41 $ 39.02 $ 34.06 $ 33.61 $ 31.48 $ 22.47 $ 35.32
INCOME/(LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) ........................ 0.14 0.37 0.45 0.53 0.39 0.44 (0.03) 0.15
Net realized and unrealized
gains/(losses) on
investments ................... 2.19 (13.52) 2.70 4.96 0.46 2.13 2.31 (12.26)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS ............ 2.33 (13.15) 3.15 5.49 0.85 2.57 2.28 (12.11)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............ -- 0.36 0.44 0.53 0.40 0.44 -- 0.28
Net realized gains ............... -- 0.46 5.32 -- -- -- -- 0.46
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................. -- 0.82 5.76 0.53 0.40 0.44 -- 0.74
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ...... $ 24.77 $ 22.44 $ 36.41 $ 39.02 $ 34.06 $ 33.61 $ 24.75 $ 22.47
====================================================================================================================================
TOTAL RETURN (a) .................... 10.38% (36.05)% 8.01% 16.12% 2.51% 8.17% 10.15% (34.25)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ................ $ 37,707 $ 37,917 $ 77,777 $ 101,885 $ 98,883 $ 112,545 $ 7 $ 7
Ratios to average net assets:
Net investment income* ........ 1.27% 1.03% 0.94% 1.43% 1.06% 1.30% 0.83% 0.74%*
Expenses* ..................... 0.87%(b) 0.72%(b) 0.66% 0.63% 0.63% 0.63% 1.30%(b) 1.17%(b)*
Portfolio turnover rate .......... 27% 56% 55% 45% 40% 30% 27% 56%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges.
(b) Reflects GEAM's waiver of a portion of the Fund's management fee in an
amount equal to the management fee earned by GEAM with respect to the
Fund's investment in the GE Funds - GE Money Market Fund. Excluding
waiver, the expense ratios would be unchanged.
* Annualized for periods less than one year.
** Per share values have been calculated using the average share method.
+ Unaudited
See Notes to Financial Statements.
11
U.S.
Statement of Assets EQUITY
and Liabilities JUNE 30, 2009 (UNAUDITED) FUND
- ----------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $40,903,318) ............ $ 36,477,338
Investments in affiliated securities, at market (cost $13,961) ..... 7,678
Short-term affiliated investments (at amortized cost) .............. 1,263,204
Foreign cash (cost $528) ........................................... 526
Receivable for investments sold .................................... 77,212
Income receivables ................................................. 32,542
Receivable for fund shares sold .................................... 482
- ----------------------------------------------------------------------------------------
TOTAL ASSETS .................................................... 37,858,982
- ----------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased .................................. 38,975
Payable for fund shares redeemed ................................... 6,087
Payable to GEAM .................................................... 30,364
Accrued other expenses ............................................. 60,788
Variation margin payable ........................................... 2,850
Other liabilities .................................................. 5,486
- ----------------------------------------------------------------------------------------
TOTAL LIABILITIES ............................................... 144,550
- ----------------------------------------------------------------------------------------
NET ASSETS ............................................................ $ 37,714,432
========================================================================================
NET ASSETS CONSIST OF:
Capital paid in .................................................... 52,660,409
Undistributed (distribution in excess of) net investment income .... 241,042
Accumulated net realized loss ...................................... (10,758,659)
Net unrealized appreciation/(depreciation) on:
Investments ..................................................... (4,432,263)
Futures ......................................................... 3,905
Foreign currency related transactions ........................... (2)
- ----------------------------------------------------------------------------------------
NET ASSETS ............................................................ $ 37,714,432
========================================================================================
CLASS 1:
NET ASSETS ............................................................ 37,707,191
Shares outstanding ($0.01 par value; unlimited shares authorized) ..... 1,522,315
Net asset value per share ............................................. $ 24.77
CLASS 4:
NET ASSETS ............................................................ 7,241.00
Shares outstanding ($0.01 par value; unlimited shares authorized) ..... 293.00
Net asset value per share ............................................. $ 24.75
See Notes to Financial Statements.
12
U.S
Statement of Operations EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) FUND
- -------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ............................................................ $ 318,562
Interest ............................................................ 56,359
Interest from affliated investments ................................. 2,753
Less: Foreign taxes withheld ........................................ (1,680)
- -------------------------------------------------------------------------------------------
TOTAL INCOME .......................................................... 375,994
- -------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees .................................... 96,787
Distributors Fees (Notes 4) Service Class ........................... 15
Transfer agent ...................................................... 9,786
Directors's fees .................................................... 548
Custody and accounting expenses ..................................... 27,651
Professional fees ................................................... 12,033
Registration expenses ............................................... 1,536
Other expenses ...................................................... 6,407
- -------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ........................ 154,763
- -------------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser ............................ (1,229)
- -------------------------------------------------------------------------------------------
Net expenses ........................................................ 153,534
- -------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ................................................. 222,460
===========================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ..................................................... (5,776,247)
Futures ......................................................... (38,419)
Foreign currency related transactions ........................... 106
INCREASE IN UNREALIZED APPRECIATION ON:
Investments ..................................................... 8,925,718
Futures ......................................................... 19,325
Foreign currency related transactions ........................... 2
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments ..................... 3,130,485
- -------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. $ 3,352,945
===========================================================================================
See Notes to Financial Statements.
13
U.S.
Statements of EQUITY
Changes in Net Assets FUND
- -------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2009 DECEMBER 31,
(UNAUDITED) 2008
- -------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income .................................................. $ 222,460 $ 605,161
Net realized loss on investments, futures and foreign currency related
transactions .......................................................... (5,814,560) (4,098,376)
Net increase (decrease) in unrealized appreciation/(depreciation) on
investments, futures and foreign currency related transactions ........ 8,945,045 (20,808,739)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ................................. 3,352,945 (24,301,954)
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 ............................................................... -- (594,165)
Class 4 ............................................................... -- (78)
Net realized gains
Class 1 ............................................................... -- (757,321)
Class 4 ............................................................... -- (132)
- -------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ....................................................... -- (1,351,696)
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ....... 3,352,945 (25,653,650)
- -------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 ............................................................... 263,200 1,109,760
Class 4 ............................................................... -- 10,000
Value of distributions reinvested
Class 1 ............................................................... -- 1,351,472
Class 4 ............................................................... -- 210
Cost of shares redeemed
Class 1 ............................................................... (3,825,703) (16,670,624)
Class 4 ............................................................... -- --
- -------------------------------------------------------------------------------------------------------------------
Net decrease from share transactions .................................... (3,562,503) (14,199,182)
- -------------------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS .............................................. (209,558) (39,852,832)
NET ASSETS
Beginning of period ....................................................... 37,923,990 77,776,822
- -------------------------------------------------------------------------------------------------------------------
End of period ............................................................. $ 37,714,432 $ 37,923,990
===================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF
PERIOD .................................................................... $ 241,042 $ 18,582
- -------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold .................................................................. 11,305 37,873
Issued for distributions reinvested .......................................... -- 61,208
Shares redeemed .............................................................. (178,786) (545,150)
- -------------------------------------------------------------------------------------------------------------------
Net decrease in fund shares .................................................. (167,481) (446,069)
===================================================================================================================
CLASS 4
Shares sold .................................................................. -- 283
Issued for distributions reinvested .......................................... -- 10
Shares redeemed .............................................................. -- --
- -------------------------------------------------------------------------------------------------------------------
Net increase in fund shares .................................................. -- 293
===================================================================================================================
See Notes to Financial Statements.
14
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of fourteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, (the "Fund") S&P 500 Index Fund,
Premier Growth Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund,
Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income
Fund, Money Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
The Company offers two share classes (Class 1 and Class 4) of the Fund as
investment options for variable life insurance and variable annuity contracts.
Class 4 shares were first offered on May 1, 2008, and Fund shares outstanding
prior to May 1, 2008 were designated as Class 1 shares. Each share class has
different fees and expenses, and as a result, each share class will have
different share price and performance. Not all variable contracts offer both
share classes of the Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on recent trading activity and other
relevant information which may include market interest rate curves, referenced
credit spreads and estimated prepayment rates where applicable. In the absence
of a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations. The Fund's written or
purchased options are valued at the last sales price, or if no sales occurred
that day, at the last reported bid price. Short-term investments with remaining
maturities of sixty days or less at the time of purchase are valued on the basis
of amortized cost, which approximates market value.
All assets and liabilities of the Fund that are initially expressed in foreign
currency values will be converted into U.S. dollars at the WM/Reuters exchange
rate computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
15
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Fund adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards 157, FAIR VALUE MEASUREMENTS ("SFAS
157"). SFAS 157 establishes a new framework for measuring fair value and expands
related disclosures. Broadly, the SFAS 157 framework requires fair value to be
determined based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants. SFAS 157 establishes a three-level valuation hierarchy
based upon observable and unobservable inputs.
For financial assets and liabilities, fair value is the price that would be
received to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets and liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect our market assumptions. Preference is given to
observable inputs. These two types of inputs create the following fair value
hierarchy:
Level 1 -- Quoted prices for identical investments in active markets.
Level 2 -- Quoted prices for similar investments in active markets; quoted
prices for identical or similar investments in markets that are not
active; and model-derived valuations whose significant value drivers are
observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
The Fund maintains policies and procedures to value investments using the best
and most relevant data available. The Fund performs periodic reviews of the
methodologies used by independent pricing services including obtaining price
validation for certain securities. The following section describes the valuation
methodologies that the Fund uses to measure investments at fair value.
When available, the Fund uses quoted market prices to determine fair value of
investment securities, and they are included in Level 1. Level 1 securities
primarily include publicly-traded equity securities.
When quoted market prices are unobservable, the Fund uses quotes from
independent pricing vendors based on recent trading activity and other relevant
information including market interest rate curves, referenced credit spreads and
estimated prepayment rates where applicable. These investments are included in
level 2 and primarily include long-term US government, agency and corporate
debt, notes, bonds, and mortgage backed securities. In infrequent circumstances,
the Fund's pricing vendors may provide valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
classified in Level 3.
Other financial instruments are derivative instruments that are not reflected in
Total Investments, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------------
Investments in Securities $37,740,542 $7,678 $ -- $37,748,220
Other Financial Instruments 3,903 -- -- 3,903
16
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase
17
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
the Fund's exposure to the underlying instrument while buying puts and writing
calls tend to decrease the Fund's exposure to the underlying instrument, or
hedge other Fund investments. The Fund will not enter into a transaction
involving options for speculative purposes. The Fund's risks in using these
contracts include changes in the value of the underlying instruments,
non-performance of the counterparties under the contracts' terms and changes in
the liquidity of the secondary market for the contracts. Options are valued at
the last sale price, or if no sales occurred on that day, at the last quoted bid
price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2009, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- --------------------------------------------------------------------------------
$44,286,380 $1,512,767 $(8,050,927) $(6,538,160)
As of December 31, 2008, the Fund has capital loss carryovers as indicated
below.
Amount Expires
- --------------------------------------------------------------------------------
$805,607 12/31/16
Capital loss carryovers are available to offset future realized capital gains to
the extent provided in the Internal Revenue Code and regulations thereunder. To
the extent that these carryover losses are used to offset future capital gains,
it is probable that the gains so offset will not be distributed to shareholders
because they would be taxable as ordinary income.
During the year ended December 31, 2008, there were no capital loss carryover
expirations.
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund incurred $2,048,015 losses after October 31, 2008.
The tax composition of distributions paid during the years ended December
31,2008 and December 31, 2007 were as follows:
18
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
2008 $943,520 $ 408,176 $ 1,351,696
2007 821,468 9,856,050 10,677,518
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures and
losses deferred due to wash sale transactions. Reclassifications due to
permanent book/tax differences are made to the Fund's capital accounts to
reflect income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. These reclassifications have no impact
on net investment income, realized gains or losses, or the net asset value of
the Fund. The calculation of net investment income per share in the Financial
Highlights table excludes these adjustments.
The reclassifications for the year ended December 31, 2008 were as follows:
Undistributed
(Distribution in Excess of) Accumulated
Net Investment Income Net Realized Gain
- --------------------------------------------------------------------------------
$(282) $282
On October 1, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in
Income Taxes." FIN48 provides guidance for how certain uncertain tax positions
should be recognized, measured, presented and disclosed in the financial
statements. FIN48 requires evaluation of tax positions taken or expected to be
taken in the course of preparing the Fund's tax returns to determine whether the
tax positions are "more likely than not" of being sustained by the applicable
tax authority. The adoption of FIN48 did not have an impact on the Fund's net
assets and financial statements. The Fund's 2005, 2006, 2007 and 2008 calendar
years tax returns are still open to examination by the Federal and applicable
state tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Fund specific expenses are allocated to the Fund that incurs such
expense and pro rata across share classes. Expenses, other than those incurred
by a specific Fund, are allocated pro rata among Funds and share classes. Such
expenses may include custodial fees, legal and accounting fees, printing costs
and registration fees. All expenses of the Fund are paid by GEAM and reimbursed
by the Fund. Certain class specific expenses (such as transfer agency fees or
distribution fees) are allocated to the class that incurs such expense.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES On March 19, 2008, the FASB issued
Statement of Financial Accounting Standards No. 161 ("FAS No. 161"), "Disclosure
about Derivative Instruments and Hedging Activities." This new accounting
statement requires enhanced disclosures about an entity's derivative and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity invests in derivatives, (b) how derivatives are accounted for
under FAS No. 133, and (c) how derivatives affect an entity's financial
position, financial performance, and cash flows. FAS No. 161 also requires
enhanced disclosures regarding credit-risk-related contingent features of
derivative instruments.
The Fund is subject to equity price risk in the normal course of pursuing its
investment objectives. The Fund may use futures contracts to gain exposure to,
or hedge against changes in the value of equities. A futures contract represents
a commitment for the future purchase or sale of an asset at a specified price on
a specified date. Upon entering into such contracts, the Fund is required to
deposit with the broker, either in cash or securities, an initial margin in an
amount equal to a certain percentage of the contract amount. Subsequent payments
(variation margin) are made or received by the Fund each day, depending on the
daily fluctuations in the value of the contract, and are recorded for financial
statement purposes as unrealized gains or losses by the Fund. Upon entering into
such contracts, the Fund bears the risk of securities prices moving
unexpectedly, in which case, the Fund may not achieve the anticipated benefits
of the futures contracts and may realize a loss. With futures contracts, there
is minimal counterparty credit risk to the Fund since futures contracts are
exchange traded and the exchange's clearinghouse, as counterparty to all traded
futures, guarantees the futures against default.
19
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Shown below are the derivative contracts entered into by the Fund, summarized by
primary risk exposure.
Asset Derivatives June 30, 2009 Liability Derivatives June 30, 2009
Derivatives not ------------------------------------------------ --------------------------------------
accounted for as Location in Notional Location in Notional
hedging instruments the Statements Value/No. of the Statements Value/No. of
under FASB of Assets Contracts Fair of Assets Contracts Fair
Statement 133 and Liabilities Long/(Short) Value and Liabilities Long/(Short) Value
- ------------------------------------------------------------------------------------------------------------------
Equity Contracts Receivables, Net Assets - 500 3,900* -- -- --
Unrealized Appreciation/
(Depreciation)
- ------------------------------------------------------------------------------------------------------------------
* INCLUDES CUMULATIVE APPRECIATION/DEPRECIATION OF FUTURES CONTRACTS AS
REPORTED IN THE SCHEDULE OF INVESTMENTS. ONLY THE CURRENT DAY'S VARIATION
MARGIN IS REPORTED WITHIN THE STATEMENT OF ASSETS AND LIABILITIES.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Change in Unrealized
Derivatives not accounted Location in the Realized Gain or Appreciation/(Depreciation)
for as hedging instruments Statements of (Loss) on Derivatives on Derivatives
under FASB Statement 133 Operations Recognized in Income Recognized in Income
- ---------------------------------------------------------------------------------------------------------------
Equity Contracts Net realized gain/(loss) on (38,419) 19,325
futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on futures
- ---------------------------------------------------------------------------------------------------------------
3. LINE OF CREDIT
The Company shares a revolving credit facility of up to $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established on November 7, 2007. Generally, borrowings under
the credit facilities would accrue interest at the Federal Funds Rate plus 50
basis points and would be borne by the borrowing Fund. The maximum amount
allowed to be borrowed by any one Fund is the lesser of (i) its prospectus
limitation or (ii) 20% of its net assets. The credit facilities were not
utilized by the Fund during the fiscal year ended June 30, 2009.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective November 17, 1997 to act as investment adviser and
administrator of the Fund. GEAM's compensation for investment advisory and
administrative services is paid monthly based on the average daily net assets of
the Fund at an annualized rate of 0.55%.
DISTRIBUTION AND SERVICE (12b-1) FEES The Company has adopted a Distribution and
Service (12b-1) Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with
respect to Class 4 shares of the Fund. Under the Plan, the Fund may compensate
GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and
the Fund's principal distributor, for certain sales services provided by GEID or
other broker dealers and investor services provided by GEID or other service
providers relating to the Fund's Class 4 shares, including services to owners or
prospective owners of variable contracts issued by insurance companies that
offer such share class as an investment option. The amount of compensation paid
under the Plan by the Fund's Class 4 shares may not exceed 0.45% of the average
daily net assets of the Fund attributable to such share class. The Plan
continues in effect from year to year for so long as such continuance is
approved annually by the Board of Directors, including by those directors who
are not interested persons of the Company and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related to
it.
20
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2009, $330 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each Fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2009 were as follows:
U.S. Government Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$ -- $ --
Other Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$9,414,997 $13,927,917
SECURITY LENDING At June 30, 2009, the Fund did not participate in securities
lending.
21
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 60
POSITION(S) HELD WITH FUND Chairman of the Board and President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 11 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS President and Chief Executive
Officer - Mutual Funds and Intermediary Business since March 2007; Executive
Vice President of GEAM from February 1997 to March 2007; Director of GEAM since
1988; Vice President, GE Capital Corporation, an indirect wholly-owned
subsidiary of GE, since December 1999; Executive Vice President - Sales and
Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, from
March 1993 to March 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds since its inception; Trustee of
General Electric Savings & Security Trust, General Electric S&S Income Fund,
General Electric S&S Program Mutual Fund ("GE Savings & Security Funds"), Elfun
Funds, General Electric Insurance Plan Trust, General Relief Loan Fund, and
General Electric Pension Trust since 1988; Trustee of Fordham University since
2002; Trustee of GE Volunteers since 1993; Director, GE Asset Management
(Ireland) since February 1999; Director, GE Asset Management Funds Plc., GE
Asset Canada Company, and GE Asset Management Limited since 1998.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Director and Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds since July 2007.
22
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 43
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years (Vice President); one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
from September 2003 to July 2007; Vice President and Secretary of GE Funds and
GE Institutional Funds since July 2007; Vice President and Assistant Secretary
of Elfun Funds and GE Savings & Security Funds since October 2003.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
23
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 63
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since its inception; Trustee of Fordham University since
2002 and Marymount College from 2001 through 2002; Neuroscience Research
Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn &
Queens since 2001; Gregorian University Foundation since 1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 73
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception; Trustee, St. Francis Hospital Corp.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
24
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J. Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE
OFFICER - MUTUAL FUNDS & INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Ralph R. Layman, PRESIDENT - PUBLIC EQUITIES
(SINCE JULY 2009)
Maureen B. Mitchell, PRESIDENT - INSTITUTIONAL SALES AND
MARKETING (SINCE JULY 2009)
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST (SINCE JULY 2009)
Don W. Torey, PRESIDENT - ALTERNATIVE INVESTMENTS
John J. Walker, EVP, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT - INVESTMENT STRATEGIES
25
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii)
on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
- --------------------------------------------------------------------------------
[GE LOGO]
GE Investments Funds, Inc.
S&P 500 Index Fund Letter from the Chairman
- --------------------------------------------------------------------------------
[PHOTO OF MICHAEL J. COSGROVE]
MICHAEL J. COSGROVE
CHAIRMAN,
GE INVESTMENTS FUNDS, INC.
DEAR SHAREHOLDER:
Attached is the semi-annual report for the GE Investments Funds, Inc. -- S&P 500
Index Fund (the "Fund") for the six-month period ended June 30, 2009. The report
contains information about the performance of the Fund, and other Fund specific
data, along with portfolio manager commentary. We have provided you with an
overview of the investment markets, along with our investment outlook for the
coming months.
MARKET OVERVIEW
Despite investors' hopes that the new U.S. administration and Congress would
help stabilize the nation's financial crisis, asset values continued to fall in
the first quarter of 2009. Global equities experienced sharp price declines in
January and February as troubles in the United States continued to cast a cloud
over world markets. U.S. Treasury Secretary Geithner indicated that some U.S.
banks would need large amounts of assistance to survive and talks of stress
tests and bank nationalization spooked investors. The markets also booed
government plans to take a 36% stake in Citigroup even as the financial status
of institutions already on government life-support, such as AIG, remained
uncertain. Similarly, news of troubled automakers GM and Chrysler worried
international bondholders and shareholders alike. Financial services and small
cap stocks were hardest hit in the downswing as equity indexes broke the
November 2008 lows in February. Government debt issues also had a rough February
as U.S. and U.K. debt auctions saw weak support for long and non-inflation
indexed government securities. These poor showings were soon followed by a
warmer reception for shorter-dated debt.
U.S. stocks abruptly reversed course and posted three straight weeks of gains
through the end of March after the three largest U.S. banks announced they had
turned a profit. Equity indexes around the globe followed the U.S. path,
regaining much of their losses since January. In late March, the U.S. Treasury
Secretary unveiled his Public-Private Investment Partnership (PPIP) plan to
remove toxic assets from the balance sheets of the nation's banks, and the
markets seemed convinced of a financial sector backstop. Another policy move to
support the markets came on March 18th when the Federal Reserve announced that
it would buy $300 billion of 2- and 10-year Treasuries, increase its purchase
plan of agency mortgage-backed securities from $500 billion to $1.25 trillion,
double its purchases of agency debt to $200 billion and expand the eligible
collateral in the Term Asset-Backed Securities Loan Facility (TALF) program. In
response, the yield on the U.S. Treasury 10-year note fell 47 basis points to
2.53%, recording the largest one-day drop in over four decades.
The rebound in global equities continued into the second quarter, as markets
experienced strong gains in April and May, before tailing off into a flat June
as investors started to question the strength and timing of an economic
recovery. Despite a double-digit rally since mid-March, the S&P 500 Index ended
the second quarter approximately where it started at the beginning of 2009
(priced in the low 900s). Emerging markets equities continued to outperform
their developed peers during the second quarter. The MSCI Emerging Markets Index
gained 34.7%, its best quarterly return since data collection began in 1988.
Speculation persists that developing markets are better positioned to weather
the global recession given that their financial systems are generally better
capitalized and less leveraged than the developed countries.
During the second quarter, U.S. government stress tests concluded and the banks
that needed capital swiftly and successfully raised it. The Federal Reserve also
announced that it would allow 10 large banks to repay bailout funds from the
government's controversial Troubled Asset Relief Program. In this environment,
financial stocks enjoyed a notably strong quarter, bolstered by growing
speculation that the worst of the global banking crisis was over. However,
financial risks remain as the European Central Bank said that European banks
might need to write down an additional $283 billion by the end of next year. In
late June, The European Central Bank also injected (euro)442 billion ($621
billion) into Europe's banking system in one-year funds to spur lending and help
stabilize the economy.
[GE LOGO]
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
S&P 500 Index Fund Letter from the Chairman (Continued)
- --------------------------------------------------------------------------------
Against this backdrop, financial markets posted improved results for the six-
and 12-month periods ended June 30.
TOTAL RETURNS AS OF
JUNE 30, 2009 6-MONTH 12-MONTH
- --------------------------------------------------------------------------------
U.S. equities (S&P 500 Index) 3.16 -26.21
Global equities (MSCI World Index) 6.35 -29.50
International equities
(MSCI EAFE Index) 7.95 -31.35
Emerging Markets equities
(MSCI EM Index) 36.01 -28.07
Small-cap U.S. equities
(Russell 2000 Index) 2.64 -25.01
Mid-cap U.S. equities
(Russell Mid Cap Index) 9.96 -30.36
U.S. fixed income (Barclays Capital
U.S. Aggregate Bond Index) 1.90 6.05
U.S. short-term government
fixed income (Barclays Capital
U.S. Treasury Bond Index 1-3 Year) 0.47 4.94
U.S. tax-exempt income
(Barclays Capital U.S. Municipal
Bond Index 10 year) 4.38 5.58
- --------------------------------------------------------------------------------
OUTLOOK
Uncertainty will likely continue around the strength and timing of a U.S.
economic recovery. With unemployment at a 25-year high of 9.5%, and American
consumers having suffered a collapse in wealth of at least $15 trillion since
early 2007, it is hard to have much confidence in a consumer-driven recovery in
the short term. We believe the economy will work below its potential for many
quarters to come as deleveraging continues among consumers and global financial
institutions.
While equity markets have enjoyed a bounce off of the bottom over the first half
of the year, the positive earnings surprises in April and May came mostly from
productivity gains and cost containment programs. Earnings in the second quarter
will be heavily scrutinized for evidence that a real recovery is sustainable and
that restocking is giving way to growth in final demand. We believe companies
are going to have to show evidence of a top-line recovery -- increased demand
and improving fundamentals -- in order for stocks to work their way higher.
Given the economic headwinds we're facing, consolidation of the second quarter's
gains seems a real possibility.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. We encourage
long-term investors to maintain a diversified investment approach that is
consistent with their goals, time horizon and risk tolerance. While diversified
portfolios are not immune to market downturns, history suggests they can put you
in a position to benefit from the inevitable return to better times.
Thank you for investing with GE Investments Funds.
Sincerely,
/s/ Michael J. Cosgrove
Michael J. Cosgrove
CHAIRMAN, GE INVESTMENTS FUNDS, INC.
JUNE 2009
MIKE COSGROVE IS PRESIDENT AND CHIEF EXECUTIVE OFFICER -MUTUAL FUNDS &
INTERMEDIARY BUSINESS AT GE ASSET MANAGEMENT. MR. COSGROVE ALSO SERVES AS A
TRUSTEE OF THE GE PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM. PREVIOUSLY
CHIEF FINANCIAL OFFICER OF GE ASSET MANAGEMENT AND ASSISTANT TREASURER - GE
COMPANY, MIKE JOINED GE IN 1970 AND HELD A NUMBER OF MANAGERIAL POSITIONS IN
FINANCE AND SALES AT GE'S INTERNATIONAL OPERATION AND IN GE TRADING COMPANY.
MIKE HAS A B.S. IN ECONOMICS FROM FORDHAM UNIVERSITY AND AN M.B.A. FROM ST.
JOHN'S UNIVERSITY.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC.
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
[SIDE BAR]
GE Investments Funds, Inc.
S&P 500 Index Fund
Semi-Annual Report
JUNE 30, 2009
[GE LOGO]
GE Investments Funds, Inc.
S&P 500 Index Fund Contents
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE ..................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................... 2
NOTES TO SCHEDULE OF INVESTMENTS ......................................... 13
FINANCIAL STATEMENTS
Financial Highlights .................................................. 14
Statement of Assets and Liabilities ................................... 15
Statement of Operations ............................................... 16
Statements of Changes in Net Assets ................................... 17
Notes to Financial Statements ......................................... 18
ADDITIONAL INFORMATION ................................................... 24
INVESTMENT TEAM .......................................................... 27
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
Notes to Performance June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any. Total returns shown
are net of Fund expenses but do not reflect fees and charges associated with the
variable contracts such as administrative fees, account charges and surrender
charges, which, if reflected, would reduce the Fund's total returns for all
periods shown.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in a Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. An investment in a Fund is subject to risk, including
possible loss of principal invested.
The Standard & Poor's ("S&P") 500(R) Composite Price Index of stocks (S&P 500
Index) is an unmanaged index and does not reflect the actual cost of investing
in the instruments that comprise the index.
The S&P 500 Index is a market capitalization-weighted index of stocks of 500
large U.S. companies, which is widely used as a measure of large-cap stock
market performance. The results shown for the foregoing index assume the
reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer group average
return calculation is based on the blend of Morningstar peer categories, as
shown. Morningstar is an independent mutual fund rating service. A Fund's
performance may be compared to or ranked within a universe of mutual funds with
investment objectives and policies similar but not necessarily identical to the
Fund's.
The S&P 500 Index Fund is not sponsored, endorsed, sold or promoted by Standard
& Poor's, and Standard & Poor's makes no representation or warranty, express or
implied, to the investors of the Fund or any member of the public regarding the
advisability of investing in the securities generally or in this Fund
particularly or the ability of the S&P 500 Index Fund to track general stock
market performance.
(C)2009 Morningstar, Inc. All Rights Reserved. The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is no warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are responsible for any
damage or losses relating from any use of this information. Past performance is
no guarantee or future results.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUND.
1
S&P 500 Index Fund
- --------------------------------------------------------------------- [Q&A LOGO]
SSGA FUNDS MANAGEMENT, INC. ("SSGA FM") IS THE SUB-ADVISER TO THE S&P 500 INDEX
FUND. SSGA FM IS REGISTERED WITH THE SEC AS AN INVESTMENT ADVISER UNDER THE
INVESTMENT ADVISERS ACT OF 1940, AS AMENDED, AND IS A WHOLLY OWNED SUBSIDIARY OF
STATE STREET CORPORATION. THE FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS
COMPOSED OF THE FOLLOWING MEMBERS: KARL SCHNEIDER AND JOHN TUCKER.
KARL SCHNEIDER IS THE LEAD PORTFOLIO MANAGER FOR THE FUND, AND IS A VICE
PRESIDENT OF STATE STREET GLOBAL ADVISORS ("SSGA") AND A PRINCIPAL OF SSGA FM.
KARL JOINED THE FIRM IN 1996 AND IS A MEMBER OF THE FIRM'S GLOBAL STRUCTURED
PRODUCTS TEAM. KARL MANAGES A VARIETY OF THE FIRM'S DOMESTIC AND INTERNATIONAL
PASSIVE FUNDS. KARL HOLDS A BS DEGREE IN FINANCE AND INVESTMENTS FROM BABSON
COLLEGE AND AN MS DEGREE IN FINANCE FROM BOSTON COLLEGE. ADDITIONALLY, HE HOLDS
A SERIES 3 LICENSE FROM THE NATIONAL FUTURES ASSOCIATION.
JOHN F. TUCKER, CFA, IS A VICE PRESIDENT OF SSGA AND A PRINCIPAL OF SSGA FM.
JOHN JOINED THE FIRM IN 1988 AND IS THE HEAD OF US EQUITY MARKETS IN THE GLOBAL
STRUCTURED PRODUCTS TEAM. HE IS ALSO RESPONSIBLE FOR ALL DERIVATIVE STRATEGIES
AND EXCHANGE TRADED FUNDS. JOHN RECEIVED A BA IN ECONOMICS FROM TRINITY COLLEGE
AND AN MS IN FINANCE FROM BOSTON COLLEGE. HE IS A MEMBER OF THE BOSTON SECURITY
ANALYSTS SOCIETY AND THE CFA INSTITUTE.
Q. HOW DID THE S&P 500 INDEX FUND PERFORM COMPARED TO ITS BENCHMARK AND
MORNINGSTAR PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009?
A. For the six-month period ended June 30, 2009, the S&P 500 Index Fund
returned 3.13%. The S&P 500 Index, the Fund's benchmark, returned 3.16%
and the Fund's Morningstar peer group of 475 US Insurance Large Blend
funds returned an average of 5.31% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The year started quite dismally for US equities, but the sentiment shifted
in early March. Most US equity averages tagged their best levels of 2009
in early June, but lukewarm data on industrial production and a pullback
in commodity prices brought a loss of momentum and subsequent
consolidation. Still, a fresh retreat in volatility measures to their
lowest levels since the Lehman collapse last September, as well as ample
liquidity in the money markets, allowed most US benchmarks to eke out
positive returns for June. The strong gains from April and May meant a
refreshing double-digit quarter for the S&P 500, its first positive
quarter since the third quarter of 2007, and its best three-month
performance since the final quarter of 1998.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. By utilizing a passive, full replication investment style, the Fund owns
the same stocks and sectors in approximately the same weights as the S&P
500 Index. As of June 30, 2009, the four largest sectors in the S&P 500
Index were information technology (18.3%), healthcare (14.0%), financials
(13.6%), and energy (12.4%). The highest performing sector for the last
six months was information technology (+24%) followed by materials (+12%).
The lowest performing sectors were industrials (-8%) and telecommunication
services (-7%).
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. Over the last six months there were 14 index addition/deletion changes
announced by Standard & Poors that impacted the Fund. Not all the
additions and deletions were bought and sold in the Fund, however, as many
changes were as a result of a merger or acquisition, or a spin-off
involving another S&P500 constituent. Additionally, there were numerous
index share changes throughout the period, as well as at each quarter's
end. Many of the share changes also required no trading, as the weight
change within the portfolio was negligible.
2
S&P 500 Index Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2009.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2009 - JUNE 30, 2009
- --------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- --------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,031.25 2.27
- --------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,022.31 2.26
- --------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.45% FOR
CLASS 1 SHARES (FOR THE PERIOD JANUARY 1, 2009 - JUNE 30, 2009),
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
181/365 (TO REFLECT THE SIX MONTH PERIOD)
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2009 WAS: 3.13%.
3
S&P 500 Index Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT (CLASS 1 SHARES)
================================================================================
[LINE GRAPH]
S&P 500 Index Fund (ending value $7,699) S&P 500 Index (ending value $7,991)
06/99 $10,000 $10,000
12/99 $10,763 $10,784
12/00 $ 9,748 $ 9,794
12/01 $ 8,553 $ 8,627
12/02 $ 6,640 $ 6,720
12/03 $ 8,517 $ 8,651
12/04 $ 9,408 $ 9,592
12/05 $ 9,832 $10,064
12/06 $11,349 $11,654
12/07 $11,927 $12,294
12/08 $ 7,466 $ 7,746
06/09 $ 7,699 $ 7,991
TOTAL RETURNS FOR THE
PERIODS ENDED JUNE 30, 2009 (CLASS 1 SHARES)
================================================================================
Six One Five Ten
Months Year Year Year
- --------------------------------------------------------------------------------
S&P 500 Index Fund 3.13% -26.53% -2.62% -2.58%
- --------------------------------------------------------------------------------
S&P 500 Index 3.16% -26.21% -2.24% -2.22%
- --------------------------------------------------------------------------------
Morningstar peer group average* 5.31% -26.22% -2.14% -2.07%
- --------------------------------------------------------------------------------
Inception date 4/15/85
================================================================================
INVESTMENT PROFILE
A Fund designed for investors who seek growth of capital and accumulation of
income that corresponds to the investment return of the Standard & Poor's 500
Composite Stock Index by investing at least 80% of its net assets in equity
securities of companies contained in that Index.
TOP TEN LARGEST EQUITY HOLDINGS
(EXCLUDES SHORT-TERM INVESTMENTS)
AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Exxon Mobil Corp. 4.14%
- --------------------------------------------------------------------------------
Microsoft Corp. 2.21%
- --------------------------------------------------------------------------------
Johnson & Johnson 1.90%
- --------------------------------------------------------------------------------
The Procter & Gamble Co. 0.00%
- --------------------------------------------------------------------------------
AT&T Inc. 1.78%
- --------------------------------------------------------------------------------
International Business Machines Corp. 1.68%
- --------------------------------------------------------------------------------
JPMorgan Chase & Co. 1.61%
- --------------------------------------------------------------------------------
Chevron Corp. 1.61%
- --------------------------------------------------------------------------------
Apple Inc. 1.54%
- --------------------------------------------------------------------------------
General Electric Co. 1.51%
================================================================================
PORTFOLIO COMPOSITION
AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Market Value of $198,857 (in thousands)
[PIE CHART]
Information Technology 18.1%
Healthcare 13.7%
Financials 13.3%
Energy 12.2%
Consumer Staples 11.7%
Industrials 9.6%
Consumer Discretionary 8.7%
Utilities 4.0%
Telecommunication Services 3.5%
Materials 3.1%
Short-Term 2.1%
Other Investments 0.0%**
* MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS
INDICATED IN THE LARGE BLEND PEER GROUP CONSISTING OF 475, 463, 323 AND
161 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** LESS THAN 0.01%
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
4
S&P 500 INDEX FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
S&P 500 INDEX FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.0% +
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 2.7%
Boeing Co. ..................................... 17,582 $ 747,235 (d)
General Dynamics Corp. ......................... 9,164 507,594
Goodrich Corp. ................................. 3,001 149,960
Honeywell International Inc. ................... 17,743 557,130
ITT Corp. ...................................... 4,426 196,957
L-3 Communications Holdings, Inc. .............. 2,900 201,202
Lockheed Martin Corp. .......................... 7,852 633,264
Northrop Grumman Corp. ......................... 7,922 361,877
Precision Castparts Corp. ...................... 3,400 248,302
Raytheon Co. ................................... 9,469 420,708
Rockwell Collins, Inc. ......................... 3,768 157,239
United Technologies Corp. ...................... 22,672 1,178,037 (d)
5,359,505
AIR FREIGHT & LOGISTICS -- 1.0%
CH Robinson Worldwide, Inc. .................... 4,200 219,030
Expeditors International of
Washington, Inc. ............................ 5,200 173,368
FedEx Corp. .................................... 7,511 417,762
United Parcel Service, Inc. (Class B) .......... 23,896 1,194,561
2,004,721
AIRLINES -- 0.1%
Southwest Airlines Co. ......................... 17,649 118,778
AUTO COMPONENTS -- 0.2%
Johnson Controls, Inc. ......................... 14,546 315,939
The Goodyear Tire & Rubber Co. ................. 5,519 62,144 (a)
378,083
AUTOMOBILES -- 0.3%
Ford Motor Co. ................................. 77,727 471,803 (a)
Harley-Davidson, Inc. .......................... 6,000 97,260
569,063
BEVERAGES -- 2.6%
Brown-Forman Corp. (Class B) ................... 2,447 105,172
Coca-Cola Enterprises, Inc. .................... 7,900 131,535
Constellation Brands, Inc. (Class A) ........... 4,700 59,596 (a)
Dr Pepper Snapple Group, Inc. .................. 6,000 127,140 (a)
Molson Coors Brewing Co. (Class B) ............. 3,598 152,303
Pepsi Bottling Group, Inc. ..................... 3,300 111,672
PepsiCo, Inc. .................................. 37,574 2,065,067 (d)
The Coca-Cola Co. .............................. 48,002 2,303,616 (d)
5,056,101
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.8%
Amgen Inc. ..................................... 24,548 $1,299,571 (a,d)
Biogen Idec Inc. ............................... 6,900 311,535 (a)
Celgene Corp. .................................. 11,100 531,024 (a)
Cephalon, Inc. ................................. 1,700 96,305 (a)
Genzyme Corp. .................................. 6,500 361,855 (a)
Gilead Sciences, Inc. .......................... 22,049 1,032,775 (a)
3,633,065
BUILDING PRODUCTS -- 0.1%
Masco Corp. .................................... 8,790 84,208
CAPITAL MARKETS -- 3.0%
Ameriprise Financial, Inc. ..................... 5,504 133,582
E*Trade Financial Corp. ........................ 15,100 19,328 (a)
Federated Investors, Inc. (Class B) ............ 2,100 50,589
Franklin Resources, Inc. ....................... 3,600 259,236
Invesco Ltd. ................................... 9,200 163,944
Janus Capital Group, Inc. ...................... 4,300 49,020
Legg Mason, Inc. ............................... 3,400 82,892
Morgan Stanley ................................. 32,696 932,163
Northern Trust Corp. ........................... 5,800 311,344
State Street Corp. ............................. 11,700 552,240 (c)
T Rowe Price Group, Inc. ....................... 6,300 262,521
The Bank of New York Mellon Corp. .............. 28,903 847,147
The Charles Schwab Corp. ....................... 23,011 403,613
The Goldman Sachs Group, Inc ................... 12,199 1,798,621
5,866,240
CHEMICALS -- 1.8%
Air Products & Chemicals, Inc. ................. 5,132 331,476 (d)
CF Industries Holdings, Inc. ................... 1,170 86,744
Eastman Chemical Co. ........................... 1,859 70,456
Ecolab Inc. .................................... 4,152 161,886
EI Du Pont de Nemours & Co. .................... 21,861 560,079
International Flavors &
Fragrances Inc. ............................. 1,847 60,434
Monsanto Co. ................................... 13,205 981,660 (d)
PPG Industries, Inc. ........................... 3,937 172,834
Praxair, Inc. .................................. 7,425 527,695
Sigma-Aldrich Corp. ............................ 2,982 147,788
The Dow Chemical Co. ........................... 25,594 413,087
3,514,139
COMMERCIAL BANKS -- 2.6%
BB&T Corp. ..................................... 15,600 342,888
Comerica Inc. .................................. 3,656 77,324
Fifth Third Bancorp ............................ 17,316 122,944
First Horizon National Corp. ................... 4,815 57,778
Huntington Bancshares Inc. ..................... 9,234 38,598
Keycorp ........................................ 16,528 86,607
M&T Bank Corp. ................................. 2,000 101,860
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
5
S&P 500 INDEX FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Marshall & Ilsley Corp. ........................ 6,498 $ 31,190
PNC Financial Services Group, Inc. ............. 11,104 430,946
Regions Financial Corp. ........................ 27,568 111,375
SunTrust Banks, Inc. ........................... 11,329 186,362
US Bancorp ..................................... 46,299 829,678
Wells Fargo & Co. .............................. 112,302 2,724,447
Zions Bancorporation ........................... 2,500 28,900
5,170,897
COMMERCIAL SERVICES & SUPPLIES -- 0.5%
Avery Dennison Corp. ........................... 2,655 68,180
Cintas Corp. ................................... 3,300 75,372
Iron Mountain Inc. ............................. 4,600 132,250 (a)
Pitney Bowes Inc. .............................. 4,932 108,159
Republic Services, Inc. ........................ 8,050 196,501
RR Donnelley & Sons Co. ........................ 5,199 60,412
Stericycle, Inc. ............................... 2,200 113,366 (a)
Waste Management, Inc. ......................... 12,003 338,005
1,092,245
COMMUNICATIONS EQUIPMENT -- 2.7%
Ciena Corp. .................................... 2,742 28,380 (a)
Cisco Systems, Inc. ............................ 139,164 2,594,017 (a,d)
Harris Corp. ................................... 3,400 96,424
JDS Uniphase Corp. ............................. 4,450 25,454 (a)
Juniper Networks, Inc. ......................... 12,800 302,080 (a)
Motorola, Inc. ................................. 54,650 362,330
QUALCOMM Inc. .................................. 39,978 1,807,006
Tellabs, Inc. .................................. 9,252 53,014 (a)
5,268,705
COMPUTERS & PERIPHERALS -- 5.3%
Apple Inc. ..................................... 21,535 3,067,230 (a)
Dell Inc. ...................................... 41,928 575,671 (a,d)
EMC Corp. ...................................... 48,614 636,843 (a)
Hewlett-Packard Co. ............................ 57,549 2,224,269
International Business
Machines Corp. .............................. 31,930 3,334,131
Lexmark International, Inc.
(Class A) ................................... 1,700 26,945 (a)
NetApp, Inc. ................................... 8,200 161,704 (a)
QLogic Corp. ................................... 2,900 36,772 (a)
SanDisk Corp. .................................. 5,500 80,795 (a)
Sun Microsystems, Inc. ......................... 18,390 169,556 (a)
Teradata Corp. ................................. 4,400 103,092 (a)
Western Digital Corp. .......................... 5,300 140,450 (a)
10,557,458
CONSTRUCTION & ENGINEERING -- 0.2%
Fluor Corp. .................................... 4,304 220,752
Jacobs Engineering Group, Inc. ................. 3,100 130,479 (a)
Quanta Services, Inc. .......................... 4,700 108,711 (a)
459,942
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 0.1%
Vulcan Materials Co. ........................... 2,800 $ 120,680
CONSUMER FINANCE -- 0.6%
American Express Co. ........................... 28,696 666,895 (d)
Capital One Financial Corp. .................... 10,925 239,039
Discover Financial Services .................... 12,298 126,300
SLM Corp. ...................................... 11,900 122,213 (a)
1,154,447
CONTAINERS & PACKAGING -- 0.2%
Ball Corp. ..................................... 2,416 109,107
Bemis Company Inc. ............................. 2,362 59,522
Owens-Illinois, Inc. ........................... 3,900 109,239 (a)
Pactiv Corp. ................................... 3,248 70,482 (a)
Sealed Air Corp. ............................... 3,914 72,213
420,563
DISTRIBUTORS -- 0.1%
Genuine Parts Co. .............................. 3,896 130,750
DIVERSIFIED CONSUMER SERVICES -- 0.2%
Apollo Group, Inc. (Class A) ................... 2,700 192,024 (a)
DeVry, Inc. .................................... 1,400 70,056
H&R Block Inc. ................................. 8,408 144,870
406,950
DIVERSIFIED FINANCIAL SERVICES -- 3.7%
Bank of America Corp. .......................... 195,129 2,575,703
CIT Group, Inc. ................................ 10,800 23,220
Citigroup Inc. ................................. 134,706 400,077 (d)
CME Group Inc. ................................. 1,611 501,198
IntercontinentalExchange, Inc. ................. 1,800 205,632 (a)
JPMorgan Chase & Co. ........................... 94,150 3,211,457 (d)
Leucadia National Corp. ........................ 4,500 94,905
Moody's Corp. .................................. 4,584 120,788
NYSE Euronext .................................. 6,400 174,400
The NASDAQ OMX Group Inc. ...................... 3,500 74,585 (a)
7,381,965
DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.1%
AT&T Inc. ...................................... 142,415 3,537,589
CenturyTel, Inc. ............................... 2,484 76,259
Embarq Corp. ................................... 3,370 141,742
Frontier Communications Corp. .................. 7,900 56,406
Qwest Communications
International Inc. .......................... 34,948 145,034
Verizon Communications Inc. .................... 68,467 2,103,991
Windstream Corp. ............................... 11,043 92,320
6,153,341
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
6
S&P 500 INDEX FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 2.3%
Allegheny Energy, Inc. ......................... 4,300 $ 110,295
American Electric Power
Comapny Inc. ................................ 11,525 332,957 (d)
Duke Energy Corp. .............................. 31,354 457,455
Edison International ........................... 7,742 243,563
Entergy Corp. .................................. 4,647 360,235
Exelon Corp. ................................... 15,952 816,902
FirstEnergy Corp. .............................. 7,520 291,400
FPL Group, Inc. ................................ 9,962 566,439
Northeast Utilities ............................ 4,000 89,240
Pepco Holdings, Inc. ........................... 5,300 71,232
Pinnacle West Capital Corp. .................... 2,500 75,375
PPL Corp. ...................................... 9,044 298,090
Progress Energy, Inc. .......................... 6,856 259,362
The Southern Co. ............................... 18,858 587,615
4,560,160
ELECTRICAL EQUIPMENT -- 0.4%
Cooper Industries Ltd. ......................... 4,059 126,032
Emerson Electric Co. ........................... 18,248 591,235
Rockwell Automation, Inc. ...................... 3,368 108,180
825,447
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.6%
Agilent Technologies, Inc. ..................... 8,485 172,330 (a)
Amphenol Corp. (Class A) ....................... 4,100 129,724
Corning Inc. ................................... 37,939 609,300
FLIR Systems, Inc. ............................. 3,600 81,216 (a)
Jabil Circuit, Inc. ............................ 4,700 34,874
Molex Inc. ..................................... 3,450 53,648
1,081,092
ENERGY EQUIPMENT & SERVICES -- 1.8%
Baker Hughes Inc. .............................. 7,650 278,766
BJ Services Co. ................................ 7,400 100,862
Cameron International Corp. .................... 5,200 147,160 (a)
Diamond Offshore Drilling, Inc. ................ 1,700 141,185
ENSCO International Inc. ....................... 3,400 118,558
FMC Technologies, Inc. ......................... 3,000 112,740 (a)
Halliburton Co. ................................ 21,891 453,144
Nabors Industries Ltd. ......................... 7,000 109,060 (a)
National Oilwell Varco, Inc. ................... 10,200 333,132 (a)
Rowan Companies, Inc. .......................... 2,677 51,720
Schlumberger Ltd. .............................. 29,033 1,570,976
Smith International, Inc. ...................... 5,200 133,900
3,551,203
FOOD & STAPLES RETAILING -- 3.0%
Costco Wholesale Corp. ......................... 10,366 473,726
CVS Caremark Corp. ............................. 35,427 1,129,058
Safeway Inc. ................................... 10,000 203,700
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SUPERVALU, Inc. ................................ 5,313 $ 68,803
Sysco Corp. .................................... 14,244 320,205
The Kroger Co. ................................. 15,666 345,435
Walgreen Co. ................................... 24,200 711,480
Wal-Mart Stores, Inc. .......................... 53,887 2,610,286
Whole Foods Market, Inc. ....................... 3,300 62,634
5,925,327
FOOD PRODUCTS -- 1.8%
Archer-Daniels-Midland Co. ..................... 15,486 414,560
Campbell Soup Co. .............................. 5,076 149,336
ConAgra Foods, Inc. ............................ 11,068 210,956
Dean Foods Co. ................................. 3,700 71,003 (a)
General Mills, Inc. ............................ 7,903 442,726
HJ Heinz Co. ................................... 7,597 271,213
Hormel Foods Corp. ............................. 1,700 58,718
Kellogg Co. .................................... 5,990 278,954
Kraft Foods Inc. (Class A) ..................... 35,413 897,365
McCormick & Company Inc. ....................... 3,300 107,349
Sara Lee Corp. ................................. 17,057 166,476
The Hershey Co. ................................ 3,984 143,424
The JM Smucker Co. ............................. 3,017 146,807
Tyson Foods, Inc. (Class A) .................... 7,300 92,053
3,450,940
GAS UTILITIES -- 0.1%
EQT CORP. ...................................... 3,300 115,203
Nicor Inc. ..................................... 1,243 43,033
Questar Corp. .................................. 4,400 136,664
294,900
HEALTHCARE EQUIPMENT & SUPPLIES -- 2.0%
Baxter International Inc. ...................... 14,629 774,752 (d)
Becton Dickinson & Co. ......................... 5,870 418,590
Boston Scientific Corp. ........................ 36,860 373,760 (a)
CR Bard, Inc. .................................. 2,502 186,274
DENTSPLY International Inc. .................... 3,500 106,820
Hospira, Inc. .................................. 4,039 155,582 (a)
Intuitive Surgical, Inc. ....................... 960 157,114 (a)
Medtronic, Inc. ................................ 27,232 950,124
St Jude Medical, Inc. .......................... 8,292 340,801 (a)
Stryker Corp. .................................. 5,752 228,584
Varian Medical Systems, Inc. ................... 3,200 112,448 (a)
Zimmer Holdings, Inc. .......................... 5,300 225,780 (a)
4,030,629
HEALTHCARE PROVIDERS & SERVICES -- 2.1%
Aetna Inc. ..................................... 11,008 275,750
AmerisourceBergen Corp. ........................ 7,284 129,218
Cardinal Health, Inc. .......................... 8,751 267,343
CIGNA Corp. .................................... 6,589 158,729
Coventry Health Care, Inc. ..................... 3,400 63,614 (a)
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
7
S&P 500 INDEX FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
DaVita Inc. .................................... 2,500 $ 123,650 (a)
Express Scripts, Inc. .......................... 6,500 446,875 (a)
Humana Inc. .................................... 3,927 126,685 (a)
Laboratory Corporation of
America Holdings ............................ 2,700 183,033 (a)
McKesson Corp. ................................. 6,502 286,088
Medco Health Solutions, Inc. ................... 11,566 527,525 (a)
Patterson Companies, Inc. ...................... 2,100 45,570 (a)
Quest Diagnostics Inc. ......................... 3,700 208,791
Tenet Healthcare Corp. ......................... 11,495 32,416 (a)
UnitedHealth Group, Inc. ....................... 28,776 718,825
WellPoint, Inc. ................................ 11,700 595,413 (a)
4,189,525
HEALTHCARE TECHNOLOGY -- 0.0%*
IMS Health Inc. ................................ 4,457 56,604
HOTELS RESTAURANTS & LEISURE -- 1.5%
Carnival Corp. ................................. 10,500 270,585
Darden Restaurants, Inc. ....................... 3,229 106,492
International Game Technology .................. 6,900 109,710
Marriott International, Inc.
(Class A) ................................... 7,070 156,035
McDonald's Corp. ............................... 26,690 1,534,408
Starbucks Corp. ................................ 17,898 248,603 (a)
Starwood Hotels & Resorts
Worldwide, Inc. ............................. 4,300 95,460
Wyndham Worldwide Corp. ........................ 3,849 46,650
Wynn Resorts Ltd. .............................. 1,500 52,950 (a)
Yum! Brands, Inc. .............................. 11,329 377,709
2,998,602
HOUSEHOLD DURABLES -- 0.3%
Black & Decker Corp. ........................... 1,307 37,459
Centex Corp. ................................... 2,920 24,703
DR Horton, Inc. ................................ 6,500 60,840
Fortune Brands, Inc. ........................... 3,541 123,014
Harman International
Industries, Inc. ............................ 1,200 22,560
KB Home ........................................ 1,560 21,341
Leggett & Platt, Inc. .......................... 3,900 59,397
Lennar Corp. (Class A) ......................... 3,200 31,008
Newell Rubbermaid Inc. ......................... 6,956 72,412
Pulte Homes, Inc. .............................. 5,088 44,927
Snap-On Inc. ................................... 1,309 37,621
The Stanley Works .............................. 1,926 65,176
Whirlpool Corp. ................................ 1,843 78,438
678,896
HOUSEHOLD PRODUCTS -- 2.6%
Clorox Co. ..................................... 3,384 188,929
Colgate-Palmolive Co. .......................... 12,172 861,047
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Kimberly-Clark Corp. ........................... 10,036 $ 526,187 (d)
The Procter & Gamble Co. ....................... 70,392 3,597,031
5,173,194
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.2%
Constellation Energy Group, Inc. ............... 4,703 125,006
Dynegy Inc. (Class A) .......................... 14,800 33,596 (a)
The AES Corp. .................................. 15,700 182,277 (a)
340,879
INDUSTRIAL CONGLOMERATES -- 2.0%
General Electric Co. ........................... 255,562 2,995,187 (f)
Textron, Inc. .................................. 6,325 61,100
3M Co. ......................................... 16,880 1,014,488
4,070,775
INSURANCE -- 2.3%
Aflac Inc. ..................................... 11,400 354,426
American International
Group, Inc. ................................. 68,517 79,480 (d)
AON Corp. ...................................... 6,736 255,092
Assurant, Inc. ................................. 3,000 72,270
Chubb Corp. .................................... 8,494 338,741
Cincinnati Financial Corp. ..................... 4,092 91,456
Genworth Financial, Inc. (Class A) ............. 9,400 65,706
Hartford Financial Services
Group, Inc. ................................. 7,804 92,633
Lincoln National Corp. ......................... 6,542 112,588
Loews Corp. .................................... 8,966 245,668
Marsh & McLennan
Companies, Inc. ............................. 12,469 251,001
MBIA Inc. ...................................... 4,535 19,637 (a)
MetLife, Inc. .................................. 19,973 599,390
Principal Financial Group, Inc. ................ 7,500 141,300
Prudential Financial, Inc. ..................... 11,100 413,142
The Allstate Corp. ............................. 13,211 322,348 (d)
The Progressive Corp. .......................... 16,673 251,929
The Travelers Companies, Inc. .................. 14,099 578,623
Torchmark Corp. ................................ 2,172 80,451
Unum Group ..................................... 7,889 125,120
XL Capital Ltd. ................................ 7,900 90,534
4,581,535
INTERNET & CATALOG RETAIL -- 0.4%
Amazon.com, Inc. ............................... 7,800 652,548 (a)
Expedia, Inc. .................................. 5,000 75,550 (a)
728,098
INTERNET SOFTWARE & SERVICES -- 1.8%
Akamai Technologies, Inc. ...................... 4,100 78,638 (a)
eBay Inc. ...................................... 26,000 445,380 (a)
Google Inc. (Class A) .......................... 5,779 2,436,369 (a)
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
8
S&P 500 INDEX FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
VeriSign, Inc. ................................. 4,862 $ 89,850 (a)
Yahoo! Inc. .................................... 33,689 527,570 (a)
3,577,807
IT SERVICES -- 1.0%
Affiliated Computer
Services, Inc. (Class A) .................... 2,500 111,050 (a)
Automatic Data Processing, Inc. ................ 11,980 424,571
Cognizant Technology Solutions
Corp. (Class A) ............................. 7,100 189,570 (a)
Computer Sciences Corp. ........................ 3,582 158,683 (a)
Convergys Corp. ................................ 2,500 23,200 (a)
Fidelity National Information
Services, Inc. .............................. 4,600 91,816
Fiserv, Inc. ................................... 3,850 175,945 (a)
Mastercard Inc. (Class A) ...................... 1,700 284,427
Paychex, Inc. .................................. 7,925 199,710
The Western Union Co. .......................... 17,324 284,114
Total System Services, Inc. .................... 5,202 69,655
2,012,741
LEISURE EQUIPMENT & PRODUCTS -- 0.1%
Eastman Kodak Co. .............................. 7,175 21,238
Hasbro, Inc. ................................... 3,096 75,047
Mattel, Inc. ................................... 8,551 137,244
233,529
LIFE SCIENCES TOOLS & SERVICES -- 0.4%
Life Technologies Corp. ........................ 4,103 171,177 (a)
Millipore Corp. ................................ 1,345 94,432 (a)
PerkinElmer, Inc. .............................. 2,910 50,634
Thermo Fisher Scientific, Inc. ................. 10,028 408,842 (a)
Waters Corp. ................................... 2,300 118,381 (a)
843,466
MACHINERY -- 1.4%
Caterpillar Inc. ............................... 14,632 483,441
Cummins Inc. ................................... 4,756 167,459
Danaher Corp. .................................. 6,100 376,614
Deere & Co. .................................... 10,240 409,088
Dover Corp. .................................... 4,458 147,515
Eaton Corp. .................................... 4,000 178,440
Flowserve Corp. ................................ 1,400 97,734
Illinois Tool Works Inc. ....................... 9,417 351,631
PACCAR Inc. .................................... 9,022 293,305
Pall Corp. ..................................... 2,878 76,440
Parker Hannifin Corp. .......................... 3,972 170,637
The Manitowoc Company Inc. ..................... 2,500 13,150
2,765,454
MEDIA -- 2.5%
CBS Corp. (Class B) ............................ 16,009 110,782
Comcast Corp. (Class A) ........................ 69,758 1,010,793
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Gannett Company Inc. ........................... 5,608 $ 20,021
Interpublic Group of
Companies, Inc. ............................. 11,330 57,217 (a)
Meredith Corp. ................................. 598 15,279
News Corp. (Class A) ........................... 55,600 506,516
Omnicom Group Inc. ............................. 7,400 233,692
Scripps Networks Interactive, Inc.
(Class A) ................................... 2,200 61,226
The DIRECTV Group Inc. ......................... 12,400 306,404 (a)
The McGraw-Hill Companies, Inc. ................ 7,721 232,479
The New York Times Co. (Class A) ............... 3,388 18,668
The Walt Disney Co. ............................ 45,079 1,051,693
The Washington Post Co. (Class B) .............. 140 49,305
Time Warner Cable Inc. ......................... 8,696 275,402
Time Warner Inc. ............................... 28,738 723,910
Viacom, Inc. (Class B) ......................... 14,913 338,525 (a)
5,011,912
METALS & MINING -- 0.9%
AK Steel Holding Corp. ......................... 2,300 44,137
Alcoa Inc. ..................................... 23,640 244,201 (d)
Allegheny Technologies Inc. .................... 2,451 85,613
Freeport-McMoRan Copper &
Gold Inc. ................................... 9,955 498,845
Newmont Mining Corp. ........................... 11,928 487,497
Nucor Corp. .................................... 7,736 343,710
Titanium Metals Corp. .......................... 1,600 14,704
United States Steel Corp. ...................... 2,965 105,969
1,824,676
MULTILINE RETAIL -- 0.8%
Big Lots, Inc. ................................. 1,800 37,854 (a)
Family Dollar Stores, Inc. ..................... 3,500 99,050
JC Penney Company Inc. ......................... 5,287 151,790
Kohl's Corp. ................................... 7,300 312,075 (a)
Macy's, Inc. ................................... 10,630 125,009
Nordstrom, Inc. ................................ 3,792 75,423
Sears Holdings Corp. ........................... 1,419 94,392 (a)
Target Corp. ................................... 18,049 712,394
1,607,987
MULTI-UTILITIES -- 1.4%
Ameren Corp. ................................... 5,042 125,495
Centerpoint Energy, Inc. ....................... 8,618 95,487
CMS Energy Corp. ............................... 5,500 66,440
Consolidated Edison, Inc. ...................... 6,807 254,718
Dominion Resources, Inc. ....................... 14,100 471,222
DTE Energy Co. ................................. 4,166 133,312
Integrys Energy Group, Inc. .................... 1,931 57,911
NiSource Inc. .................................. 6,915 80,629
PG&E Corp. ..................................... 9,054 348,036
Public Service Enterprise
Group Inc. .................................. 12,418 405,199
SCANA Corp. .................................... 3,000 97,410
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
9
S&P 500 INDEX FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Sempra Energy .................................. 5,875 $ 291,576
TECO Energy, Inc. .............................. 5,300 63,229
Wisconsin Energy Corp. ......................... 3,000 122,130
Xcel Energy, Inc. .............................. 11,080 203,983
2,816,777
OFFICE ELECTRONICS -- 0.1%
Xerox Corp. .................................... 20,590 133,423
OIL, GAS & CONSUMABLE FUELS -- 10.4%
Anadarko Petroleum Corp. ....................... 11,856 538,144
Apache Corp. ................................... 8,148 587,878
Cabot Oil & Gas Corp. .......................... 2,500 76,600
Chesapeake Energy Corp. ........................ 13,700 271,671
Chevron Corp. .................................. 48,358 3,203,718
ConocoPhillips ................................. 35,719 1,502,341
Consol Energy Inc. ............................. 4,400 149,424
Denbury Resources, Inc. ........................ 6,100 89,853 (a)
Devon Energy Corp. ............................. 10,792 588,164
El Paso Corp. .................................. 16,582 153,052
EOG Resources, Inc. ............................ 6,100 414,312
Exxon Mobil Corp. .............................. 117,902 8,242,529 (d)
Hess Corp. ..................................... 6,870 369,263 (d)
Marathon Oil Corp. ............................. 17,342 522,514
Massey Energy Co. .............................. 1,800 35,172
Murphy Oil Corp. ............................... 4,700 255,304
Noble Energy, Inc. ............................. 4,200 247,674
Occidental Petroleum Corp. ..................... 19,620 1,291,192
Peabody Energy Corp. ........................... 6,400 193,024
Pioneer Natural Resources Co. .................. 3,000 76,500
Range Resources Corp. .......................... 3,800 157,358
Southwestern Energy Co. ........................ 8,300 322,455 (a)
Spectra Energy Corp. ........................... 15,577 263,563
Sunoco, Inc. ................................... 2,876 66,723
Tesoro Corp. ................................... 3,300 42,009
The Williams Companies Inc. .................... 14,186 221,443
Valero Energy Corp. ............................ 12,500 211,125
XTO Energy Inc. ................................ 13,841 527,896
20,620,901
PAPER & FOREST PRODUCTS -- 0.2%
International Paper Co. ........................ 10,075 152,435
MeadWestvaco Corp. ............................. 4,100 67,281
Weyerhaeuser Co. ............................... 5,094 155,010
374,726
PERSONAL PRODUCTS -- 0.2%
Avon Products, Inc. ............................ 10,528 271,412
The Estee Lauder Companies Inc.
(Class A).................................... 2,900 94,743
366,155
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 7.3%
Abbott Laboratories ............................ 37,504 $1,764,188 (d)
Allergan, Inc. ................................. 7,504 357,040
Bristol-Myers Squibb Co. ....................... 47,908 973,011 (d)
Eli Lilly & Co. ................................ 24,516 849,234
Forest Laboratories, Inc. ...................... 7,400 185,814 (a)
Johnson & Johnson .............................. 66,527 3,778,734
King Pharmaceuticals, Inc. ..................... 5,733 55,209 (a)
Merck & Company Inc. ........................... 51,150 1,430,154
Mylan Inc. ..................................... 7,500 97,875 (a)
Pfizer Inc. .................................... 162,821 2,442,315
Schering-Plough Corp. .......................... 39,102 982,242 (d)
Watson Pharmaceuticals, Inc. ................... 2,600 87,594 (a)
Wyeth .......................................... 32,154 1,459,470 (d)
14,462,880
PROFESSIONAL SERVICES -- 0.2%
Dun & Bradstreet Corp. ......................... 1,300 105,573
Equifax Inc. ................................... 3,200 83,520
Monster Worldwide, Inc. ........................ 2,700 31,887 (a)
Robert Half International Inc. ................. 3,900 92,118
313,098
REAL ESTATE INVESTMENT TRUSTS (REIT'S) -- 0.9%
Apartment Investment &
Management Co. (Class A) (REIT) ............. 2,431 21,514
Boston Properties, Inc. (REIT) ................. 2,900 138,330
Developers Diversified Realty
Corp. (REIT)................................. 278 1,357
Equity Residential (REIT) ...................... 6,500 144,495
HCP, Inc. (REIT) ............................... 6,500 137,735
Health Care REIT, Inc. (REIT) .................. 2,600 88,660
Host Hotels & Resorts, Inc. (REIT) ............. 13,300 111,587
Kimco Realty Corp. (REIT) ...................... 7,600 76,380
Plum Creek Timber Company,
Inc. (REIT).................................. 4,000 119,120
ProLogis (REIT) ................................ 10,800 87,048
Public Storage (REIT) .......................... 3,100 202,988
Simon Property Group, Inc. (REIT) .............. 6,725 345,867
Ventas, Inc. (REIT) ............................ 3,600 107,496
Vornado Realty Trust (REIT) .................... 3,473 156,389
AvalonBay Communities, Inc. (REIT) ............. 1,901 106,342
1,845,308
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.0%*
CB Richard Ellis Group, Inc.
(Class A).................................... 5,500 51,480 (a)
ROAD & RAIL -- 0.9%
Burlington Northern Santa Fe Corp. ............. 6,674 490,806
CSX Corp. ...................................... 9,439 326,873
Norfolk Southern Corp. ......................... 8,918 335,941
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
10
S&P 500 INDEX FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Ryder System, Inc. ............................. 1,331 $ 37,162
Union Pacific Corp. ............................ 12,308 640,754
1,831,536
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.4%
Advanced Micro Devices, Inc. ................... 13,974 54,079 (a,d)
Altera Corp. ................................... 7,200 117,216
Analog Devices, Inc. ........................... 7,100 175,938
Applied Materials, Inc. ........................ 32,000 351,040 (d)
Broadcom Corp. (Class A) ....................... 10,450 259,056 (a)
Intel Corp. .................................... 135,065 2,235,326 (d)
Kla-Tencor Corp. ............................... 4,000 101,000
Linear Technology Corp. ........................ 5,600 130,760
LSI Corp. ...................................... 14,692 66,996 (a)
MEMC Electronic Materials, Inc. ................ 5,700 101,517 (a)
Microchip Technology Inc. ...................... 4,500 101,475
Micron Technology, Inc. ........................ 19,154 96,919 (a)
National Semiconductor Corp. ................... 4,566 57,303
Novellus Systems, Inc. ......................... 2,200 36,740 (a)
Nvidia Corp. ................................... 13,100 147,899 (a)
Teradyne, Inc. ................................. 3,600 24,696 (a)
Texas Instruments Inc. ......................... 30,851 657,126
Xilinx, Inc. ................................... 6,700 137,082
4,852,168
SOFTWARE -- 4.2%
Adobe Systems Inc. ............................. 12,884 364,617 (a,d)
Autodesk, Inc. ................................. 5,748 109,097 (a)
BMC Software, Inc. ............................. 4,500 152,055 (a)
CA, Inc. ....................................... 9,600 167,328
Citrix Systems, Inc. ........................... 4,200 133,938 (a)
Compuware Corp. ................................ 5,600 38,416 (a)
Electronic Arts, Inc. .......................... 7,800 169,416 (a)
Intuit, Inc. ................................... 7,900 222,464 (a)
McAfee, Inc. ................................... 3,900 164,541 (a)
Microsoft Corp. ................................ 184,854 4,393,980 (d)
Novell, Inc. ................................... 7,666 34,727 (a)
Oracle Corp. ................................... 91,752 1,965,328 (d)
Salesforce.com, Inc. ........................... 2,600 99,242 (a)
Symantec Corp. ................................. 20,208 314,436 (a)
8,329,585
SPECIALTY RETAIL -- 1.9%
Abercrombie & Fitch Co. (Class A) .............. 2,100 53,319
AutoNation, Inc. ............................... 2,872 49,829 (a)
AutoZone, Inc. ................................. 844 127,537 (a)
Bed Bath & Beyond, Inc. ........................ 6,300 193,725 (a)
Best Buy Company Inc. .......................... 8,400 281,316
GameStop Corp. (Class A) ....................... 4,100 90,241 (a)
Home Depot, Inc. ............................... 41,118 971,618
Lowe's Companies, Inc. ......................... 35,456 688,201
Ltd Brands, Inc. ............................... 6,288 75,267
Office Depot, Inc. ............................. 5,400 24,624 (a)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
O'Reilly Automotive, Inc. ...................... 3,300 $ 125,664 (a)
RadioShack Corp. ............................... 2,856 39,870
Staples, Inc. .................................. 17,350 349,950
The Gap Inc. ................................... 11,279 184,976
The Sherwin-Williams Co. ....................... 2,463 132,386
Tiffany & Co. .................................. 3,100 78,616
TJX Companies, Inc. ............................ 10,080 317,117
3,784,256
TEXTILES APPAREL & LUXURY GOODS -- 0.4%
Coach, Inc. .................................... 7,500 201,600
NIKE, Inc. (Class B) ........................... 9,310 482,072
Polo Ralph Lauren Corp. (Class A) .............. 1,400 74,956
VF Corp. ....................................... 2,202 121,881
880,509
THRIFTS & MORTGAGE FINANCE -- 0.1%
Hudson City Bancorp, Inc. ...................... 12,600 167,454
People's United Financial, Inc. ................ 8,500 127,840
295,294
TOBACCO -- 1.7%
Altria Group, Inc. ............................. 49,679 814,239
Lorillard, Inc. ................................ 4,111 278,602
Philip Morris International Inc. ............... 47,579 2,075,396
Reynolds American Inc. ......................... 4,100 158,342
3,326,579
TRADING COMPANIES & DISTRIBUTORS -- 0.1%
Fastenal Co. ................................... 3,300 109,461
WW Grainger, Inc. .............................. 1,582 129,534
238,995
WIRELESS TELECOMMUNICATION SERVICES -- 0.4%
American Tower Corp. (Class A) ................. 9,500 299,535 (a)
MetroPCS Communications, Inc. .................. 6,100 81,191 (a)
Sprint Nextel Corp. (Series 1) ................. 69,200 332,852 (a)
713,578
TOTAL COMMON STOCK
(COST $240,448,002).......................... 194,554,472
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $124,867).............................. 68,677 (e)
TOTAL INVESTMENTS IN SECURITIES
(COST $240,572,869) ......................... 194,623,149
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
11
S&P 500 INDEX FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.1%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.9%
GE Money Market Fund
Institutional Class
0.28% ....................................... $ 3,712,973 (b,g)
PRINCIPAL
AMOUNT
- ------------------------------------------------------------
Money Market Obligation Trust
0.45% 12/31/30 ............................ $ 470 473 (h)
U.S. GOVERNMENT -- 0.2%
U.S. Treasury Bill
0.15% 07/02/09 ............................ 520,000 519,999 (b)
TOTAL SHORT-TERM INVESTMENTS
(COST $4,233,443) ........................... 4,233,445
TOTAL INVESTMENTS
(COST $244,806,312) ......................... 198,856,594
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (0.1)% ............................... (187,090)
------------
NET ASSETS -- 100.0% ........................... $198,669,504
============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI S&P 500 Fund Index had the following long futures contracts
open at June 30, 2009 (unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------
S&P 500 EMini
Index Futures September 2009 102 $4,669,050 $ (115,311)
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
12
Notes to Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(d) At June 30, 2009, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(e) GEAM, the investment adviser of the Fund, also serves as the investment
adviser of the GEI Investment Fund.
(f) General Electric Co. is the parent company of GE Asset Management
Incorporated, the Fund's investment Adviser.
(g) GEAM, the investment adviser of the Fund, also serves as investment
adviser of the GE Money Market Fund.
(h) Managed by SSgA Funds Management, Inc., the Fund's sub-adviser.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2009.
Abbreviations:
REIT Real Estate Investment Trust
13
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
S&P 500 INDEX FUND
6/30/09+ 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
- ------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 4/15/85
Net asset value, beginning of period ................. $ 15.99 $ 26.52 $ 26.06 $ 22.94 $ 22.30 $ 20.51
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.18 0.52 0.47 0.42 0.36 0.36
Net realized and unrealized
gains/(losses) on investments ................... 0.32 (10.46) 0.86 3.12 0.65 1.79
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ....... 0.50 (9.94) 1.33 3.54 1.01 2.15
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................. -- 0.50 0.47 0.42 0.37 0.36
Net realized gains ................................ -- 0.09 0.40 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .................................. -- 0.59 0.87 0.42 0.37 0.36
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ....................... $ 16.50 $ 15.99 $ 26.52 $ 26.06 $ 22.94 $ 22.30
====================================================================================================================================
TOTAL RETURN (a) ..................................... 3.13% (37.40)% 5.10% 15.43% 4.51% 10.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .......... $ 198,669 $ 209,176 $ 447,426 $ 497,105 $ 531,015 $ 601,008
Ratios to average net assets:
Net investment income* .......................... 2.33% 1.91% 1.62% 1.58% 1.47% 1.62%*
Expenses* ....................................... 0.45%(b) 0.41%(b) 0.39% 0.40% 0.40% 0.40%*
Portfolio turnover rate ........................... 2% 4% 6% 4% 4% 5%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges.
(b) Reflects GEAM's waiver of a portion of the Fund's management fee in an
amount equal to the management fee earned by GEAM with respect to the
Fund's investment in the GE Funds - GE Money Market Fund. Excluding
waiver, the expense ratios would be unchanged.
* Annualized for periods less than one year.
+ Unaudited
See Notes to Financial Statements.
14
Statement of Assets S&P 500
and Liabilities JUNE 30, 2009 (UNAUDITED) INDEX FUND
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $ 231,793,789) ..................................................... $ 191,559,286
Investments in affiliated securities, at market (cost $ 8,779,080) ............................................ 3,063,863
Short-term Investments at market (cost $520,470) .............................................................. 520,472
Short-term affiliated investments (at amortized cost) ......................................................... 3,712,973
Receivable for investments sold ............................................................................... 160,264
Income receivables ............................................................................................ 270,240
Receivable for fund shares sold ............................................................................... 12,566
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ................................................................................................ 199,299,664
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ............................................................................. 336,022
Payable for fund shares redeemed .............................................................................. 64,153
Payable to GEAM ............................................................................................... 146,928
Accrued other expenses ........................................................................................ 32,601
Variation margin payable ...................................................................................... 29,428
Other liabilities ............................................................................................. 21,028
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................................................................... 630,160
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ....................................................................................................... $ 198,669,504
===================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ............................................................................................... 290,952,264
Undistributed (distribution in excess of)
net investment income ....................................................................................... 2,399,490
Accumulated net realized loss ................................................................................. (48,617,221)
Net unrealized depreciation on:
Investments ................................................................................................. (45,949,718)
Futures ..................................................................................................... (115,311)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ....................................................................................................... $ 198,669,504
===================================================================================================================================
CLASS 1:
NET ASSETS ....................................................................................................... 198,669,504
Shares outstanding ($0.01 par value; unlimited shares authorized) ................................................ 12,042,327
Net asset value per share ........................................................................................ $ 16.50
See Notes to Financial Statements.
15
STATEMENT OF OPERATIONS S&P 500
FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) INDEX FUND
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend .................................................................................................... $ 2,499,486
Interest .................................................................................................... 99,743
Interest from affliated investments ......................................................................... 8,340
Less: Foreign taxes withheld ................................................................................ 224
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME .................................................................................................. 2,607,793
- -----------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ............................................................................ 330,259
Transfer agent .............................................................................................. 24
Directors's fees ............................................................................................ 2,808
Custody and accounting expenses ............................................................................. 17,902
Professional fees ........................................................................................... 24,322
Registration expenses ....................................................................................... 18,629
Other expenses .............................................................................................. 28,519
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ................................................................ 422,463
- -----------------------------------------------------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser .................................................................... (3,349)
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses ................................................................................................ 419,114
- -----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ......................................................................................... 2,188,679
===================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ............................................................................................... (14,557,931)
Futures ................................................................................................... 434,780
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ............................................................................................... 16,630,555
Futures ................................................................................................... (235,415)
Foreign currency transactions ............................................................................. 209
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments ............................................................. 2,272,198
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......................................................... $ 4,460,877
===================================================================================================================================
See Notes to Financial Statements.
16
Statements of S&P 500
Changes in Net Assets INDEX FUND
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2009 DECEMBER 31,
(UNAUDITED) 2008
- -----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income ..................................................................... $ 2,188,679 $ 6,554,179
Net realized loss on investments, futures and foreign currency related
transactions ............................................................................. (14,123,151) (26,812,058)
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures and foreign currency related translation ......................... 16,395,349 (134,714,212)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ...................................................... 4,460,877 (154,972,091)
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 .................................................................................... -- (6,315,180)
Net realized gains
Class 1 .................................................................................... -- (1,148,328)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .......................................................................... -- (7,463,508)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions .......................... 4,460,877 (162,435,599)
- -----------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 .................................................................................... 2,683,184 7,168,562
Value of distributions reinvested
Class 1 .................................................................................... -- 7,463,508
Cost of shares redeemed
Class 1 .................................................................................... (17,650,352) (90,446,405)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease from share transactions ....................................................... (14,967,168) (75,814,335)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS ................................................................. (10,506,291) (238,249,934)
NET ASSETS
Beginning of period .......................................................................... 209,175,795 447,425,729
- -----------------------------------------------------------------------------------------------------------------------------------
End of period ................................................................................ $ 198,669,504 $ 209,175,795
===================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD .................. $ 2,399,490 $ 210,811
- -----------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold ................................................................................ 179,390 343,939
Issued for distributions reinvested ........................................................ -- 473,269
Shares redeemed ............................................................................ (1,212,998) (4,612,561)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in fund shares ..................................................................... (1,033,608) (3,795,353)
===================================================================================================================================
See Notes to Financial Statements.
17
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of fourteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund (the "Fund"),
Premier Growth Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund,
Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income
Fund, Money Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on recent trading activity and other
relevant information which may include market interest rate curves, referenced
credit spreads and estimated prepayment rates where applicable. In the absence
of a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations. The Fund's written or
purchased options are valued at the last sales price, or if no sales occurred
that day, at the last reported bid price. Short-term investments with remaining
maturities of sixty days or less at the time of purchase are valued on the basis
of amortized cost, which approximates market value.
All assets and liabilities of the Fund that are initially expressed in foreign
currency values will be converted into U.S. dollars at the WM/Reuters exchange
rate computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
18
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Fund adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards 157, FAIR VALUE MEASUREMENTS ("SFAS
157"). SFAS 157 establishes a new framework for measuring fair value and expands
related disclosures. Broadly, the SFAS 157 framework requires fair value to be
determined based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants. SFAS 157 establishes a three-level valuation hierarchy
based upon observable and unobservable inputs.
For financial assets and liabilities, fair value is the price that would be
received to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets and liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect our market assumptions. Preference is given to
observable inputs. These two types of inputs create the following fair value
hierarchy:
Level 1 -- Quoted prices for identical investments in active markets.
Level 2 -- Quoted prices for similar investments in active markets; quoted
prices for identical or similar investments in markets that are not
active; and model-derived valuations whose significant value drivers are
observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
The Fund maintains policies and procedures to value investments using the best
and most relevant data available. The Fund performs periodic reviews of the
methodologies used by independent pricing services including obtaining price
validation for certain securities. The following section describes the valuation
methodologies that the Fund uses to measure investments at fair value.
When available, the Fund uses quoted market prices to determine fair value of
investment securities, and they are included in Level 1. Level 1 securities
primarily include publicly-traded equity securities.
When quoted market prices are unobservable, the Fund uses quotes from
independent pricing vendors based on recent trading activity and other relevant
information including market interest rate curves, referenced credit spreads and
estimated prepayment rates where applicable. These investments are included in
level 2 and primarily include long-term US government, agency and corporate
debt, notes, bonds, and mortgage backed securities. In infrequent circumstances,
the Fund's pricing vendors may provide valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
classified in Level 3.
Other financial instruments are derivative instruments that are not reflected in
Total Investments, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------------
Investments in Securities $198,267,918 $588,676 $ -- $198,856,594
Other Financial Instruments (115,311) -- -- (115,311)
19
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values.
20
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Writing puts and buying calls tend to increase the Fund's exposure to the
underlying instrument while buying puts and writing calls tend to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
The Fund will not enter into a transaction involving options for speculative
purposes. The Fund's risks in using these contracts include changes in the value
of the underlying instruments, non-performance of the counterparties under the
contracts' terms and changes in the liquidity of the secondary market for the
contracts. Options are valued at the last sale price, or if no sales occurred on
that day, at the last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2009, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- --------------------------------------------------------------------------------
$253,449,760 $29,922,887 $(84,516,053) $(54,593,166)
As of December 31, 2008, the Fund has capital loss carryovers, as indicated
below.
Amount Expires
- --------------------------------------------------------------------------------
$21,852,323 12/31/16
During the year ended December 31, 2008, there were no capital loss carryover
expirations. Any net capital and currency losses incurred after October 31,
within the Fund's tax year, are deemed to arise on the first day of the Fund's
next tax year if the Fund so elects to defer such losses.
The Fund incurred $3,878,195 losses after October 31, 2008.
The tax composition of distributions paid during the years ended December 31,
2008 and December 31, 2007 were as follows:
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
2008 $6,315,180 $1,148,328 $ 7,463,508
2007 7,666,833 6,622,449 14,289,282
21
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures,
distributions from Real Estate Investment Trusts (REITS), and losses deferred
due to wash sale transactions. Reclassifications due to permanent book/tax
differences are made to the Fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryovers) under income
tax regulations. These reclassifications have no impact on net investment
income, realized gains or losses, or the net asset value of the Fund. The
calculation of net investment income per share in the Financial Highlights table
excludes these adjustments.
The reclassifications for the year ended December 31, 2008 were as follows:
Undistributed
(Distribution in Excess of) Accumulated
Net Investment Income Net Realized Gain
- --------------------------------------------------------------------------------
$(42,881) $42,881
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2005, 2006, 2007 and 2008 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Fund specific expenses are allocated to the Fund that incurs such
expense and pro rata across share classes. Expenses, other than those incurred
by a specific Fund, are allocated pro rata among Funds and share classes. Such
expenses may include custodial fees, legal and accounting fees, printing costs
and registration fees. All expenses of the Fund are paid by GEAM and reimbursed
by the Fund. Certain class specific expenses (such as transfer agency fees or
distribution fees) are allocated to the class that incurs such expense.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES On March 19, 2008, the FASB issued
Statement of Financial Accounting Standards No. 161 ("FAS No. 161"), "Disclosure
about Derivative Instruments and Hedging Activities." This new accounting
statement requires enhanced disclosures about an entity's derivative and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity invests in derivatives, (b) how derivatives are accounted for
under FAS No. 133, and (c) how derivatives affect an entity's financial
position, financial performance, and cash flows. FAS No. 161 also requires
enhanced disclosures regarding credit-risk-related contingent features of
derivative instruments.
The Fund is subject to equity price risk in the normal course of pursuing their
investment objectives. The Fund may use futures contracts to gain exposure to,
or hedge against changes in the value of equities. A futures contract represents
a commitment for the future purchase or sale of an asset at a specified price on
a specified date. Upon entering into such contracts, the Fund is required to
deposit with the broker, either in cash or securities, an initial margin in an
amount equal to a certain percentage of the contract amount. Subsequent payments
(variation margin) are made or received by the Fund each day, depending on the
daily fluctuations in the value of the contract, and are recorded for financial
statement purposes as unrealized gains or losses by the Fund. Upon entering into
such contracts, the Fund bears the risk of securities prices moving
unexpectedly, in which case, the Fund may not achieve the anticipated benefits
of the futures contracts and may realize a loss. With futures contracts, there
is minimal counterparty credit risk to the Fund since futures contracts are
exchange traded and the exchange's clearinghouse, as counterparty to all traded
futures, guarantees the futures against default.
22
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Shown below are the derivative contracts entered into by the Fund, summarized by
primary risk exposure.
Asset Derivatives June 30, 2009 Liability Derivatives June 30, 2009
Derivatives not ----------------------------------------------------- --------------------------------------
accounted for as Location in Notional Location in Notional
hedging instruments the Statements Value/No. of the Statements Value/No. of
under FASB of Assets Contracts Fair of Assets Contracts Fair
Statement 133 and Liabilities Long/(Short) Value and Liabilities Long/(Short) Value
- --------------------------------------------------------------------------------------------------------------------
Equity Contracts Receivables, Net Assets - 5,100 (115,311)* -- -- --
Unrealized Appreciation/
(Depreciation)
- --------------------------------------------------------------------------------------------------------------------
* INCLUDES CUMULATIVE APPRECIATION/DEPRECIATION OF FUTURES CONTRACTS AS
REPORTED IN THE SCHEDULE OF INVESTMENTS. ONLY THE CURRENT DAY'S VARIATION
MARGIN IS REPORTED WITHIN THE STATEMENT OF ASSETS AND LIABILITIES.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Change in Unrealized
Derivatives not accounted Location in the Realized Gain or Appreciation/(Depreciation)
for as hedging instruments Statements of (Loss) on Derivatives on Derivatives
under FASB Statement 133 Operations Recognized in Income Recognized in Income
- ---------------------------------------------------------------------------------------------------------------
Equity Contracts Net realized gain/(loss) on 434,780 (235,415)
futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on futures
- ---------------------------------------------------------------------------------------------------------------
3. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund at an
annualized rate of 0.35%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2009, $1,819 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information).
4. SUB-ADVISORY FEES
Pursuant to an investment sub-advisory agreement with GEAM, SSgA Funds
Management, Inc. ("SSgA") is the Sub-Adviser to the S&P 500 Index Fund. SSgA is
responsible for the day-to-day portfolio management of the assets of the Fund,
including the responsibility for making decisions to buy, sell or hold a
particular security, under the general supervision of GEAM and the Board.
For its services, GEAM pays SSgA monthly sub-advisory fees which are calculated
as a percentage of the average daily net assets of the Fund.
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2009 were as follows:
U.S. Government Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$ -- $ --
Other Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$4,120,215 $16,694,965
23
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 60
POSITION(S) HELD WITH FUND Chairman of the Board and President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 11 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS President and Chief Executive
Officer - Mutual Funds and Intermediary Business since March 2007; Executive
Vice President of GEAM from February 1997 to March 2007; Director of GEAM since
1988; Vice President, GE Capital Corporation, an indirect wholly-owned
subsidiary of GE, since December 1999; Executive Vice President - Sales and
Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, from
March 1993 to March 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds since its inception; Trustee of
General Electric Savings & Security Trust, General Electric S&S Income Fund,
General Electric S&S Program Mutual Fund ("GE Savings & Security Funds"), Elfun
Funds, General Electric Insurance Plan Trust, General Relief Loan Fund, and
General Electric Pension Trust since 1988; Trustee of Fordham University since
2002; Trustee of GE Volunteers since 1993; Director, GE Asset Management
(Ireland) since February 1999; Director, GE Asset Management Funds Plc., GE
Asset Canada Company, and GE Asset Management Limited since 1998.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Director and Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds since July 2007.
24
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 43
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years (Vice President); one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
from September 2003 to July 2007; Vice President and Secretary of GE Funds and
GE Institutional Funds since July 2007; Vice President and Assistant Secretary
of Elfun Funds and GE Savings & Security Funds since October 2003.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
25
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 63
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since its inception; Trustee of Fordham University since
2002 and Marymount College from 2001 through 2002; Neuroscience Research
Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn &
Queens since 2001; Gregorian University Foundation since 1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 73
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception; Trustee, St. Francis Hospital Corp.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
26
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J. Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS &
INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Ralph R. Layman, PRESIDENT - PUBLIC EQUITIES (SINCE JULY 2009)
Maureen B. Mitchell, PRESIDENT - INSTITUTIONAL SALES AND MARKETING (SINCE JULY
2009)
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST (SINCE JULY 2009)
Don W. Torey, PRESIDENT - ALTERNATIVE INVESTMENTS
John J. Walker, EVP, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT - INVESTMENT STRATEGIES
27
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii)
on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
- --------------------------------------------------------------------------------
[GE LOGO]
GE Investments Funds, Inc.
Premier Growth Equity Fund Letter from the Chairman
- --------------------------------------------------------------------------------
[PHOTO OF MICHAEL J. COSGROVE]
MICHAEL J. COSGROVE
CHAIRMAN,
GE INVESTMENTS FUNDS, INC.
DEAR SHAREHOLDER:
Attached is the semi-annual report for the GE Investments Funds, Inc. -- Premier
Growth Equity Fund (the "Fund") for the six-month period ended June 30, 2009.
The report contains information about the performance of the Fund, and other
Fund specific data, along with portfolio manager commentary. We have provided
you with an overview of the investment markets, along with our investment
outlook for the coming months.
MARKET OVERVIEW
Despite investors' hopes that the new U.S. administration and Congress would
help stabilize the nation's financial crisis, asset values continued to fall in
the first quarter of 2009. Global equities experienced sharp price declines in
January and February as troubles in the United States continued to cast a cloud
over world markets. U.S. Treasury Secretary Geithner indicated that some U.S.
banks would need large amounts of assistance to survive and talks of stress
tests and bank nationalization spooked investors. The markets also booed
government plans to take a 36% stake in Citigroup even as the financial status
of institutions already on government life-support, such as AIG, remained
uncertain. Similarly, news of troubled automakers GM and Chrysler worried
international bondholders and shareholders alike. Financial services and small
cap stocks were hardest hit in the downswing as equity indexes broke the
November 2008 lows in February. Government debt issues also had a rough February
as U.S. and U.K. debt auctions saw weak support for long and non-inflation
indexed government securities. These poor showings were soon followed by a
warmer reception for shorter-dated debt.
U.S. stocks abruptly reversed course and posted three straight weeks of gains
through the end of March after the three largest U.S. banks announced they had
turned a profit. Equity indexes around the globe followed the U.S. path,
regaining much of their losses since January. In late March, the U.S. Treasury
Secretary unveiled his Public- Private Investment Partnership (PPIP) plan to
remove toxic assets from the balance sheets of the nation's banks, and the
markets seemed convinced of a financial sector backstop. Another policy move to
support the markets came on March 18th when the Federal Reserve announced that
it would buy $300 billion of 2- and 10-year Treasuries, increase its purchase
plan of agency mortgage-backed securities from $500 billion to $1.25 trillion,
double its purchases of agency debt to $200 billion and expand the eligible
collateral in the Term Asset-Backed Securities Loan Facility (TALF) program. In
response, the yield on the U.S. Treasury 10-year note fell 47 basis points to
2.53%, recording the largest one-day drop in over four decades.
The rebound in global equities continued into the second quarter, as markets
experienced strong gains in April and May, before tailing off into a flat June
as investors started to question the strength and timing of an economic
recovery. Despite a double-digit rally since mid-March, the S&P 500 Index ended
the second quarter approximately where it started at the beginning of 2009
(priced in the low 900s). Emerging markets equities continued to outperform
their developed peers during the second quarter. The MSCI Emerging Markets Index
gained 34.7%, its best quarterly return since data collection began in 1988.
Speculation persists that developing markets are better positioned to weather
the global recession given that their financial systems are generally better
capitalized and less leveraged than the developed countries.
During the second quarter, U.S. government stress tests concluded and the banks
that needed capital swiftly and successfully raised it. The Federal Reserve also
announced that it would allow 10 large banks to repay bailout funds from the
government's controversial Troubled Asset Relief Program. In this environment,
financial stocks enjoyed a notably strong quarter, bolstered by growing
speculation that the worst of the global banking crisis was over. However,
financial risks remain as the European Central Bank said that European banks
might need to write down an additional $283 billion by the end of next year. In
late June, The European Central Bank also injected (euro)442 billion ($621
billion) into Europe's banking system in one-year funds to spur lending and help
stabilize the economy.
[GE LOGO]
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Premier Growth Equity Fund Letter from the Chairman (Continued)
- --------------------------------------------------------------------------------
Against this backdrop, financial markets posted improved results for the six-
and 12-month periods ended June 30.
TOTAL RETURNS AS OF
JUNE 30, 2009 6-MONTH 12-MONTH
- --------------------------------------------------------------------------------
U.S. equities (S&P 500 Index) 3.16 -26.21
Global equities (MSCI World Index) 6.35 -29.50
International equities (MSCI EAFE Index) 7.95 -31.35
Emerging Markets equities (MSCI EM
Index) 36.01 -28.07
Small-cap U.S. equities (Russell 2000
Index) 2.64 -25.01
Mid-cap U.S. equities (Russell Mid Cap
Index) 9.96 -30.36
U.S. fixed income (Barclays Capital
U.S. Aggregate Bond Index) 1.90 6.05
U.S. short-term government fixed income
(Barclays Capital U.S. Treasury Bond
Index 1-3 Year) 0.47 4.94
U.S. tax-exempt income (Barclays
Capital U.S. Municipal Bond Index 10
year) 4.38 5.58
- --------------------------------------------------------------------------------
OUTLOOK
Uncertainty will likely continue around the strength and timing of a U.S.
economic recovery. With unemployment at a 25-year high of 9.5%, and American
consumers having suffered a collapse in wealth of at least $15 trillion since
early 2007, it is hard to have much confidence in a consumer-driven recovery in
the short term. We believe the economy will work below its potential for many
quarters to come as deleveraging continues among consumers and global financial
institutions.
While equity markets have enjoyed a bounce off of the bottom over the first half
of the year, the positive earnings surprises in April and May came mostly from
productivity gains and cost containment programs. Earnings in the second quarter
will be heavily scrutinized for evidence that a real recovery is sustainable and
that restocking is giving way to growth in final demand. We believe companies
are going to have to show evidence of a top-line recovery -- increased demand
and improving fundamentals -- in order for stocks to work their way higher.
Given the economic headwinds we're facing, consolidation of the second quarter's
gains seems a real possibility.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. We encourage
long-term investors to maintain a diversified investment approach that is
consistent with their goals, time horizon and risk tolerance. While diversified
portfolios are not immune to market downturns, history suggests they can put you
in a position to benefit from the inevitable return to better times.
Thank you for investing with GE Investments Funds.
Sincerely,
/s/ Michael J. Cosgrove
Michael J. Cosgrove
CHAIRMAN, GE INVESTMENTS FUNDS, INC.
JUNE 2009
MIKE COSGROVE IS PRESIDENT AND CHIEF EXECUTIVE OFFICER -MUTUAL FUNDS &
INTERMEDIARY BUSINESS AT GE ASSET MANAGEMENT. MR. COSGROVE ALSO SERVES AS A
TRUSTEE OF THE GE PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM. PREVIOUSLY
CHIEF FINANCIAL OFFICER OF GE ASSET MANAGEMENT AND ASSISTANT TREASURER - GE
COMPANY, MIKE JOINED GE IN 1970 AND HELD A NUMBER OF MANAGERIAL POSITIONS IN
FINANCE AND SALES AT GE'S INTERNATIONAL OPERATION AND IN GE TRADING COMPANY.
MIKE HAS A B.S. IN ECONOMICS FROM FORDHAM UNIVERSITY AND AN M.B.A. FROM ST.
JOHN'S UNIVERSITY.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC.
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
[SIDE BAR]
GE Investments Funds, Inc.
Premier Growth Equity Fund
Semi-Annual Report
JUNE 30, 2009
[GE LOGO]
GE Investments Funds, Inc.
Premier Growth Equity Fund Contents
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE ...................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ................................ 2
NOTES TO SCHEDULE OF INVESTMENTS .......................................... 8
FINANCIAL STATEMENTS
Financial Highlights ................................................... 9
Statement of Assets and Liabilities .................................... 10
Statement of Operations ................................................ 11
Statements of Changes in Net Assets .................................... 12
Notes to Financial Statements .......................................... 13
ADDITIONAL INFORMATION .................................................... 20
INVESTMENT TEAM ........................................................... 23
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
Notes to Performance June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any. Total returns shown
are net of Fund expenses but do not reflect fees and charges associated with the
variable contracts such as administrative fees, account charges and surrender
charges, which, if reflected, would reduce the Fund's total returns for all
periods shown.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in a Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. An investment in a Fund is subject to risk, including
possible loss of principal invested.
The Standard & Poor's ("S&P") 500(R) Composite Price Index of stocks (S&P 500
Index) is an unmanaged index and does not reflect the actual cost of investing
in the instruments that comprise the index. The S&P 500 Index is a market
capitalization-weighted index of stocks of 500 large U.S. companies, which is
widely used as a measure of large-cap stock market performance. The results
shown for the foregoing index assume the reinvestment of net dividends or
interest.
The peer universe of the underlying annuity funds used in our peer group average
return calculation is based on the blend of Morningstar peer categories, as
shown. Morningstar is an independent mutual fund rating service. A Fund's
performance may be compared to or ranked within a universe of mutual funds with
investment objectives and policies similar but not necessarily identical to the
Fund's.
(C)2009 Morningstar, Inc. All Rights Reserved. The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is no warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are responsible for any
damage or losses relating from any use of this information. Past performance is
no guarantee or future results.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUND.
1
Premier Growth Equity Fund
- --------------------------------------------------------------------------------
[PHOTO OF DAVID B. CARLSON]
DAVID B. CARLSON
DAVID B. CARLSON IS CHIEF INVESTMENT OFFICER - U.S. EQUITIES AT GE ASSET
MANAGEMENT. HE MANAGES THE OVERALL U.S. EQUITY INVESTMENTS FOR GE ASSET
MANAGEMENT. MR. CARLSON IS PORTFOLIO MANAGER FOR THE PREMIER GROWTH EQUITY FUND
AND HAS SERVED IN THAT CAPACITY SINCE THE FUND'S COMMENCEMENT. MR. CARLSON
JOINED GE ASSET MANAGEMENT IN 1982 AS A SECURITIES ANALYST FOR INVESTMENT
OPERATIONS. HE BECAME A VICE PRESIDENT FOR MUTUAL FUND PORTFOLIOS IN 1987, A
SENIOR VICE PRESIDENT IN 1989.
Q. HOW DID THE PREMIER GROWTH EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK
AND MORNINGSTAR PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009?
A. For the six-month period ended June 30, 2009, the Premier Growth Equity
Fund returned 17.60% for the Class 1 shares and 17.34% for the Class 4
shares. The S&P 500 Index, the Fund's benchmark, returned 3.16% and the
Fund's Morningstar peer group of 432 US Insurance Large-Cap Growth funds
returned an average of 11.35% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The U.S. equity markets almost made a round trip in the first half of
2009. Stocks fell sharply through early March against a backdrop of severe
global economic recession, but picked up again as clarity emerged in the
U.S. financial sector with the resolution of the government bank stress
tests and improving credit spreads. By the end of the period, the equity
rally lost momentum -- while the S&P 500 achieved a greater than 14%
return from March 31st to May 4th, it advanced just 1% in the next eight
weeks. June's returns were basically flat, reflecting investor uncertainty
on whether or not the fundamentals were in place for sustainable economic
growth. Sector performance has been mixed, with only three S&P 500 sectors
achieving year-to-date gains: information technology (+25%), materials
(+14%) and consumer discretionary (+9%). The defensive health care sector
was flat on a total return basis. Financials, although they rallied almost
36% in the second quarter, are down 3% year-to-date. Industrials (-6%) and
telecom (-4%) have also lagged. In this environment, growth outperformed
value as evidenced by the returns of the Russell 1000 Growth (+11.5%) and
Russell 1000 Value (-2.9%), and large caps beat small caps -- although the
smaller, lower quality companies led the market in the second quarter's
rally.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund benefited from positive contributions in every economic sector
year-to-date; however financials contributed the most, returning 36%
versus a 3% decline in the S&P 500 sector. Owning outperformers among
diversified financials and capital markets helped us to take advantage of
the strong up-market in financials during the second half of the period.
Chicago Mercantile Exchange Group (+51%), and Goldman Sachs (+76%)
exemplified the broad-based strength among Premier Growth's holdings in
this volatile sector. An advantageous tech overweight was also a key
performance driver, with notable strength among companies benefiting from
growth in the smart phone market, including Research in Motion (+75%) and
Qualcomm (+27%). Within energy, emphasizing services companies like
Transocean (+57%) at the expense of large integrated oil companies (-6%)
helped returns. And one final key single-stock contributor was Liberty
Media Entertainment, which soared 53% on news of its deal to combine with
DirecTV.
2
- --------------------------------------------------------------------- [Q&A LOGO]
On a sector level, materials was the only sector to slightly detract from
performance, as the Fund missed a rally in metals and mining stocks during
the period. Our Premier Growth process prefers companies with sustainable
earnings growth profiles as opposed to the more cyclical patterns
characteristic of most materials and industrial companies. In terms of
single stock detractors in a generally strong period of stock selection,
Aflac (-31%), Comcast (-12%), Amgen (-8%), Lincare (-13%) and Lowe's (-9%)
tempered the Fund's outperformance.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. We ended the period with 35 stocks in the portfolio, consistent with our
history. The Fund's largest sector weighting remains technology at
approximately 32% of the portfolio. Some of corporate America's strongest
balance sheets are in the technology sector, with companies such as
Microsoft, Qualcomm, and Cisco holding extremely large cash balances and
little to no debt. We ended the period with a new underweight in health
care, as we tendered our shares of Genentech to Roche at $95 per share,
and eliminated Johnson & Johnson. The Fund also went from underweight to
overweight in financials, as signs of healing emerged in terms of a
reduction in spreads as well as a more constructive capital raising
environment. While we made incremental purchases of CME, State Street and
Aflac, strong price movements in many of our core financials holdings
bolstered our positioning (e.g., CME which we believe will benefit from a
migration in derivatives transactions from over-the-counter to exchanges
and Goldman Sachs which has managed to remain profitable throughout the
credit crisis). The portfolio remains overweight in consumer discretionary
(primarily media and retail) and underweight in energy, although we will
likely add to this sector when we see signs of a better economy.
3
Premier Growth Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2009.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2009 - JUNE 30, 2009
- --------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ----------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ----------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,175.95 4.86
Class 4 1,000.00 1,173.36 7.17
- ----------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ----------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,020.13 4.51
Class 4 1,000.00 1,018.03 6.65
- ----------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.90% FOR
CLASS 1 SHARES AND 1.33% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1,
2009 - JUNE 30, 2009), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE
PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE ONE-HALF YEAR PERIOD)
** ACTUAL FUND RETURNS FOR SIX-MONTH PERIOD ENDED JUNE 30, 2009 WERE AS
FOLLOWS: 17.60% FOR CLASS 1 SHARES, AND 17.34% FOR CLASS 4 SHARES.
4
Premier Growth Equity Fund (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
Premier Growth Equity Fund S&P 500 Index
06/99 $10,000 $10,000
12/99 $11,343 $10,784
12/00 $10,750 $ 9,794
12/01 $ 9,767 $ 8,627
12/02 $ 7,715 $ 6,720
12/03 $ 9,945 $ 8,651
12/04 $10,645 $ 9,592
12/05 $10,782 $10,064
12/06 $11,760 $11,654
12/07 $12,388 $12,294
12/08 $ 7,847 $ 7,746
06/09 $ 9,227 $ 7,991
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2009
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 12/12/97)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS YEAR YEAR YEAR $10,000 INVESTMENT
- -----------------------------------------------------------------------------------------------
Premier Growth Equity Fund 17.60% -19.97% -1.67% -0.80% $9,227
- -----------------------------------------------------------------------------------------------
S&P 500 Index 3.16% -26.21% -2.24% -2.22% $7,991
- -----------------------------------------------------------------------------------------------
Morningstar peer group average* 11.35% -27.32% -2.03% -2.65%
===============================================================================================
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
Premier Growth Equity Fund S&P 500 Index
05/01/08 $10,000 $10,000
06/08 $ 9,352 $ 9,276
09/08 $ 8,800 $ 8,499
12/08 $ 6,351 $ 6,634
06/09 $ 7,452 $ 6,844
- --------------------------------------------------------------------------------
TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 2009
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
SIX ONE SINCE ENDING VALUE OF A
MONTHS YEAR INCEPTION $10,000 INVESTMENT
- ---------------------------------------------------------------------------------------------
Premier Growth Equity Fund 17.34% -20.32% -22.28% $7,452
- ---------------------------------------------------------------------------------------------
S&P 500 Index 3.16% -26.21% -27.75% $6,844
- ---------------------------------------------------------------------------------------------
Morningstar peer group average** 11.35% -27.32%
=============================================================================================
INVESTMENT PROFILE
A Fund designed for investors who seek long-term growth of capital and future
income rather than current income by investing at least 80% of its net assets in
equity securities under normal circumstances. The Fund invests primarily in a
limited number of large-and medium-sized companies that the portfolio manager
believes have above-average growth histories and/or growth potential.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2009
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $45,399 (in thousands)
[PIE CHART]
Information Technology 34.7%
Consumer Discretionary 17.5%
Financials 15.1%
Healthcare 12.2%
Energy 6.8%
Consumer Staples 3.5%
Materials 3.2%
Industrials 2.9%
Telecommunication Services 2.3%
Short-Term 1.8%
Other Investments 0.0%***
TOP TEN LARGEST EQUITY HOLDINGS
AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
QUALCOMM Inc. 4.80%
- --------------------------------------------------------------------------------
Liberty Media Corp - Entertainment (Series A) 4.77%
- --------------------------------------------------------------------------------
The Western Union Co. 4.20%
- --------------------------------------------------------------------------------
CME Group Inc. 4.17%
- --------------------------------------------------------------------------------
Intuit, Inc. 4.12%
- --------------------------------------------------------------------------------
State Street Corp. 4.10%
- --------------------------------------------------------------------------------
Amgen Inc. 3.95%
- --------------------------------------------------------------------------------
Schlumberger Ltd. 3.63%
- --------------------------------------------------------------------------------
Bed Bath & Beyond, Inc. 3.56%
- --------------------------------------------------------------------------------
PepsiCo, Inc. 3.52%
================================================================================
* MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS
INDICATED IN THE LARGE GROWTH PEER GROUP CONSISTING OF 432, 420, 336, AND
148 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS AND ONE YEAR PERIODS INDICATED IN THE LARGE
GROWTH PEER GROUP CONSISTING OF 432 AND 420 UNDERLYING ANNUITY FUNDS,
RESPECTIVELY.
*** LESS THAN 0.1%.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
5
PREMIER GROWTH EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREMIER GROWTH EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.6% +
- --------------------------------------------------------------------------------
BEVERAGES -- 3.5%
PepsiCo, Inc. ............................... 29,063 $ 1,597,302
BIOTECHNOLOGY -- 5.8%
Amgen Inc. .................................. 33,907 1,795,037 (a)
Gilead Sciences, Inc. ....................... 17,577 823,307 (a)
2,618,344
CAPITAL MARKETS -- 7.3%
State Street Corp. .......................... 39,443 1,861,710 (c)
The Goldman Sachs Group, Inc. ............... 9,688 1,428,399
3,290,109
CHEMICALS -- 3.2%
Monsanto Co. ................................ 19,375 1,440,337
COMMERCIAL SERVICES & SUPPLIES -- 2.7%
Iron Mountain Inc. .......................... 42,211 1,213,566 (a)
COMMUNICATIONS EQUIPMENT -- 10.0%
Cisco Systems, Inc. ......................... 76,117 1,418,821 (a,d)
QUALCOMM Inc. ............................... 48,162 2,176,922
Research In Motion Ltd. ..................... 13,148 934,165 (a)
4,529,908
DIVERSIFIED FINANCIAL SERVICES -- 4.2%
CME Group Inc. .............................. 6,089 1,894,349
ELECTRONIC EQUIPMENT, INSTRUMENTS &
COMPONENTS -- 3.7%
Corning Inc. ................................ 61,309 984,622
Molex Inc. (Class A) ........................ 48,992 704,505 (d)
1,689,127
ENERGY EQUIPMENT & SERVICES -- 6.8%
Schlumberger Ltd. ........................... 30,447 1,647,487
Transocean Ltd. ............................. 19,375 1,439,369 (a)
3,086,856
HEALTHCARE EQUIPMENT & SUPPLIES -- 2.0%
Medtronic, Inc. ............................. 25,465 888,474
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
HEALTHCARE PROVIDERS & SERVICES -- 4.5%
Express Scripts, Inc. ....................... 7,474 $ 513,837 (a)
Lincare Holdings Inc. ....................... 31,831 748,665 (a)
VCA Antech, Inc. ............................ 28,371 757,506 (a)
2,020,008
HOTELS RESTAURANTS & LEISURE -- 1.8%
Carnival Corp. .............................. 31,139 802,452
INSURANCE -- 1.8%
Aflac Inc. .................................. 26,987 839,026
INTERNET SOFTWARE & SERVICES -- 3.1%
Baidu, Inc ADR .............................. 1,887 568,157 (a)
eBay Inc. ................................... 47,746 817,889 (a)
1,386,046
IT SERVICES -- 8.5%
Paychex, Inc. ............................... 36,674 924,185
The Western Union Co. ....................... 116,252 1,906,533
Visa, Inc. (Class A) ........................ 16,608 1,034,014
3,864,732
MACHINERY -- 2.9%
Dover Corp. ................................. 39,443 1,305,169
MEDIA -- 10.2%
Comcast Corp. (Class A) ..................... 100,336 1,414,738
Liberty Global, Inc. (Series C) ............. 65,046 1,028,377 (a)
Liberty Media Corp - Entertainment
(Series A) ............................... 80,961 2,165,707 (a)
4,608,822
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 1.8%
CB Richard Ellis Group, Inc.
(Class A) ................................ 87,189 816,089 (a)
SOFTWARE -- 6.8%
Intuit, Inc. ................................ 66,430 1,870,669 (a,d)
Microsoft Corp. ............................. 51,206 1,217,167
3,087,836
SPECIALTY RETAIL -- 5.6%
Bed Bath & Beyond, Inc. ..................... 52,590 1,617,142 (a)
Lowe's Companies, Inc. ...................... 48,023 932,126
2,549,268
WIRELESS TELECOMMUNICATION SERVICES -- 2.4%
American Tower Corp. (Class A) .............. 33,907 1,069,088 (a)
TOTAL COMMON STOCK
(COST $52,187,247) ....................... 44,596,908
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
PREMIER GROWTH EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $4,771) ............................ $ 2,624 (e)
TOTAL INVESTMENTS IN SECURITIES
(COST $52,192,018) ....................... 44,599,532
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.8%
- --------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class
0.28% .................................... 799,138 (b,f)
(COST $799,138)
TOTAL INVESTMENTS
(COST $52,991,156) ....................... 45,398,670
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (0.4)% ............................ (171,009)
------------
NET ASSETS -- 100.0% ........................ $ 45,227,661
============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Premier Growth Equity had the following short futures contracts open at
June 30, 2009 (unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------
S&P 500 Index
Futures September 2009 2 $(457,750) $(9,213)
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
Notes to Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(d) At June 30, 2009, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(e) GEAM, the investment adviser of the Fund, also serves as the investment
adviser of the GEI Investment Fund.
(f) GEAM, the investment adviser of the Fund, also serves as investment
adviser of the GE Money Market Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2009.
Abbreviations:
ADR American Depository Receipt
8
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
PREMIER GROWTH EQUITY FUND
----------------------------------------------------------------- ------------------------
CLASS 1 CLASS 4
----------------------------------------------------------------- ------------------------
6/30/09+ 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 6/30/09+ 12/31/08**
----------------------------------------------------------------- ------------------------
INCEPTION DATE -- -- -- -- -- 12/12/97 -- 5/1/08
Net asset value, beginning of period .. $ 46.49 $ 78.95 $ 82.17 $ 75.65 $ 74.95 $ 70.46 $46.55 $ 78.52
INCOME/(LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income (loss) ....... 0.14 0.30 0.23 0.35 0.24 0.47 (0.06) 0.02
Net realized and unrealized
gains/(losses) on investments ... 8.04 (29.32) 4.19 6.51 0.73 4.48 8.13 (28.75)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS .............. 8.18 (29.02) 4.42 6.86 0.97 4.95 8.07 (28.73)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .............. -- 0.26 0.23 0.34 0.27 0.46 -- 0.06
Return of Capital .................. -- 0.01 -- -- -- -- -- 0.01
Net realized gains ................. -- 3.17 7.41 -- -- -- -- 3.17
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -- 3.44 7.64 0.34 0.27 0.46 -- 3.24
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ........ $ 54.67 $ 46.49 $ 78.95 $ 82.17 $ 75.65 $ 74.95 $54.62 $ 46.55
====================================================================================================================================
TOTAL RETURN (a) ..................... 17.60% (36.66)% 5.34% 9.07% 1.29% 7.03% 17.34% (36.49)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) ...................... $45,220 $ 43,308 $ 94,720 $ 110,538 $126,682 $137,801 $ 7 $ 6
Ratios to average net assets:
Net investment income* .......... 0.38% 0.36% 0.24% 0.41% 0.30% 0.62% (0.06)% 0.05%*
Expenses* ....................... 0.90%(b) 0.76%(b) 0.72% 0.71% 0.71% 0.71% 1.33%(b) 1.21%(b)*
Portfolio turnover rate ............ 10% 23% 29% 27% 34% 22% 10% 23%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges.
(b) Reflects GEAM's waiver of a portion of the Fund's management fee in an
amount equal to the management fee earned by GEAM with respect to the
Fund's investment in the GE Funds - GE Money Market Fund. Excluding
waiver, the expense ratios would be unchanged.
* Annualized for periods less than one year.
** Per share values have been calculated using the average share method.
+ Unaudited
See Notes to Financial Statements.
9
PREMIER
Statement of Assets GROWTH
and Liabilities JUNE 30, 2009 (UNAUDITED) EQUITY FUND
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $52,187,247) ..... $ 44,596,908
Investments in affiliated securities, at market
(cost $4,771) ............................................ 2,624
Short-term affiliated investments (at amortized cost) ....... 799,138
Receivable for investments sold ............................. 91,005
Income receivables .......................................... 19,682
Receivable for fund shares sold ............................. 968
Variation margin receivable ................................. 2,850
- --------------------------------------------------------------------------------
TOTAL ASSETS ............................................. 45,513,175
- --------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ........................... 135,612
Payable for fund shares redeemed ............................ 61,616
Payable to GEAM ............................................. 47,338
Accrued other expenses ...................................... 33,809
Other liabilities ........................................... 7,139
- --------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................ 285,514
- --------------------------------------------------------------------------------
NET ASSETS ..................................................... $ 45,227,661
================================================================================
NET ASSETS CONSIST OF:
Capital paid in ............................................. 58,128,452
Undistributed (distribution in excess of)
net investment income .................................... 79,563
Accumulated net realized loss ............................... (5,378,655)
Net unrealized depreciation on:
Investments .............................................. (7,592,486)
Futures .................................................. (9,213)
- --------------------------------------------------------------------------------
NET ASSETS ..................................................... $ 45,227,661
================================================================================
CLASS 1:
NET ASSETS ..................................................... 45,220,209
Shares outstanding ($0.01 par value; unlimited shares
authorized) ................................................. 827,161
Net asset value per share ...................................... $ 54.67
CLASS 4:
NET ASSETS ..................................................... 7,452.00
Shares outstanding ($0.01 par value; unlimited shares
authorized) ................................................. 136.00
Net asset value per share ...................................... $ 54.62
See Notes to Financial Statements.
10
Statement of Operations PREMIER
GROWTH
FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) EQUITY FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ................................................. $ 239,012
Interest ................................................. 24,789
Interest from affliated investments ...................... 2,493
- --------------------------------------------------------------------------------
TOTAL INCOME ................................................ 266,294
- --------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ......................... 134,738
Distributors Fees (Notes 4)
Service Class ......................................... 15
Transfer agent ........................................... 9,812
Directors' fees .......................................... 581
Custody and accounting expenses .......................... 21,098
Professional fees ........................................ 11,562
Registration expenses .................................... 1,641
Other expenses ........................................... 8,465
- --------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT .............. 187,912
- --------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser ................. (1,181)
- --------------------------------------------------------------------------------
NET EXPENSES ............................................. 186,731
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME ....................................... 79,563
================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ........................................... (3,464,844)
Futures ............................................... 33,340
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ........................................... 10,039,813
Futures ............................................... (150)
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments .......... 6,608,159
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $ 6,687,722
================================================================================
See Notes to Financial Statements.
11
PREMIER
Statements of GROWTH
Changes in Net Assets EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2009 DECEMBER 31,
(UNAUDITED) 2008
- -----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income ........................................................ $ 79,563 $ 262,873
Net realized gain (loss) on investments and futures ........................... (3,431,504) 745,786
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments and futures ................................................. 10,039,663 (29,818,290)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ....................................... 6,687,722 (28,809,631)
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 .................................................................... -- (222,187)
Class 4 .................................................................... -- (7)
Return of Capital
Class 1 .................................................................... -- (11,151)
Class 4 .................................................................... -- (2)
Net realized gains
Class 1 .................................................................... -- (2,751,709)
Class 4 .................................................................... -- (404)
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............................................................. -- (2,985,460)
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions .............. 6,687,722 (31,795,091)
- -----------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 .................................................................... 386,704 1,952,543
Class 4 .................................................................... -- 10,000
Value of distributions reinvested
Class 1 .................................................................... -- 2,985,047
Class 4 .................................................................... -- 413
Cost of shares redeemed
Class 1 .................................................................... (5,160,992) (24,559,128)
- -----------------------------------------------------------------------------------------------------------------------
Net decrease from share transactions .......................................... (4,774,288) (19,611,125)
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .......................................... 1,913,434 (51,406,216)
NET ASSETS
Beginning of period .............................................................. 43,314,227 94,720,443
- -----------------------------------------------------------------------------------------------------------------------
End of period .................................................................... $45,227,661 $ 43,314,227
=======================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ..... $ 79,563 $ --
- -----------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold ........................................................................ 7,759 28,477
Issued for distributions reinvested ................................................ -- 65,620
Shares redeemed .................................................................... (112,193) (362,227)
- -----------------------------------------------------------------------------------------------------------------------
Net decrease in fund shares ........................................................ (104,434) (268,130)
=======================================================================================================================
CLASS 4
Shares sold ........................................................................ -- 127
Issued for distributions reinvested ................................................ -- 9
- -----------------------------------------------------------------------------------------------------------------------
Net increase in fund shares ........................................................ -- 136
=======================================================================================================================
See Notes to Financial Statements.
12
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of fourteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund (the "Fund"), Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap
Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
The Company offers two share classes (Class 1 and Class 4) of the Fund as
investment options for variable life insurance and variable annuity contracts.
Class 4 shares were first offered on May 1, 2008, and Fund shares outstanding
prior to May 1, 2008 were designated as Class 1 shares. Each share class has
different fees and expenses, and as a result, each share class will have
different share price and performance. Not all variable contracts offer both
share classes of the Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTION
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on recent trading activity and other
relevant information which may include market interest rate curves, referenced
credit spreads and estimated prepayment rates where applicable. In the absence
of a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations. The Fund's written or
purchased options are valued at the last sales price, or if no sales occurred
that day, at the last reported bid price. Short-term investments with remaining
maturities of sixty days or less at the time of purchase are valued on the basis
of amortized cost, which approximates market value.
All assets and liabilities of the Fund that are initially expressed in foreign
currency values will be converted into U.S. dollars at the WM/Reuters exchange
rate computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
13
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Fund adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards 157, FAIR VALUE MEASUREMENTS ("SFAS
157"). SFAS 157 establishes a new framework for measuring fair value and expands
related disclosures. Broadly, the SFAS 157 framework requires fair value to be
determined based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants. SFAS 157 establishes a three-level valuation hierarchy
based upon observable and unobservable inputs.
For financial assets and liabilities, fair value is the price that would be
received to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets and liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect our market assumptions. Preference is given to
observable inputs. These two types of inputs create the following fair value
hierarchy:
Level 1 -- Quoted prices for identical investments in active markets.
Level 2 -- Quoted prices for similar investments in active markets; quoted
prices for identical or similar investments in markets that are not
active; and model-derived valuations whose significant value drivers are
observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
The Fund maintains policies and procedures to value investments using the best
and most relevant data available. The Fund performs periodic reviews of the
methodologies used by independent pricing services including obtaining price
validation for certain securities. The following section describes the valuation
methodologies that the Fund uses to measure investments at fair value.
When available, the Fund uses quoted market prices to determine fair value of
investment securities, and they are included in Level 1. Level 1 securities
primarily include publicly-traded equity securities.
When quoted market prices are unobservable, the Fund uses quotes from
independent pricing vendors based on recent trading activity and other relevant
information including market interest rate curves, referenced credit spreads and
estimated prepayment rates where applicable. These investments are included in
level 2 and primarily include long-term US government, agency and corporate
debt, notes, bonds, and mortgage backed securities. In infrequent circumstances,
the Fund's pricing vendors may provide valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
classified in Level 3.
Other financial instruments are derivative instruments that are not reflected in
Total Investments, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------------
Investments in Securities $ 45,396,046 $ 2,624 $ -- $ 45,398,670
Other Financial Instruments (9,213) -- -- (9,213)
14
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values.
15
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Writing puts and buying calls tend to increase the Fund's exposure to the
underlying instrument while buying puts and writing calls tend to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
The Fund will not enter into a transaction involving options for speculative
purposes. The Fund's risks in using these contracts include changes in the value
of the underlying instruments, non-performance of the counterparties under the
contracts' terms and changes in the liquidity of the secondary market for the
contracts. Options are valued at the last sale price, or if no sales occurred on
that day, at the last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders.
Therefore, no provision for federal income tax has been made. The Fund is
treated as a separate taxpayer for federal income tax purposes.
At June 30, 2009, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- --------------------------------------------------------------------------------
$54,610,658 $1,963,833 $(11,175,821) $(9,211,988)
As of December 31, 2008, the Fund has no capital loss carryovers as indicated
below. Capital loss carryovers are available to offset future realized capital
gains to the extent provided in the Internal Revenue Code and regulations
thereunder. To the extent that these carryover losses are used to offset future
capital gains, it is probable that the gains so offset will not be distributed
to shareholders because they would be taxable as ordinary income.
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund incurred $336,712 losses after October 31, 2008.
The tax composition of distributions paid during the years ended December 31,
2008 and December 31, 2007 were as follows:
Ordinary Long-Term Return
Income Capital Gains of Capital Total
- -------------------------------------------------------------
2008 $323,003 $2,651,304 $ 11,153 $2,985,460
2007 477,858 7,913,484 -- 8,391,342
16
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures and
losses deferred due to wash sale transactions. Reclassifications due to
permanent book/tax differences are made to the Fund's capital accounts to
reflect income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. These reclassifications have no impact
on net investment income, realized gains or losses, or the net asset value of
the Fund. The calculation of net investment income per share in the Financial
Highlights table excludes these adjustments.
Undistributed Accumulated
Net Investment Net Realized
Income Loss Paid In Capital
- -----------------------------------------------------------
$(40,895) $52,048 $(11,153)
On October 1, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in
Income Taxes." FIN48 provides guidance for how certain uncertain tax positions
should be recognized, measured, presented and disclosed in the financial
statements. FIN48 requires evaluation of tax positions taken or expected to be
taken in the course of preparing the Fund's tax returns to determine whether the
tax positions are "more likely than not" of being sustained by the applicable
tax authority. The adoption of FIN48 did not have an impact on the Fund's net
assets and financial statements. The Funds' 2005, 2006, 2007 and 2008 calendar
years tax returns are still open to examination by the Federal and applicable
state tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Fund specific expenses are allocated to the Fund that incurs such
expense and pro rata across share classes. Expenses, other than those incurred
by a specific Fund, are allocated pro rata among Funds and share classes. Such
expenses may include custodial fees, legal and accounting fees, printing costs
and registration fees. All expenses of the Fund are paid by GEAM and reimbursed
by the Fund. Certain class specific expenses (such as transfer agency fees or
distribution fees) are allocated to the class that incurs such expense.
DERIVATIVES INSTRUMENTS AND HEDGING ACTIVITIES On March 19, 2008, the FASB
issued Statement of Financial Accounting Standards No. 161 ("FAS No. 161"),
"Disclosure about Derivative Instruments and Hedging Activities." This new
accounting statement requires enhanced disclosures about an entity's derivative
and hedging activities. Entities are required to provide enhanced disclosures
about (a) how and why an entity invests in derivatives, (b) how derivatives are
accounted for under FAS No. 133, and (c) how derivatives affect an entity's
financial position, financial performance, and cash flows. FAS No. 161 also
requires enhanced disclosures regarding credit-risk-related contingent features
of derivative instruments.
The Fund is subject to equity price risk in the normal course of pursuing its
investment objectives. The Fund may use futures contracts to gain exposure to,
or hedge against changes in the value of equities. A futures contract represents
a commitment for the future purchase or sale of an asset at a specified price on
a specified date. Upon entering into such contracts, the Fund is required to
deposit with the broker, either in cash or securities, an initial margin in an
amount equal to a certain percentage of the contract amount. Subsequent payments
(variation margin) are made or received by the Fund each day, depending on the
daily fluctuations in the value of the contract, and are recorded for financial
statement purposes as unrealized gains or losses by the Fund. Upon entering into
such contracts, the Fund bears the risk of securities prices moving
unexpectedly, in which case, the Fund may not achieve the anticipated benefits
of the futures contracts and may realize a loss. With futures contracts, there
is minimal counterparty credit risk to the Fund since futures contracts are
exchange traded and the exchange's clearinghouse, as counterparty to all traded
futures, guarantees the futures against default.
17
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Shown below are the derivative contracts entered into by the Fund, summarized by
primary risk exposure.
Asset Derivatives June 30, 2009 Liability Derivatives June 30, 2009
-------------------------------------- --------------------------------------------------
Derivatives not
accounted for as Location in Notional Location in Notional
hedging instruments the Statements Value/No. of the Statements Value/No. of
under FASB of Assets Contracts Fair of Assets Contracts Fair
Statement 133 and Liabilities Long/(Short) Value and Liabilities Long/(Short) Value
- ---------------------------------------------------------------------------------------------------------------------
Equity Contracts -- -- -- Payables, Net Assets - (500) (9,250)*
Unrealized Appreciation/
(Depreciation)
- ---------------------------------------------------------------------------------------------------------------------
* INCLUDES CUMULATIVE APPRECIATION/DEPRECIATION OF FUTURES CONTRACTS AS
REPORTED IN THE SCHEDULE OF INVESTMENTS. ONLY THE CURRENT DAY'S VARIATION
MARGIN IS REPORTED WITHIN THE STATEMENT OF ASSETS AND LIABILITIES.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Change in Unrealized
Derivatives not accounted Location in the Realized Gain or Appreciation/(Depreciation)
for as hedging instruments Statements of (Loss) on Derivatives on Derivatives
under FASB Statement 133 Operations Recognized in Income Recognized in Income
- -----------------------------------------------------------------------------------------------------------------
Equity Contracts Net realized gain/(loss) on 33,340 (150)
futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on futures
- -----------------------------------------------------------------------------------------------------------------
3. LINE OF CREDIT
The Company shares a revolving credit facility of up to $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established on November 7, 2007. Generally, borrowings under
the credit facilities would accrue interest at the Federal Funds Rate plus 50
basis points and would be borne by the borrowing Fund. The maximum amount
allowed to be borrowed by any one Fund is the lesser of (i) its prospectus
limitation or (ii) 20% of its net assets. The credit facilities were not
utilized by the Fund during the fiscal year ended June 30, 2009.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective November 15, 1997 to act as investment adviser and
administrator of the Fund. GEAM's compensation for investment advisory and
administrative services is paid monthly based on the average daily net assets of
the Fund at an annualized rate of 0.65%.
DISTRIBUTION AND SERVICE (12b-1) FEE The Company has adopted a Distribution and
Service (12b-1) Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with
respect to Class 4 shares of the Fund. Under the Plan, the Fund may compensate
GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and
the Fund's principal distributor, for certain sales services provided by GEID or
other broker dealers and investor services provided by GEID or other service
providers relating to the Fund's Class 4 shares, including services to owners or
prospective owners of variable contracts issued by insurance companies that
offer such share class as an investment option. The amount of compensation paid
under the Plan by the Fund's Class 4 shares may not exceed 0.45% of the average
daily net assets of the Fund attributable to such share class. The Plan
continues in effect from year to year for so long as such continuance is
approved annually by the Board of Directors, including by those directors who
are not interested persons of the Company and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related to
it.
18
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2009, $380 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
Purchases and Sales of Securities The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2009 were as follows:
U.S. Government Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$ -- $ --
Other Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$4,093,917 $8,876,443
SECURITY LENDING At June 30, 2009, the Fund did not participate in securities
lending.
19
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 60
POSITION(S) HELD WITH FUND Chairman of the Board and President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 11 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS President and Chief Executive
Officer - Mutual Funds and Intermediary Business since March 2007; Executive
Vice President of GEAM from February 1997 to March 2007; Director of GEAM since
1988; Vice President, GE Capital Corporation, an indirect wholly-owned
subsidiary of GE, since December 1999; Executive Vice President - Sales and
Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, from
March 1993 to March 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds since its inception; Trustee of
General Electric Savings & Security Trust, General Electric S&S Income Fund,
General Electric S&S Program Mutual Fund ("GE Savings & Security Funds"), Elfun
Funds, General Electric Insurance Plan Trust, General Relief Loan Fund, and
General Electric Pension Trust since 1988; Trustee of Fordham University since
2002; Trustee of GE Volunteers since 1993; Director, GE Asset Management
(Ireland) since February 1999; Director, GE Asset Management Funds Plc., GE
Asset Canada Company, and GE Asset Management Limited since 1998.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Director and Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds since July 2007.
20
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager
since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds
and GE Investments Funds since November 2005 and Elfun Funds and GE Savings &
Security Funds since September 2005; from August 2004 to September 2005 Vice
President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds,
Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January
2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from
December 1996 to November 2003, Controller - Mutual Funds, American Skandia
Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and
American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 43
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years (Vice President); one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
from September 2003 to July 2007; Vice President and Secretary of GE Funds and
GE Institutional Funds since July 2007; Vice President and Assistant Secretary
of Elfun Funds and GE Savings & Security Funds since October 2003.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
21
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 63
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since its inception; Trustee of Fordham University since
2002 and Marymount College from 2001 through 2002; Neuroscience Research
Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn &
Queens since 2001; Gregorian University Foundation since 1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 73
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception; Trustee, St. Francis Hospital Corp.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
22
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J. Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS &
INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Ralph R. Layman, PRESIDENT - PUBLIC EQUITIES (SINCE JULY 2009)
Maureen B. Mitchell, PRESIDENT - INSTITUTIONAL SALES AND MARKETING (SINCE JULY
2009)
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST (SINCE JULY 2009)
Don W. Torey, PRESIDENT - ALTERNATIVE INVESTMENTS
John J. Walker, EVP, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT - INVESTMENT STRATEGIES
23
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii)
on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
- --------------------------------------------------------------------------------
[GE LOGO]
GE Investments Funds, Inc.
Core Value Equity Fund Letter from the Chairman
- --------------------------------------------------------------------------------
[PHOTO OF MICHAEL J. COSGROVE]
MICHAEL J. COSGROVE
CHAIRMAN,
GE INVESTMENTS FUNDS, INC.
DEAR SHAREHOLDER:
Attached is the semi-annual report for the GE Investments Funds, Inc. -- Core
Value Equity Fund (the "Fund") for the six-month period ended June 30, 2009. The
report contains information about the performance of the Fund, and other Fund
specific data, along with portfolio manager commentary. We have provided you
with an overview of the investment markets, along with our investment outlook
for the coming months.
MARKET OVERVIEW
Despite investors' hopes that the new U.S. administration and Congress would
help stabilize the nation's financial crisis, asset values continued to fall in
the first quarter of 2009. Global equities experienced sharp price declines in
January and February as troubles in the United States continued to cast a cloud
over world markets. U.S. Treasury Secretary Geithner indicated that some U.S.
banks would need large amounts of assistance to survive and talks of stress
tests and bank nationalization spooked investors. The markets also booed
government plans to take a 36% stake in Citigroup even as the financial status
of institutions already on government life-support, such as AIG, remained
uncertain. Similarly, news of troubled automakers GM and Chrysler worried
international bondholders and shareholders alike. Financial services and small
cap stocks were hardest hit in the downswing as equity indexes broke the
November 2008 lows in February. Government debt issues also had a rough February
as U.S. and U.K. debt auctions saw weak support for long and non-inflation
indexed government securities. These poor showings were soon followed by a
warmer reception for shorter-dated debt.
U.S. stocks abruptly reversed course and posted three straight weeks of gains
through the end of March after the three largest U.S. banks announced they had
turned a profit. Equity indexes around the globe followed the U.S. path,
regaining much of their losses since January. In late March, the U.S. Treasury
Secretary unveiled his Public-Private Investment Partnership (PPIP) plan to
remove toxic assets from the balance sheets of the nation's banks, and the
markets seemed convinced of a financial sector backstop. Another policy move to
support the markets came on March 18th when the Federal Reserve announced that
it would buy $300 billion of 2- and 10-year Treasuries, increase its purchase
plan of agency mortgage-backed securities from $500 billion to $1.25 trillion,
double its purchases of agency debt to $200 billion and expand the eligible
collateral in the Term Asset-Backed Securities Loan Facility (TALF) program. In
response, the yield on the U.S. Treasury 10-year note fell 47 basis points to
2.53%, recording the largest one-day drop in over four decades.
The rebound in global equities continued into the second quarter, as markets
experienced strong gains in April and May, before tailing off into a flat June
as investors started to question the strength and timing of an economic
recovery. Despite a double-digit rally since mid-March, the S&P 500 Index ended
the second quarter approximately where it started at the beginning of 2009
(priced in the low 900s). Emerging markets equities continued to outperform
their developed peers during the second quarter. The MSCI Emerging Markets Index
gained 34.7%, its best quarterly return since data collection began in 1988.
Speculation persists that developing markets are better positioned to weather
the global recession given that their financial systems are generally better
capitalized and less leveraged than the developed countries.
During the second quarter, U.S. government stress tests concluded and the banks
that needed capital swiftly and successfully raised it. The Federal Reserve also
announced that it would allow 10 large banks to repay bailout funds from the
government's controversial Troubled Asset Relief Program. In this environment,
financial stocks enjoyed a notably strong quarter, bolstered by growing
speculation that the worst of the global banking crisis was over. However,
financial risks remain as the European Central Bank said that European banks
might need to write down an additional $283 billion by the end of next year. In
late June, The European Central Bank also injected (euro)442 billion ($621
billion) into Europe's banking system in one-year funds to spur lending and help
stabilize the economy.
[GE LOGO]
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Core Value Equity Fund Letter from the Chairman (Continued)
- --------------------------------------------------------------------------------
Against this backdrop, financial markets posted improved results for the six-
and 12-month periods ended June 30.
TOTAL RETURNS AS OF
JUNE 30, 2009 6-MONTH 12-MONTH
- --------------------------------------------------------------------------------
U.S. equities (S&P 500 Index) 3.16 -26.21
Global equities (MSCI World Index) 6.35 -29.50
International equities
(MSCI EAFE Index) 7.95 -31.35
Emerging Markets equities
(MSCI EM Index) 36.01 -28.07
Small-cap U.S. equities
(Russell 2000 Index) 2.64 -25.01
Mid-cap U.S. equities
(Russell Mid Cap Index) 9.96 -30.36
U.S. fixed income (Barclays Capital
U.S. Aggregate Bond Index) 1.90 6.05
U.S. short-term government
fixed income (Barclays Capital
U.S. Treasury Bond Index 1-3 Year) 0.47 4.94
U.S. tax-exempt income
(Barclays Capital U.S. Municipal
Bond Index 10 year) 4.38 5.58
- --------------------------------------------------------------------------------
OUTLOOK
Uncertainty will likely continue around the strength and timing of a U.S.
economic recovery. With unemployment at a 25-year high of 9.5%, and American
consumers having suffered a collapse in wealth of at least $15 trillion since
early 2007, it is hard to have much confidence in a consumer-driven recovery in
the short term. We believe the economy will work below its potential for many
quarters to come as deleveraging continues among consumers and global financial
institutions.
While equity markets have enjoyed a bounce off of the bottom over the first half
of the year, the positive earnings surprises in April and May came mostly from
productivity gains and cost containment programs. Earnings in the second quarter
will be heavily scrutinized for evidence that a real recovery is sustainable and
that restocking is giving way to growth in final demand. We believe companies
are going to have to show evidence of a top-line recovery -- increased demand
and improving fundamentals -- in order for stocks to work their way higher.
Given the economic headwinds we're facing, consolidation of the second quarter's
gains seems a real possibility.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. We encourage
long-term investors to maintain a diversified investment approach that is
consistent with their goals, time horizon and risk tolerance. While diversified
portfolios are not immune to market downturns, history suggests they can put you
in a position to benefit from the inevitable return to better times.
Thank you for investing with GE Investments Funds.
Sincerely,
/s/ Michael J. Cosgrove
Michael J. Cosgrove
CHAIRMAN, GE INVESTMENTS FUNDS, INC.
JUNE 2009
MIKE COSGROVE IS PRESIDENT AND CHIEF EXECUTIVE OFFICER -MUTUAL FUNDS &
INTERMEDIARY BUSINESS AT GE ASSET MANAGEMENT. MR. COSGROVE ALSO SERVES AS A
TRUSTEE OF THE GE PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM. PREVIOUSLY
CHIEF FINANCIAL OFFICER OF GE ASSET MANAGEMENT AND ASSISTANT TREASURER - GE
COMPANY, MIKE JOINED GE IN 1970 AND HELD A NUMBER OF MANAGERIAL POSITIONS IN
FINANCE AND SALES AT GE'S INTERNATIONAL OPERATION AND IN GE TRADING COMPANY.
MIKE HAS A B.S. IN ECONOMICS FROM FORDHAM UNIVERSITY AND AN M.B.A. FROM ST.
JOHN'S UNIVERSITY.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC.
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
[SIDE BAR]
GE Investments Funds, Inc.
Core Value Equity Fund
Semi-Annual Report
JUNE 30, 2009
[GE LOGO]
GE Investments Funds, Inc.
Core Value Equity Fund Contents
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE ..................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................... 2
NOTES TO SCHEDULE OF INVESTMENTS ......................................... 9
FINANCIAL STATEMENTS
Financial Highlights .................................................. 10
Statement of Assets and Liabilities ................................... 11
Statement of Operations ............................................... 12
Statements of Changes in Net Assets ................................... 13
Notes to Financial Statements ......................................... 14
ADDITIONAL INFORMATION ................................................... 21
INVESTMENT TEAM .......................................................... 24
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
Notes to Performance June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any. Total returns shown
are net of Fund expenses but do not reflect fees and charges associated with the
variable contracts such as administrative fees, account charges and surrender
charges, which, if reflected, would reduce the Fund's total returns for all
periods shown.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in a Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. An investment in a Fund is subject to risk, including
possible loss of principal invested.
The Standard & Poor's ("S&P") 500(R) Composite Price Index of stocks (S&P 500
Index) is an unmanaged index and does not reflect the actual cost of investing
in the instruments that comprise the index.
The S&P 500 Index is an unmanaged, market capitalization-weighted index of
stocks of 500 large U.S. companies, which is widely used as a measure of
large-cap stock market performance. The results shown for the foregoing index
assume the reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer group average
return calculation is based on the blend of Morningstar peer categories, as
shown. Morningstar is an independent mutual fund rating service. A Fund's
performance may be compared to or ranked within a universe of mutual funds with
investment objectives and policies similar but not necessarily identical to the
Fund's.
(C)2009 Morningstar, Inc. All Rights Reserved. The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is no warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are responsible for any
damage or losses relating from any use of this information. Past performance is
no guarantee or future results.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUND.
1
Core Value Equity Fund
- --------------------------------------------------------------------------------
THE CORE VALUE EQUITY FUND IS CO-MANAGED BY PAUL C. REINHARDT AND STEPHEN V.
GELHAUS. MESSRS. REINHARDT AND GELHAUS BOTH MANAGE THE FUND AS A COLLABORATIVE
TEAM. BOTH PORTFOLIO MANAGERS HAVE THE AUTHORITY TO INCREASE OR DECREASE
EXISTING POSITIONS IN THE FUND; HOWEVER, MR. REINHARDT, AS LEAD MANAGER, IS
VESTED WITH THE AUTHORITY TO PURCHASE SECURITIES THAT ARE NEW TO THE FUND OR TO
DIVEST THE FUND OF ITS ENTIRE POSITION IN A SECURITY. MR. REINHARDT ALSO HAS
VETO AUTHORITY OVER MR. GELHAUS' TRADE DECISIONS.
[PHOTO OF PAUL C. REINHARDT]
PAUL REINHARDT IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT AND LEAD
PORTFOLIO MANAGER OF THE CORE VALUE EQUITY FUND. HE HAS SERVED IN THIS CAPACITY
SINCE APRIL 2002. MR. REINHARDT JOINED GE ASSET MANAGEMENT IN 1982 AS AN EQUITY
ANALYST AND HAS BEEN A PORTFOLIO MANAGER SINCE 1987.
[PHOTO OF STEPHEN V. GELHAUS]
STEPHEN V. GELHAUS IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A
MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE CORE VALUE EQUITY FUND SINCE
JANUARY 2002. MR. GELHAUS JOINED GE ASSET MANAGEMENT IN JUNE 1991 AND WAS A
RESEARCH ANALYST IN THE U.S. EQUITIES GROUP FROM 1995 THROUGH 2001 AND BECAME AN
ASSOCIATE PORTFOLIO MANAGER FOR THE CORE VALUE EQUITY FUND IN AUGUST 1999.
Q. HOW DID THE CORE VALUE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND
MORNINGSTAR PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009?
A. For the six-month period ended June 30, 2009, the Core Value Equity Fund
returned 4.48% for the Class 1 shares and 4.16% for the Class 4 shares.
The S&P 500 Index, the Fund's benchmark, returned 3.16% and the Fund's
Morningstar peer group of 475 US Insurance Large Blend funds returned an
average of 5.31% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The U.S. equity markets almost made a round trip in the first half of
2009. Stocks fell sharply through early March against a backdrop of severe
global economic recession, but picked up again as clarity emerged in the
U.S. financial sector with the resolution of the government bank stress
tests and improving credit spreads. By the end of the period, the equity
rally lost momentum -- while the S&P 500 achieved a greater than 14%
return from March 31st to May 4th, it advanced just 1% in the next eight
weeks. June's returns were basically flat, reflecting investor uncertainty
on whether or not the fundamentals are in place for sustainable economic
growth.
Sector performance has been mixed, with only three S&P 500 sectors
achieving year-to-date gains: information technology (+25%), materials
(+14%) and consumer discretionary (+9%). The defensive health care sector
was flat on a total return basis. Financials, although they rallied almost
36% in the second quarter, are down 3% year-to-date. Industrials (-6%) and
telecom (-4%) have also lagged. In this environment, growth outperformed
value as evidenced by the returns of the Russell 1000 Growth (+11.5%) and
Russell 1000 Value (-2.9%), and large caps beat small caps -- although the
smaller, lower quality companies led the market in the second quarter's
rally.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. Stock selection in consumer staples, energy and materials sectors were the
Fund's primary performance drivers. In
2
- --------------------------------------------------------------------- [Q&A LOGO]
consumer staples, owning Pepsi Bottling Group helped as it soared 55% on
PepsiCo's takeover bid. PepsiCo owns 33% of Pepsi Bottling Group and it
reportedly intends to acquire the rest of the company. Also within
consumer staples, underweighting the more defensive food retailers and
selected household products companies helped performance as investors
embraced risk assets during the rally in the second half of the period.
Within energy, emphasizing services companies like Transocean (+57%) at
the expense of large integrated oil companies (-6%) helped returns.
Materials was one of the best performing S&P 500 sectors for the period
amid a recovery in metals pricing, and Freeport McMoran (+105%) and
Allegheny Technologies (+39%) added significantly to the Fund's
performance in this environment. Although the Fund is constructed stock by
stock on the basis of bottom-up fundamental research, being underweight in
the lagging health care sector added to relative performance. We were
concerned about the risk of continued price deflation in this sector amid
Washington's proposed healthcare reform.
In terms of negative contributors, technology and financial stock
selection hurt performance results. The Fund's technology holdings failed
to keep pace with the benchmark's, despite a 20% rally among the tech
companies held by the Fund. Not owning Apple (+67%) was the key detractor,
although a lofty valuation kept Apple from candidacy for inclusion in the
Fund. Amid continued volatility in the financials sector, our holdings
dragged on Fund returns, despite strength in State Street (+20%) after the
federal government's stress tests verified its financial strength. Lagging
performances in property & casualty insurance holdings, namely ACE (-16%),
Aon (-16%) and Chubb (-20%), more than offset the positive contribution
from State Street. We believe some of the property and casualty insurers
are well-positioned to gain market share, and have attractive valuations.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. The Fund continued to emphasize financially strong companies that the
investment team believes will be market share winners in the ongoing
difficult economic environment. While the recent equity market and
economic weakness is disappointing, we believe that lower stock prices and
our research team's insights have created opportunities in all economic
sectors.
During the period, we have added to holdings in certain financial
companies with strong balance sheets, robust risk management capabilities,
solid capital structures, and industry leadership. As of June 30, our
bottom-up process had resulted in financials being our top sector
overweight, with an emphasis on custody banks, investment banks and
quality insurers. We also took advantage of values within the energy and
materials sectors to increase our weighting in commodity-oriented
companies during the period. During the six months ended June 30, 2009 the
Fund became underweight in consumer staples and increased its underweight
in health care, seeing better opportunities for appreciation outside these
classically defensive sectors.
3
Core Value Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2009.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2009 - JUNE 30, 2009
- --------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ---------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,044.75 6.44
Class 4 1,000.00 1,041.60 8.61
- ---------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ---------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,018.33 6.36
Class 4 1,000.00 1,016.23 8.50
- ---------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.27% FOR
CLASS 1 SHARES AND 1.70% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1,
2009 - JUNE 30, 2009), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE
PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE ONE-HALF YEAR PERIOD)
** ACTUAL FUND RETURNS FOR SIX-MONTH PERIOD ENDED JUNE 30, 2009 WERE AS
FOLLOWS: 4.48% FOR CLASS 1 SHARES, AND 4.16% FOR CLASS 4 SHARES.
4
Core Value Equity Fund (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
Core Value Equity Fund S&P 500 Index
04/28/00 $10,000 $10,000
12/00 $ 9,979 $ 9,155
12/01 $ 9,105 $ 8,064
12/02 $ 7,506 $ 6,282
12/03 $ 9,311 $ 8,087
12/04 $10,202 $ 8,967
12/05 $10,616 $ 9,408
12/06 $12,511 $10,893
12/07 $13,775 $11,492
12/08 $ 9,238 $ 7,240
06/09 $ 9,651 $ 7,469
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 2009
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 4/28/00)
- --------------------------------------------------------------------------------
SIX ONE FIVE SINCE ENDING VALUE OF A
MONTHS YEAR YEAR INCEPTION $10,000 INVESTMENT
- ---------------------------------------------------------------------------------------------
Core Value Equity Fund 4.48% -23.04% 0.28% -0.39% $9,651
- ---------------------------------------------------------------------------------------------
S&P 500 Index 3.16% -26.21% -2.24% -3.13% $7,469
- ---------------------------------------------------------------------------------------------
Morningstar peer group average* 5.31% -26.22% -2.14% -2.07%
=============================================================================================
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
Core Value Equity Fund S&P 500 Index
05/01/08 $10,000 $10,000
06/08 $ 9,420 $ 9,276
09/08 $ 8,819 $ 8,499
12/08 $ 6,923 $ 6,634
06/09 $ 7,211 $ 6,844
- --------------------------------------------------------------------------------
TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 2009
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
SIX ONE SINCE ENDING VALUE OF A
MONTHS YEAR INCEPTION $10,000 INVESTMENT
- -------------------------------------------------------------------------------------
Core Value Equity Fund 4.16% -23.44% -24.43% $7,211
- -------------------------------------------------------------------------------------
S&P 500 Index 3.16% -26.21% -27.75% $6,844
- -------------------------------------------------------------------------------------
Morningstar peer group average** 5.31% -26.22%
=====================================================================================
INVESTMENT PROFILE
A Fund designed for investors who seek long-term growth of capital and future
income by investing at least 80% of its net assets in equity securities under
normal circumstances. The Fund invests primarily in U.S. companies that the
portfolio manager believes are undervalued by the market but have solid growth
prospects.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Market Value of $19,360 (in thousands)
[PIE CHART]
Information Technology 17.4%
Financials 17.3%
Energy 13.2%
Consumer Staples 11.2%
Healthcare 11.0%
Consumer Discretionary 8.1%
Industrials 7.2%
Materials 4.3%
Short-Term 3.5%
Telecommunication Services 3.4%
Utilities 3.3%
Other Investments 0.1%
TOP TEN LARGEST EQUITY HOLDINGS
AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Microsoft Corp. 3.61%
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 3.18%
- --------------------------------------------------------------------------------
PepsiCo, Inc. 2.61%
- --------------------------------------------------------------------------------
Time Warner Inc. 2.41%
- --------------------------------------------------------------------------------
JPMorgan Chase & Co. 2.33%
- --------------------------------------------------------------------------------
Hewlett-Packard Co. 2.21%
- --------------------------------------------------------------------------------
International Business Machines Corp. 2.14%
- --------------------------------------------------------------------------------
Intel Corp. 2.04%
- --------------------------------------------------------------------------------
Omnicom Group Inc. 1.96%
- --------------------------------------------------------------------------------
State Street Corp. 1.90%
================================================================================
* MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS
INDICATED IN THE LARGE BLEND PEER GROUP CONSISTING OF 475, 463, 323 AND
161 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS AND ONE YEAR PERIODS INDICATED IN THE LARGE
BLEND PEER GROUP CONSISTING OF 475 AND 463 UNDERLYING ANNUITY FUNDS,
RESPECTIVELY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
5
CORE VALUE EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CORE VALUE EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 94.9% +
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 2.4%
Honeywell International Inc. ................... 4,206 $ 132,068
ITT Corp. ...................................... 3,905 173,773
Rockwell Collins, Inc. ......................... 3,605 150,437
456,278
AUTOMOBILES -- 0.2%
Toyota Motor Corp. ADR ......................... 442 33,384
BEVERAGES -- 4.7%
Molson Coors Brewing Co. (Class B) ............. 2,704 114,460
Pepsi Bottling Group, Inc. ..................... 8,531 288,689
PepsiCo, Inc. .................................. 9,192 505,192
908,341
BIOTECHNOLOGY -- 1.7%
Amgen Inc. ..................................... 6,368 337,122 (a)
CAPITAL MARKETS -- 6.8%
Ameriprise Financial, Inc. ..................... 8,124 197,169
Morgan Stanley ................................. 5,707 162,707
State Street Corp. ............................. 7,810 368,632 (c)
The Bank of New York Mellon Corp. .............. 11,415 334,574
The Charles Schwab Corp. ....................... 7,209 126,446
The Goldman Sachs Group, Inc ................... 901 132,843
1,322,371
CHEMICALS -- 0.7%
Potash Corp of Saskatchewan Inc. ............... 1,502 139,761
COMMERCIAL BANKS -- 1.2%
US Bancorp ..................................... 5,107 91,517
Wells Fargo & Co. .............................. 6,008 145,754
237,271
COMMUNICATIONS EQUIPMENT -- 0.9%
Cisco Systems, Inc. ............................ 9,665 180,156 (a,d)
COMPUTERS & PERIPHERALS -- 4.3%
Hewlett-Packard Co. ............................ 11,054 427,237
International Business
Machines Corp. .............................. 3,965 414,025
841,262
- --------------------------------------------------------------------------------
Number
of Shares Value
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 3.1%
Bank of America Corp. .......................... 12,016 $ 158,611
JPMorgan Chase & Co. ........................... 13,217 450,832
609,443
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.8%
AT&T Inc. ...................................... 13,518 335,787
Verizon Communications Inc. .................... 6,849 210,470
546,257
ELECTRIC UTILITIES -- 2.1%
American Electric Power
Comapny Inc. ................................ 2,163 62,489
Edison International ........................... 8,446 265,711
Entergy Corp. .................................. 901 69,846
398,046
ELECTRICAL EQUIPMENT -- 1.3%
ABB Ltd. ADR ................................... 15,620 246,484
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.9%
Corning Inc. ................................... 10,334 165,964
ENERGY EQUIPMENT & SERVICES -- 4.3%
Halliburton Co. ................................ 10,213 211,409
National Oilwell Varco, Inc. ................... 2,824 92,232 (a)
Schlumberger Ltd. .............................. 4,206 227,587
Transocean Ltd. ................................ 4,085 303,475 (a)
834,703
FOOD PRODUCTS -- 3.0%
Archer-Daniels-Midland Co. ..................... 2,283 61,116
Kraft Foods Inc. (Class A) ..................... 7,209 182,676
McCormick & Company Inc. ....................... 6,849 222,798
Nestle S.A. ADR ................................ 3,004 113,010
579,600
HEALTHCARE EQUIPMENT & SUPPLIES -- 2.6%
Becton Dickinson & Co. ......................... 1,550 110,531
Boston Scientific Corp. ........................ 22,529 228,444 (a)
Covidien Plc ................................... 4,163 155,863
494,838
HEALTHCARE PROVIDERS & SERVICES -- 1.7%
Cardinal Health, Inc. .......................... 8,291 253,290
McKesson Corp. ................................. 1,802 79,288
332,578
HOUSEHOLD PRODUCTS -- 1.4%
Clorox Co. ..................................... 901 50,303
Kimberly-Clark Corp. ........................... 2,403 125,989
The Procter & Gamble Co. ....................... 1,864 95,250
271,542
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
6
CORE VALUE EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
INSURANCE -- 5.8%
ACE Ltd. ....................................... 6,609 $ 292,316
AON Corp. ...................................... 3,965 150,155
Chubb Corp. .................................... 1,202 47,936
MetLife, Inc. .................................. 8,231 247,012
PartnerRe Ltd. ................................. 1,162 75,472
Principal Financial Group, Inc. ................ 994 18,727
Prudential Financial, Inc. ..................... 4,133 153,830
The Travelers Companies, Inc. .................. 3,364 138,059
1,123,507
IT SERVICES -- 2.4%
Affiliated Computer Services, Inc.
(Class A) ................................... 4,085 181,456 (a)
The Western Union Co. .......................... 16,822 275,881
457,337
LIFE SCIENCES TOOLS & SERVICES -- 0.9%
Life Technologies Corp. ........................ 3,184 132,836 (a)
Thermo Fisher Scientific, Inc. ................. 1,021 41,626 (a)
174,462
MACHINERY -- 1.6%
Deere & Co. .................................... 4,886 195,196
Eaton Corp. .................................... 2,764 123,302
318,498
MEDIA -- 6.4%
Comcast Corp. (Class A) ........................ 16,822 237,190
Omnicom Group Inc. ............................. 12,016 379,465
The Walt Disney Co. ............................ 5,107 119,146
Time Warner Inc. ............................... 18,504 466,116
Viacom, Inc. (Class B) ......................... 1,802 40,905 (a)
1,242,822
METALS & MINING -- 3.2%
Allegheny Technologies Inc. .................... 4,626 161,586
Barrick Gold Corp. ............................. 3,605 120,948
Freeport-McMoRan
Copper & Gold Inc. .......................... 6,789 340,197
622,731
MULTILINE RETAIL -- 0.3%
Target Corp. ................................... 1,322 52,179
MULTI-UTILITIES -- 1.2%
Dominion Resources, Inc. ....................... 7,209 240,925
OIL, GAS & CONSUMABLE FUELS -- 8.9%
Apache Corp. ................................... 2,223 160,389
Chevron Corp. .................................. 2,583 171,124
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Devon Energy Corp. ............................. 3,604 $ 196,418
Exxon Mobil Corp. .............................. 8,806 615,627 (d)
Hess Corp. ..................................... 1,081 58,104
Marathon Oil Corp. ............................. 10,814 325,826
Occidental Petroleum Corp. ..................... 3,004 197,693
1,725,181
PAPER & FOREST PRODUCTS -- 0.4%
Weyerhaeuser Co. ............................... 2,484 75,588
PERSONAL PRODUCTS -- 0.3%
Avon Products, Inc. ............................ 1,242 32,019
The Estee Lauder Companies Inc.
(Class A) ................................... 1,021 33,356
65,375
PHARMACEUTICALS -- 4.1%
Abbott Laboratories ............................ 1,802 84,766
Bristol-Myers Squibb Co. ....................... 13,818 280,644
Merck & Company Inc. ........................... 1,802 50,384
Pfizer Inc. .................................... 5,527 82,905
Wyeth .......................................... 6,444 292,493
791,192
ROAD & RAIL -- 0.8%
Union Pacific Corp. ............................ 2,884 150,141
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 4.5%
Intel Corp. .................................... 23,851 394,734
Kla-Tencor Corp. ............................... 3,490 88,124
Lam Research Corp. ............................. 4,506 117,156 (a)
MEMC Electronic Materials, Inc. ................ 1,202 21,408 (a)
Microchip Technology Inc. ...................... 4,506 101,610
Taiwan Semiconductor Manufacturing
Company Ltd. ADR ........................... 4,206 39,578
Texas Instruments Inc. ......................... 5,107 108,779
871,389
SOFTWARE -- 4.4%
Microsoft Corp. ................................ 29,439 699,765 (d)
Oracle Corp. ................................... 7,209 154,417 (d)
854,182
SPECIALTY RETAIL -- 1.2%
Bed Bath & Beyond, Inc. ........................ 5,107 157,040 (a)
Lowe's Companies, Inc. ......................... 4,206 81,638
238,678
TOBACCO -- 1.8%
Altria Group, Inc. ............................. 1,802 29,535
Philip Morris International Inc. ............... 7,270 317,117
346,652
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
7
CORE VALUE EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.6%
American Tower Corp. (Class A) ................. 3,605 $ 113,666 (a)
TOTAL COMMON STOCK
(COST $19,616,915) .......................... 18,399,906
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 1.5%
- --------------------------------------------------------------------------------
Financial Select Sector SPDR Fund .............. 4,838 57,911 (f)
Industrial Select Sector SPDR Fund ............. 10,393 228,230 (d,f)
TOTAL EXCHANGE TRADED FUNDS
(COST $470,669) ............................. 286,141
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $13,965) .............................. 7,681 (e)
TOTAL INVESTMENTS IN SECURITIES
(COST $20,101,549) .......................... 18,693,728
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.5%
- --------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class 0.28%
(COST $666,164) ............................. 666,164 (b,g)
TOTAL INVESTMENTS
(COST $20,767,713) .......................... 19,359,892
OTHER ASSETS AND LIABILITIES,
NET -- 0.1% ................................. 22,547
-----------
NET ASSETS -- 100.0% ........................... $19,382,439
===========
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Core Value Equity Fund Index had the following long futures contracts
open at June 30, 2009 (Unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------
S&P 500 Index
Futures September 2009 2 $457,750 $10,650
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
8
Notes to Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(d) At June 30, 2009, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(e) GEAM, the investment adviser of the Fund, also serves as the investment
adviser of the GEI Investment Fund.
(f) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street
Bank & Trust Co., the Fund's custodian and accounting agent.
(g) GEAM, the investment adviser of the Fund, also serves as investment
adviser of the GE Money Market Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2009.
Abbreviations:
ADR American Depository Receipt
9
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
CORE VALUE EQUITY FUND
---------------------------------------------------------------- -------------------------
CLASS 1 CLASS 4
---------------------------------------------------------------- -------------------------
6/30/09+ 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 6/30/09+ 12/31/08**
---------------------------------------------------------------- -------------------------
INCEPTION DATE ......................... -- -- -- -- -- 4/28/00 -- 5/1/08
Net asset value, beginning of period ... $ 6.48 $ 10.16 $ 10.70 $ 10.01 $ 9.77 $ 9.02 $ 6.49 $ 9.82
INCOME/(LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income ............... 0.04 0.11 0.12 0.17 0.11 0.11 (0.01) 0.05
Net realized and unrealized
gains/(losses) on investments .... 0.25 (3.46) 0.97 1.62 0.29 0.75 0.28 (3.08)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT
OPERATIONS .......................... 0.29 (3.35) 1.09 1.79 0.40 0.86 0.27 (3.03)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............... -- 0.12 0.12 0.17 0.12 0.11 -- 0.09
Net realized gains .................. -- 0.21 1.51 0.93 0.04 -- -- 0.21
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .................... -- 0.33 1.63 1.10 0.16 0.11 -- 0.30
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ......... $ 6.77 $ 6.48 $ 10.16 $ 10.70 $ 10.01 $ 9.77 $ 6.76 $ 6.49
====================================================================================================================================
TOTAL RETURN (a) ....................... 4.48% (32.94)% 10.10% 17.85% 4.06% 9.57% 4.16% (30.77)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ................... $19,375 $ 20,361 $ 37,765 $ 39,683 $ 37,115 $ 37,128 $ 7 $ 7
Ratios to average net assets:
Net investment income* ........... 1.26% 1.18% 0.96% 1.55% 1.13% 1.26% 0.81% 0.95%*
Expenses* ........................ 1.27%(b) 0.95%(b) 0.81% 0.81% 0.80% 0.80% 1.70%(b) 1.40%(b)*
Portfolio turnover rate ............. 34% 68% 45% 42% 36% 53% 34% 68%
NOTES TO FINANCIAL HIGHLIGHTS
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges.
(b) Reflects GEAM's waiver of a portion of the Fund's management fee in an
amount equal to the management fee earned by GEAM with respect to the
Fund's investment in the GE Funds - GE Money Market Fund. Excluding
waiver, the expense ratios would be unchanged.
* Annualized for periods less than one year.
** Per share values have been calculated using the average share method.
+ Unaudited
See Notes to Financial Statements.
10
CORE VALUE
Statement of Assets EQUITY
and Liabilities JUNE 30, 2009 (UNAUDITED) FUND
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $20,087,584) ....... $18,686,047
Investments in affiliated securities, at market
(cost $$13,965) ............................................ 7,681
Short-term affiliated investments (at amortized cost) ......... 666,164
Receivable for investments sold ............................... 97,436
Income receivables ............................................ 23,851
Receivable for fund shares sold ............................... 4,918
- --------------------------------------------------------------------------------
TOTAL ASSETS ................................................ 19,486,097
- --------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ............................. 39,169
Payable for fund shares redeemed .............................. 38
Payable to GEAM ............................................... 13,593
Accrued other expenses ........................................ 39,776
Variation margin payable ...................................... 2,850
Other liabilities ............................................. 8,232
- --------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................... 103,658
- --------------------------------------------------------------------------------
NET ASSETS ...................................................... $19,382,439
================================================================================
NET ASSETS CONSIST OF:
Capital paid in ............................................... 25,158,964
Undistributed (distribution in excess of)
net investment income ....................................... 114,676
Accumulated net realized loss ................................. (4,494,030)
Net unrealized appreciation/(depreciation) on:
Investments ................................................. (1,407,821)
Futures ..................................................... 10,650
- --------------------------------------------------------------------------------
NET ASSETS ...................................................... $19,382,439
================================================================================
CLASS 1:
NET ASSETS ...................................................... 19,375,225
Shares outstanding ($0.01 par value; unlimited shares
authorized) .................................................. 2,862,514
Net asset value per share ....................................... $ 6.77
CLASS 4:
NET ASSETS ...................................................... 7,214
Shares outstanding ($0.01 par value; unlimited shares
authorized) .................................................. 1,067
Net asset value per share ....................................... $ 6.76
See Notes to Financial Statements.
11
CORE VALUE
Statement of Operations EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend .................................................. $ 221,331
Interest .................................................. 9,820
Interest from affliated investments ....................... 1,277
Less: Foreign taxes withheld .............................. (1,746)
- --------------------------------------------------------------------------------
TOTAL INCOME ................................................. 230,682
- --------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees .......................... 59,419
Distributors Fees (Notes 4) ...............................
Service Class .......................................... 15
Transfer agent ............................................ 9,776
Directors's fees .......................................... 306
Custody and accounting expenses ........................... 26,473
Professional fees ......................................... 10,158
Registration expenses ..................................... 1,209
Other expenses ............................................ 9,144
- --------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ............... 116,500
- --------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser .................. (494)
- --------------------------------------------------------------------------------
NET EXPENSES .............................................. 116,006
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME ........................................ 114,676
================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED LOSS ON:
Investments ............................................ (2,986,220)
Futures ................................................ (26,445)
INCREASE IN UNREALIZED APPRECIATION ON:
Investments ............................................ 3,588,181
Futures ................................................ 11,620
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments ........... 587,136
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......... $ 701,812
================================================================================
See Notes to Financial Statements.
12
CORE VALUE
Statements of EQUITY
Changes in Net Assets FUND
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2009 DECEMBER 31,
(UNAUDITED) 2008
- -----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income .................................................... $ 114,676 $ 343,611
Net realized loss on investments and futures .............................. (3,012,665) (1,070,866)
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments and futures ............................................. 3,599,801 (10,354,106)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ................................... 701,812 (11,081,361)
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 ................................................................ -- (348,972)
Class 4 ................................................................ -- (94)
Net realized gains
Class 1 ................................................................ -- (634,685)
Class 4 ................................................................ -- (216)
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .......................................................... -- (983,967)
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions .......... 701,812 (12,065,328)
- -----------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 ................................................................ 321,468 992,710
Class 4 ................................................................ -- 10,000
Value of distributions reinvested
Class 1 ................................................................... -- 983,648
Class 4 ................................................................ -- 310
Cost of shares redeemed
Class 1 ................................................................ (2,008,449) (7,319,163)
Class 4 ................................................................ -- --
- -----------------------------------------------------------------------------------------------------------------------
Net decrease from share transactions ...................................... (1,686,981) (5,332,495)
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS ................................................. (985,169) (17,397,823)
NET ASSETS
Beginning of period .......................................................... 20,367,608 37,765,431
- -----------------------------------------------------------------------------------------------------------------------
End of period ................................................................ $ 19,382,439 $ 20,367,608
=======================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD .. $ 114,676 $ --
- -----------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold ..................................................................... 52,572 115,279
Issued for distributions reinvested ............................................. -- 153,935
Shares redeemed ................................................................. (333,236) (843,882)
- -----------------------------------------------------------------------------------------------------------------------
Net decrease in fund shares ..................................................... (280,664) (574,668)
=======================================================================================================================
CLASS 4
Shares sold ..................................................................... -- 1,018
Issued for distributions reinvested ............................................. -- 48
- -----------------------------------------------------------------------------------------------------------------------
Net increase in fund shares ..................................................... -- 1,066
=======================================================================================================================
See Notes to Financial Statements.
13
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of fourteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund (the "Fund"), Mid-Cap Equity Fund, Small-Cap
Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
The Company offers two share classes (Class 1 and Class 4) of the Fund as
investment options for variable life insurance and variable annuity contracts.
Class 4 shares were first offered on May 1, 2008, and Fund shares outstanding
prior to May 1, 2008 were designated as Class 1 shares. Each share class has
different fees and expenses, and as a result, each share class will have
different share price and performance. Not all variable contracts offer both
share classes of the Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on recent trading activity and other
relevant information which may include market interest rate curves, referenced
credit spreads and estimated prepayment rates where applicable. In the absence
of a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations. The Fund's written or
purchased options are valued at the last sales price, or if no sales occurred
that day, at the last reported bid price. Short-term investments with remaining
maturities of sixty days or less at the time of purchase are valued on the basis
of amortized cost, which approximates market value.
All assets and liabilities of the Fund that are initially expressed in foreign
currency values will be converted into U.S. dollars at the WM/Reuters exchange
rate computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
14
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Fund adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards 157, FAIR VALUE MEASUREMENTS ("SFAS
157"). SFAS 157 establishes a new framework for measuring fair value and expands
related disclosures. Broadly, the SFAS 157 framework requires fair value to be
determined based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants. SFAS 157 establishes a three-level valuation hierarchy
based upon observable and unobservable inputs.
For financial assets and liabilities, fair value is the price that would be
received to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets and liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect our market assumptions. Preference is given to
observable inputs. These two types of inputs create the following fair value
hierarchy:
Level 1 -- Quoted prices for identical investments in active markets.
Level 2 -- Quoted prices for similar investments in active markets; quoted
prices for identical or similar investments in markets that are not
active; and model-derived valuations whose significant value drivers are
observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
The Fund maintains policies and procedures to value investments using the best
and most relevant data available. The Fund performs periodic reviews of the
methodologies used by independent pricing services including obtaining price
validation for certain securities. The following section describes the valuation
methodologies that the Fund uses to measure investments at fair value.
When available, the Fund uses quoted market prices to determine fair value of
investment securities, and they are included in Level 1. Level 1 securities
primarily include publicly-traded equity securities.
When quoted market prices are unobservable, the Fund uses quotes from
independent pricing vendors based on recent trading activity and other relevant
information including market interest rate curves, referenced credit spreads and
estimated prepayment rates where applicable. These investments are included in
level 2 and primarily include long-term US government, agency and corporate
debt, notes, bonds, and mortgage backed securities. In infrequent circumstances,
the Fund's pricing vendors may provide valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
classified in Level 3.
Other financial instruments are derivative instruments that are not reflected in
Total Investments, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------------
Investments in Securities $19,352,210 $7,681 $-- $19,359,892
Other Financial Instruments 10,650 -- -- 10,650
15
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Repurchase Agreements The Fund may engage into repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values.
16
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Writing puts and buying calls tend to increase the Fund's exposure to the
underlying instrument while buying puts and writing calls tend to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
The Fund will not enter into a transaction involving options for speculative
purposes. The Fund's risks in using these contracts include changes in the value
of the underlying instruments, non-performance of the counterparties under the
contracts' terms and changes in the liquidity of the secondary market for the
contracts. Options are valued at the last sale price, or if no sales occurred on
that day, at the last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2009, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- --------------------------------------------------------------------------------
$21,261,148 $1,007,725 $(2,908,981) $(1,901,256)
As of December 31, 2008, the Fund has no capital loss carryovers. Capital loss
carryovers are available to offset future realized capital gains to the extent
provided in the Internal Revenue Code and regulations thereunder. To the extent
that these carryover losses are used to offset future capital gains, it is
probable that the gains so offset will not be distributed to shareholders
because they would be taxable as ordinary income.
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund incurred $1,010,356 losses after October 31, 2008.
The tax composition of distributions paid during the years ended December 31,
2008 and December 31, 2007 were as follows:
Long-Term
Ordinary Capital
Income Gains Total
- -------------------------------------------------------------------------------
2008 $350,157 $ 633,810 $ 983,967
2007 741,446 4,501,504 5,242,950
17
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures and
losses deferred due to wash sale transactions. Reclassifications due to
permanent book/tax differences are made to the Fund's capital accounts to
reflect income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. These reclassifications have no impact
on net investment income, realized gains or losses, or the net asset value of
the Fund. The calculation of net investment income per share in the Financial
Highlights table excludes these adjustments.
The reclassifications for the year ended December 31, 2008 were as follows:
Undistributed
Net Investment Accumulated
Income Net Realized Loss
- --------------------------------------------------------------------------------
$258 $(258)
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Fund's 2005, 2006, 2007 and 2008 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Fund specific expenses are allocated to the Fund that incurs such
expense and pro rata across share classes. Expenses, other than those incurred
by a specific Fund, are allocated pro rata among Funds and share classes. Such
expenses may include custodial fees, legal and accounting fees, printing costs
and registration fees. All expenses of the Fund are paid by GEAM and reimbursed
by the Fund. Certain class specific expenses (such as transfer agency fees or
distribution fees) are allocated to the class that incurs such expense.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES On March 19, 2008, the FASB issued
Statement of Financial Accounting Standards No. 161 ("FAS No. 161"), "Disclosure
about Derivative Instruments and Hedging Activities." This new accounting
statement requires enhanced disclosures about an entity's derivative and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity invests in derivatives, (b) how derivatives are accounted for
under FAS No. 133, and (c) how derivatives affect an entity's financial
position, financial performance, and cash flows. FAS No. 161 also requires
enhanced disclosures regarding credit-risk-related contingent features of
derivative instruments.
The Fund is subject to equity price risk in the normal course of pursuing its
investment objectives. The Fund may use futures contracts to gain exposure to,
or hedge against changes in the value of equities. A futures contract represents
a commitment for the future purchase or sale of an asset at a specified price on
a specified date. Upon entering into such contracts, the Fund is required to
deposit with the broker, either in cash or securities, an initial margin in an
amount equal to a certain percentage of the contract amount. Subsequent payments
(variation margin) are made or received by the Fund each day, depending on the
daily fluctuations in the value of the contract, and are recorded for financial
statement purposes as unrealized gains or losses by the Fund. Upon entering into
such contracts, the Fund bears the risk of securities prices moving
unexpectedly, in which case, the Fund may not achieve the anticipated benefits
of the futures contracts and may realize a loss. With futures contracts, there
is minimal counterparty credit risk to the Fund since futures contracts are
exchange traded and the exchange's clearinghouse, as counterparty to all traded
futures, guarantees the futures against default.
18
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Shown below are the derivative contracts entered into by the Fund, summarized by
primary risk exposure.
Asset Derivatives June 30, 2009 Liability Derivatives June 30, 2009
Derivatives not ------------------------------------------------- ----------------------------------------
accounted for as Location in Notional Location in Notional
hedging instruments the Statements Value/No. of the Statements Value/No. of
under FASB of Assets Contracts Fair of Assets Contracts Fair
Statement 133 and Liabilities Long/(Short) Value and Liabilities Long/(Short) Value
- -----------------------------------------------------------------------------------------------------------------
Equity Contracts Receivables, Net Assets - 500 10,650* -- -- --
Unrealized Appreciation/
(Depreciation)
- -----------------------------------------------------------------------------------------------------------------
* INCLUDES CUMULATIVE APPRECIATION/DEPRECIATION OF FUTURES CONTRACTS AS
REPORTED IN THE SCHEDULE OF INVESTMENTS. ONLY THE CURRENT DAY'S VARIATION
MARGIN IS REPORTED WITHIN THE STATEMENT OF ASSETS AND LIABILITIES.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Change in Unrealized
Derivatives not accounted Location in the Realized Gain or Appreciation/(Depreciation)
for as hedging instruments Statements of (Loss) on Derivatives on Derivatives
under FASB Statement 133 Operations Recognized in Income Recognized in Income
- ---------------------------------------------------------------------------------------------------------------
Equity Contracts Net realized gain/(loss) on (26,445) 11,625
futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on futures
- ---------------------------------------------------------------------------------------------------------------
3. LINE OF CREDIT
The Company shares a revolving credit facility of up to $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established on November 7, 2007. Generally, borrowings under
the credit facilities would accrue interest at the Federal Funds Rate plus 50
basis points and would be borne by the borrowing Fund. The maximum amount
allowed to be borrowed by any one Fund is the lesser of (i) its prospectus
limitation or (ii) 20% of its net assets. The credit facilities were not
utilized by the Fund during the fiscal year ended June 30, 2009.
4. AMOUNTS PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was
retained by the Company's Board of Directors effective March 16, 2000 to act as
investment adviser and administrator of the Fund. GEAM's compensation for
investment advisory and administrative services is paid monthly based on the
average daily net assets of the Fund at an annualized rate of 0.65%.
DISTRIBUTION AND SERVICE (12b-1) FEE The Company has adopted a Distribution and
Service (12b-1) Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with
respect to Class 4 shares of the Fund. Under the Plan, the Fund may compensate
GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and
the Fund's principal distributor, for certain sales services provided by GEID or
other broker dealers and investor services provided by GEID or other service
providers relating to the Fund's Class 4 shares, including services to owners or
prospective owners of variable contracts issued by insurance companies that
offer such share class as an investment option. The amount of compensation paid
under the Plan by the Fund's Class 4 shares may not exceed 0.45% of the average
daily net assets of the Fund attributable to such share class. The Plan
continues in effect from year to year for so long as such continuance is
approved annually by the Board of Directors, including by those directors who
are not interested persons of the Company and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related to
it.
19
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2009, $172 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2009 were as follows:
U.S. Government Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$ -- $ --
Other Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$6,159,232 $7,811,521
SECURITY LENDING At June 30, 2009, the Fund did not participate in securities
lending.
20
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 60
POSITION(S) HELD WITH FUND Chairman of the Board and President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 11 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS President and Chief Executive
Officer - Mutual Funds and Intermediary Business since March 2007; Executive
Vice President of GEAM from February 1997 to March 2007; Director of GEAM since
1988; Vice President, GE Capital Corporation, an indirect wholly-owned
subsidiary of GE, since December 1999; Executive Vice President - Sales and
Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, from
March 1993 to March 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds since its inception; Trustee of
General Electric Savings & Security Trust, General Electric S&S Income Fund,
General Electric S&S Program Mutual Fund ("GE Savings & Security Funds"), Elfun
Funds, General Electric Insurance Plan Trust, General Relief Loan Fund, and
General Electric Pension Trust since 1988; Trustee of Fordham University since
2002; Trustee of GE Volunteers since 1993; Director, GE Asset Management
(Ireland) since February 1999; Director, GE Asset Management Funds Plc., GE
Asset Canada Company, and GE Asset Management Limited since 1998.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Director and Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds since July 2007.
21
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 43
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years (Vice President); one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
from September 2003 to July 2007; Vice President and Secretary of GE Funds and
GE Institutional Funds since July 2007; Vice President and Assistant Secretary
of Elfun Funds and GE Savings & Security Funds since October 2003.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
22
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 63
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since its inception; Trustee of Fordham University since
2002 and Marymount College from 2001 through 2002; Neuroscience Research
Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn &
Queens since 2001; Gregorian University Foundation since 1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 73
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception; Trustee, St. Francis Hospital Corp.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
23
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J. Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS &
INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Ralph R. Layman, PRESIDENT - PUBLIC EQUITIES (SINCE JULY 2009)
Maureen B. Mitchell, PRESIDENT - INSTITUTIONAL SALES AND MARKETING (SINCE JULY
2009)
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST (SINCE JULY 2009)
Don W. Torey, PRESIDENT - ALTERNATIVE INVESTMENTS
John J. Walker, EVP, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT - INVESTMENT STRATEGIES
24
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii)
on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
- --------------------------------------------------------------------------------
[GE LOGO]
GE Investments Funds, Inc.
Mid-Cap Equity Fund Letter from the Chairman
- --------------------------------------------------------------------------------
[PHOTO OF MICHAEL J. COSGROVE]
MICHAEL J. COSGROVE
CHAIRMAN, GE INVESTMENTS FUNDS, INC.
DEAR SHAREHOLDER:
Attached is the semi-annual report for the GE Investments Funds, Inc. -- Mid-Cap
Equity Fund (the "Fund") for the six-month period ended June 30, 2009. The
report contains information about the performance of the Fund, and other Fund
specific data, along with portfolio manager commentary. We have provided you
with an overview of the investment markets, along with our investment outlook
for the coming months.
MARKET OVERVIEW
Despite investors' hopes that the new U.S. administration and Congress would
help stabilize the nation's financial crisis, asset values continued to fall in
the first quarter of 2009. Global equities experienced sharp price declines in
January and February as troubles in the United States continued to cast a cloud
over world markets. U.S. Treasury Secretary Geithner indicated that some U.S.
banks would need large amounts of assistance to survive and talks of stress
tests and bank nationalization spooked investors. The markets also booed
government plans to take a 36% stake in Citigroup even as the financial status
of institutions already on government life-support, such as AIG, remained
uncertain. Similarly, news of troubled automakers GM and Chrysler worried
international bondholders and shareholders alike. Financial services and small
cap stocks were hardest hit in the downswing as equity indexes broke the
November 2008 lows in February. Government debt issues also had a rough February
as U.S. and U.K. debt auctions saw weak support for long and non-inflation
indexed government securities. These poor showings were soon followed by a
warmer reception for shorter-dated debt.
U.S. stocks abruptly reversed course and posted three straight weeks of gains
through the end of March after the three largest U.S. banks announced they had
turned a profit. Equity indexes around the globe followed the U.S. path,
regaining much of their losses since January. In late March, the U.S. Treasury
Secretary unveiled his Public- Private Investment Partnership (PPIP) plan to
remove toxic assets from the balance sheets of the nation's banks, and the
markets seemed convinced of a financial sector backstop. Another policy move to
support the markets came on March 18th when the Federal Reserve announced that
it would buy $300 billion of 2- and 10-year Treasuries, increase its purchase
plan of agency mortgage-backed securities from $500 billion to $1.25 trillion,
double its purchases of agency debt to $200 billion and expand the eligible
collateral in the Term Asset-Backed Securities Loan Facility (TALF) program. In
response, the yield on the U.S. Treasury 10-year note fell 47 basis points to
2.53%, recording the largest one-day drop in over four decades.
The rebound in global equities continued into the second quarter, as markets
experienced strong gains in April and May, before tailing off into a flat June
as investors started to question the strength and timing of an economic
recovery. Despite a double-digit rally since mid-March, the S&P 500 Index ended
the second quarter approximately where it started at the beginning of 2009
(priced in the low 900s). Emerging markets equities continued to outperform
their developed peers during the second quarter. The MSCI Emerging Markets Index
gained 34.7%, its best quarterly return since data collection began in 1988.
Speculation persists that developing markets are better positioned to weather
the global recession given that their financial systems are generally better
capitalized and less leveraged than the developed countries.
During the second quarter, U.S. government stress tests concluded and the banks
that needed capital swiftly and successfully raised it. The Federal Reserve also
announced that it would allow 10 large banks to repay bailout funds from the
government's controversial Troubled Asset Relief Program. In this environment,
financial stocks enjoyed a notably strong quarter, bolstered by growing
speculation that the worst of the global banking crisis was over. However,
financial risks remain as the European Central Bank said that European banks
might need to write down an additional $283 billion by the end of next year. In
late June, The European Central Bank also injected (euro)442 billion ($621
billion) into Europe's banking system in one-year funds to spur lending and help
stabilize the economy.
[GE LOGO]
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Mid-Cap Equity Fund Letter from the Chairman (Continued)
- --------------------------------------------------------------------------------
Against this backdrop, financial markets posted improved results for the six-
and 12-month periods ended June 30.
TOTAL RETURNS AS OF
JUNE 30, 2009 6-MONTH 12-MONTH
- --------------------------------------------------------------------------------
U.S. equities (S&P 500 Index) 3.16 -26.21
Global equities (MSCI World Index) 6.35 -29.50
International equities
(MSCI EAFE Index) 7.95 -31.35
Emerging Markets equities
(MSCI EM Index) 36.01 -28.07
Small-cap U.S. equities
(Russell 2000 Index) 2.64 -25.01
Mid-cap U.S. equities
(Russell Mid Cap Index) 9.96 -30.36
U.S. fixed income (Barclays Capital
U.S. Aggregate Bond Index) 1.90 6.05
U.S. short-term government
fixed income (Barclays Capital
U.S. Treasury Bond Index 1-3 Year) 0.47 4.94
U.S. tax-exempt income
(Barclays Capital U.S. Municipal
Bond Index 10 year) 4.38 5.58
- --------------------------------------------------------------------------------
OUTLOOK
Uncertainty will likely continue around the strength and timing of a U.S.
economic recovery. With unemployment at a 25-year high of 9.5%, and American
consumers having suffered a collapse in wealth of at least $15 trillion since
early 2007, it is hard to have much confidence in a consumer-driven recovery in
the short term. We believe the economy will work below its potential for many
quarters to come as deleveraging continues among consumers and global financial
institutions.
While equity markets have enjoyed a bounce off of the bottom over the first half
of the year, the positive earnings surprises in April and May came mostly from
productivity gains and cost containment programs. Earnings in the second quarter
will be heavily scrutinized for evidence that a real recovery is sustainable and
that restocking is giving way to growth in final demand. We believe companies
are going to have to show evidence of a top-line recovery -- increased demand
and improving fundamentals -- in order for stocks to work their way higher.
Given the economic headwinds we're facing, consolidation of the second quarter's
gains seems a real possibility.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. We encourage
long-term investors to maintain a diversified investment approach that is
consistent with their goals, time horizon and risk tolerance. While diversified
portfolios are not immune to market downturns, history suggests they can put you
in a position to benefit from the inevitable return to better times.
Thank you for investing with GE Investments Funds.
Sincerely,
/s/ Michael J. Cosgrove
Michael J. Cosgrove
CHAIRMAN, GE INVESTMENTS FUNDS, INC.
JUNE 2009
MIKE COSGROVE IS PRESIDENT AND CHIEF EXECUTIVE OFFICER -MUTUAL FUNDS &
INTERMEDIARY BUSINESS AT GE ASSET MANAGEMENT. MR. COSGROVE ALSO SERVES AS A
TRUSTEE OF THE GE PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM. PREVIOUSLY
CHIEF FINANCIAL OFFICER OF GE ASSET MANAGEMENT AND ASSISTANT TREASURER - GE
COMPANY, MIKE JOINED GE IN 1970 AND HELD A NUMBER OF MANAGERIAL POSITIONS IN
FINANCE AND SALES AT GE'S INTERNATIONAL OPERATION AND IN GE TRADING COMPANY.
MIKE HAS A B.S. IN ECONOMICS FROM FORDHAM UNIVERSITY AND AN M.B.A. FROM ST.
JOHN'S UNIVERSITY.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC.
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
[SIDE BAR]
GE Investments Funds, Inc.
Mid-Cap Equity Fund
Semi-Annual Report
JUNE 30, 2009
[GE LOGO]
GE Investments Funds, Inc.
Mid-Cap Equity Fund Contents
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE .................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS .............................. 2
NOTES TO SCHEDULE OF INVESTMENTS ........................................ 9
FINANCIAL STATEMENTS
Financial Highlights ................................................. 10
Statement of Assets and Liabilities .................................. 11
Statement of Operations .............................................. 12
Statements of Changes in Net Assets .................................. 13
Notes to Financial Statements ........................................ 14
ADDITIONAL INFORMATION .................................................. 21
INVESTMENT TEAM ......................................................... 24
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
Notes to Performance June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any. Total returns shown
are net of Fund expenses but do not reflect fees and charges associated with the
variable contracts such as administrative fees, account charges and surrender
charges, which, if reflected, would reduce the Fund's total returns for all
periods shown.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
An investment in a Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. An investment in a Fund is subject to risk, including
possible loss of principal invested.
The Russell* Mid-Cap Index (Russell Mid-Cap Index) is an unmanaged index and
does not reflect the actual cost of investing in the instruments that comprise
the index.
Russell Mid-Cap Index is a market capitalization-weighted index of the smallest
800 companies included in the Russell 1000 Index that represent approximately
25% of the total market capitalization of the Russell 1000 Index. The Russell
1000 Index comprises the 1,000 largest U.S. domiciled companies. The results
shown for the foregoing index assume the reinvestment of net dividends or
interest.
The peer universe of the underlying annuity funds used in our peer group average
return calculation is based on the blend of Morningstar peer categories, as
shown. Morningstar is an independent mutual fund rating service. A Fund's
performance may be compared to or ranked within a universe of mutual funds with
investment objectives and policies similar but not necessarily identical to the
Fund's.
(C)2009 Morningstar, Inc. All Rights Reserved. The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is no warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are responsible for any
damage or losses relating from any use of this information. Past performance is
no guarantee or future results.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUND.
* RUSSELL INVESTMENT GROUP OWNS THE RUSSELL INDEX DATA, INCLUDING ALL
APPLICABLE TRADEMARKS AND COPYRIGHTS, USED BY GE ASSET MANAGEMENT IN THESE
MATERIALS. ANY UNAUTHORIZED USE OR REDISTRIBUTION OF SUCH RUSSELL INDEX
DATA IS STRICTLY PROHIBITED. RUSSELL INVESTMENT GROUP IS NOT RESPONSIBLE
FOR THE CONFIGURATION OF THIS MATERIAL OR FOR ANY INACCURACY IN GE ASSET
MANAGEMENT'S PRESENTATION THEREOF.
1
Mid-Cap Equity Fund
- --------------------------------------------------------------------------------
[PHOTO OF DIANE M. WEHNER]
DIANE M. WEHNER
THE MID-CAP EQUITY FUND IS MANAGED BY DIANE M. WEHNER. MS. WEHNER IS A SENIOR
VICE PRESIDENT OF GE ASSET MANAGEMENT AND PORTFOLIO MANAGER OF THE MID-CAP
EQUITY FUND. SHE HAS SERVED IN THIS CAPACITY SINCE SEPTEMBER 2004. BEFORE
JOINING GE ASSET MANAGEMENT, MS. WEHNER WAS A VICE PRESIDENT AND SENIOR
PORTFOLIO MANAGER FROM JANUARY 1997 TO JUNE 2001, AND ASSOCIATE PORTFOLIO
MANAGER FROM MAY 1995 TO JANUARY 1997, WITH BENEFIT CAPITAL MANAGEMENT
CORPORATION. MS. WEHNER HAS SERVED AS AN ANALYST/PORTFOLIO MANAGER IN THE
INVESTMENT MANAGEMENT INDUSTRY SINCE 1985.
Q. HOW DID THE MID-CAP EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND
MORNINGSTAR PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009?
A. For the six-month period ended June 30, 2009, the Mid-Cap Equity Fund
returned 15.05% for the Class 1 shares and 14.94% for the Class 4 shares.
The Russell Mid-Cap Index, the Fund's benchmark, returned 9.96% and the
Fund's Morningstar peer group of 192 US Insurance Mid-Cap Growth funds
returned an average of 14.00% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. During the first half of 2009, the equity market was extremely volatile.
Macroeconomic concerns of a looming depression in the months of January
and February gave way to signs of economic stability. This improved
sentiment prevailed resulting in market appreciation as measured by the
Russell Midcap Index of 44% off its low point on March 9, 2009.
Information technology companies, many of which have strong balance
sheets, outperformed throughout the period. This sector, which was one of
the worst performing in 2008, ranked at the top year-to-date due to
expectations for a recovery in IT spending. The Fund's overweight in this
sector therefore was additive to performance.
Conversely, our underweight in financial stocks benefited the Fund as this
sector registered negative returns for the period. Despite a gradual
thawing in the credit markets throughout the first half, we remained
concerned about credit quality at the regional banks and believed that we
were in the early innings of a commercial real estate downturn. Therefore,
the portfolio was underweight banks and REITs which were down 28% and 13%,
respectively. Consumer discretionary stocks performed well during the
first six months of 2009 as a result of some improvement in consumer
sentiment. While we remain cautious on the consumer due to the increasing
unemployment rate and elevated levels of consumer debt, we reduced our
underweight in these cyclical names which benefitted the Fund.
Finally, the healthcare sector performed well during the period,
increasing 16%. While the Fund benefitted from its sizable exposure to
this sector (15% of portfolio), performance of some individual stocks
within the services and life science tools industries suffered from
company specific issues, which more than offset the benefits of being
exposed to this relatively defensive growth industry.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund outperformed during the six-month period, largely due to solid
stock selection within the consumer discretionary, information technology,
financials, and energy sectors. Specifically Cheesecake Factory (+71%), a
differentiated upscale casual dining restaurant chain, rose as the company
reported better than expected results in part due to its cost cutting
initiatives and the introduction of a smaller/lower priced menu.
Meanwhile, software company Macrovision (+72%) benefited as investors
recognized its strong technology position (it owns 4000 patents)
2
- --------------------------------------------------------------------- [Q&A LOGO]
and relatively inexpensive valuation. Also, within information technology,
the Fund was positively impacted by Mercadolibre (+64%), a Latin American
e-commerce company which is benefiting from the secular growth in internet
adoption in this region. Within the financial sector, CB Richard Ellis
Group (+117) rebounded as the company successfully raised capital and
alleviated concerns about its balance sheet. As the market leader in
commercial real estate services, the company is well positioned to benefit
from increased activity in distressed commercial real estate sales. Energy
services company Weatherford International (+81%) performed well during
the period due to expectations that earnings are near trough levels and
the company is best positioned to capitalize on an upturn in oil services
activity.
Within the healthcare sector, two companies detracted most from
performance. Psychiatric Solutions (-18%) corrected in response to
quality-of-care concerns at three of its facilities which are currently
the subject of state investigations. Medical technology firm Masimo which
develops and sells pulse oximeters (-19%) declined due to concerns about
sales growth in light of lower hospital spending. Cogent, developer of
automated fingerprint identification systems, (-21%) was negatively
impacted by the loss of a key contract.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. During the period we increased the Fund's weighting in the consumer
discretionary, energy, information technology and financial sectors, and
we reduced our exposure to consumer staples, industrials and health care.
We are focused on investing in attractively valued companies with strong
balance sheets, experienced management teams, solid earnings prospects,
leading market shares, and superior long-term fundamentals. With an
emphasis on growth, we continue to look to invest in innovative companies
that provide prospects for above-average earnings growth. Therefore,
healthcare and information technology companies represent a meaningful
percentage of the Fund's holdings.
3
Mid-Cap Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2009.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2009 - JUNE 30, 2009
- --------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ----------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ----------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,150.48 4.27
Class 4 1,000.00 1,149.38 6.45
- ----------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ----------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,020.61 4.01
Class 4 1,000.00 1,018.62 6.06
- ----------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.80% FOR
CLASS 1 SHARES AND 1.21% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1,
2009 - JUNE 30, 2009), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE
PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE ONE-HALF YEAR PERIOD)
** ACTUAL FUND RETURNS FOR SIX-MONTH PERIOD ENDED JUNE 30, 2009 WERE AS
FOLLOWS: 15.05% FOR CLASS 1 SHARES, AND 14.94% FOR CLASS 4 SHARES.
4
Mid-Cap Equity Fund (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
Russell MidCap
Mid-Cap Equity Fund Index
06/99 $10,000 $10,000
12/99 $ 9,534 $10,712
12/00 $10,324 $11,597
12/01 $10,358 $10,942
12/02 $ 8,932 $ 9,172
12/03 $11,875 $12,850
12/04 $13,777 $15,442
12/05 $15,395 $17,395
12/06 $16,688 $20,055
12/07 $18,791 $21,181
12/08 $11,685 $12,399
06/09 $13,443 $13,633
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2009
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 5/1//97)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS YEAR YEAR YEAR $10,000 INVESTMENT
- -------------------------------------------------------------------------------------------
Mid-Cap Equity Fund 15.05% -23.51% 1.48% 3.00% $13,443
- -------------------------------------------------------------------------------------------
Russell Midcap Index 9.96% -30.36% -0.10% 3.15% $13,633
- -------------------------------------------------------------------------------------------
Morningstar peer group average* 14.00% -30.92% -1.13% -0.69%
===========================================================================================
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
Russell MidCap
Mid-Cap Equity Fund Index
05/01/08 $10,000 $10,000
06/08 $ 9,596 $ 9,617
09/08 $ 8,528 $ 8,375
12/08 $ 6,364 $ 6,091
06/09 $ 7,315 $ 6,697
- --------------------------------------------------------------------------------
TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 2009
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
SIX ONE SINCE ENDING VALUE OF A
MONTHS YEAR INCEPTION $10,000 INVESTMENT
- -------------------------------------------------------------------------------------
Mid-Cap Equity Fund 14.94% -23.78% -23.50% $7,315
- -------------------------------------------------------------------------------------
Russell Midcap Index 9.96% -30.36% -29.07% $6,697
- -------------------------------------------------------------------------------------
Morningstar peer group average** 14.00% -30.92%
=====================================================================================
INVESTMENT PROFILE
A Fund designed for investors who seek long-term growth of capital and future
income by investing at least 80% of its net assets in equity securities of
mid-cap companies under normal circumstances. The Fund invests primarily in
mid-cap companies that the portfolio manager believes are undervalued by the
market and have above-average growth potential.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Market Value of $84,068 (in thousands)
[PIE CHART]
Information Technology 18.4%
Consumer Discretionary 15.0%
Healthcare 14.9%
Financials 12.2%
Energy 8.7%
Industrials 7.6%
Utilities 7.0%
Consumer Staples 5.5%
Materials 4.7%
Telecommunication Services 3.1%
Short-Term 2.9%
Other Investments 0.0%***
TOP TEN LARGEST EQUITY HOLDINGS
AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Macrovision Solutions Corp. 3.15%
- --------------------------------------------------------------------------------
HCC Insurance Holdings, Inc. 2.88%
- --------------------------------------------------------------------------------
ITC Holdings Corp. 2.38%
- --------------------------------------------------------------------------------
Activision Blizzard, Inc. 2.19%
- --------------------------------------------------------------------------------
Southwestern Energy Co. 2.17%
- --------------------------------------------------------------------------------
O'Reilly Automotive, Inc. 2.13%
- --------------------------------------------------------------------------------
Masimo Corp. 1.95%
- --------------------------------------------------------------------------------
ACE Ltd. 1.89%
- --------------------------------------------------------------------------------
Thermo Fisher Scientific, Inc. 1.87%
- --------------------------------------------------------------------------------
Corrections Corporation of America 1.86%
================================================================================
* MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS
INDICATED IN THE MID-CAP GROWTH PEER GROUP CONSISTING OF 192, 190, 154 AND
65 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS AND ONE YEAR PERIODS INDICATED IN THE MID-CAP
GROWTH PEER GROUP CONSISTING OF 192 AND 190 UNDERLYING ANNUITY FUNDS,
RESPECTIVELY.
*** LESS THAN 0.01%.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
5
MID-CAP EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MID-CAP EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 97.5% +
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 3.7%
Alliant Techsystems, Inc. ................... 18,673 $ 1,537,908 (a,c)
Hexcel Corp. ................................ 62,855 599,008 (a)
ITT Corp. ................................... 22,289 991,860
3,128,776
BEVERAGES -- 1.6%
Pepsi Bottling Group, Inc. .................. 39,413 1,333,736
BIOTECHNOLOGY -- 2.4%
Amylin Pharmaceuticals, Inc. ................ 57,107 770,944 (a)
Vertex Pharmaceuticals Inc. ................. 33,918 1,208,838 (a)
1,979,782
CAPITAL MARKETS -- 3.5%
Affiliated Managers Group Inc. .............. 25,403 1,478,201 (a)
Greenhill & Company Inc. .................... 8,043 580,785
Invesco Ltd. ................................ 32,115 572,289
The Charles Schwab Corp. .................... 16,959 297,461
2,928,736
CHEMICALS -- 4.1%
Intrepid Potash, Inc. ....................... 38,194 1,072,488 (a)
Monsanto Co. ................................ 13,624 1,012,808 (c)
Praxair, Inc. ............................... 19,314 1,372,646 (c)
3,457,942
COMMERCIAL BANKS -- 0.7%
SunTrust Banks, Inc. ........................ 27,368 450,204
Zions Bancorporation ........................ 13,497 156,025
606,229
COMMERCIAL SERVICES & SUPPLIES -- 1.9%
Corrections Corporation of America .......... 92,193 1,566,359 (a)
COMMUNICATIONS EQUIPMENT -- 2.1%
Harris Corp. ................................ 11,440 324,438 (c)
Harris Stratex Networks, Inc.
(Class A) ................................ 2,928 18,973 (a)
Juniper Networks, Inc. ...................... 59,121 1,395,256 (a)
1,738,667
DIVERSIFIED FINANCIAL SERVICES -- 0.9%
CME Group Inc. .............................. 2,307 717,731
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 3.6%
ITC Holdings Corp. .......................... 44,096 $ 2,000,195 (c)
Northeast Utilities ......................... 43,763 976,353
2,976,548
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.0%
Cogent, Inc. ................................ 79,277 850,642 (a)
ENERGY EQUIPMENT & SERVICES -- 3.4%
Dresser-Rand Group Inc. ..................... 39,277 1,025,130 (a)
Noble Corp. ................................. 17,423 527,046
Tesco Corp. ................................. 47,981 380,969 (a)
Weatherford International Ltd. .............. 47,528 929,648 (a)
2,862,793
FOOD PRODUCTS -- 1.4%
McCormick & Company Inc. .................... 38,267 1,244,826 (c)
GAS UTILITIES -- 0.7%
EQT CORP. ................................... 17,423 608,237
HEALTHCARE EQUIPMENT & SUPPLIES -- 4.2%
DENTSPLY International Inc. ................. 20,163 615,375
Gen-Probe Inc. .............................. 20,991 902,193 (a)
Hologic, Inc. ............................... 25,653 365,042 (a)
Masimo Corp. ................................ 68,150 1,643,096 (a,c)
3,525,706
HEALTHCARE PROVIDERS & SERVICES -- 1.9%
Catalyst Health Solutions, Inc. ............. 40,094 999,944 (a)
Psychiatric Solutions, Inc. ................. 27,112 616,527 (a,c)
1,616,471
HOTELS RESTAURANTS & LEISURE -- 2.7%
Life Time Fitness, Inc. ..................... 28,962 579,530 (a)
Penn National Gaming, Inc. .................. 29,710 864,858 (a)
The Cheesecake Factory Inc. ................. 47,195 816,473 (a)
2,260,861
HOUSEHOLD DURABLES -- 0.4%
MDC Holdings, Inc. .......................... 10,214 307,543
INDUSTRIAL CONGLOMERATES -- 0.6%
McDermott International, Inc. ............... 23,195 471,090 (a)
INSURANCE -- 4.8%
ACE Ltd. .................................... 35,856 1,585,911
HCC Insurance Holdings, Inc. ................ 100,803 2,420,280 (c)
4,006,191
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
6
MID-CAP EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES -- 3.2%
Baidu, Inc ADR .............................. 3,004 $ 904,474 (a)
Equinix, Inc. ............................... 4,149 301,798 (a)
MercadoLibre, Inc. .......................... 54,338 1,460,605 (a)
2,666,877
IT SERVICES -- 2.8%
Affiliated Computer Services, Inc.
(Class A) ................................ 24,227 1,076,163 (a)
Cybersource Corp. ........................... 25,646 392,384 (a)
DST Systems, Inc. ........................... 12,077 446,245 (a)
Fidelity National Information
Services, Inc. ........................... 21,837 435,867
2,350,659
LIFE SCIENCES TOOLS & SERVICES -- 6.4%
Covance Inc. ................................ 31,235 1,536,762 (a)
Illumina, Inc. .............................. 32,457 1,263,876 (a)
Mettler-Toledo International, Inc. .......... 13,331 1,028,487 (a,c)
Thermo Fisher Scientific, Inc. .............. 38,562 1,572,173 (a,c)
5,401,298
MACHINERY -- 1.4%
Harsco Corp. ................................ 42,630 1,206,429
MEDIA -- 3.3%
Focus Media Holding Ltd. ADR ................ 31,628 254,922 (a)
Liberty Global, Inc. (Series C) ............. 35,359 559,026 (a)
Liberty Media Corp - Entertainment
(Series A) ............................... 27,205 727,734 (a)
Regal Entertainment Group (Class A) ......... 93,410 1,241,419 (c)
2,783,101
METALS & MINING -- 0.5%
Freeport-McMoRan Copper &
Gold Inc. ................................ 9,186 460,310
MULTILINE RETAIL -- 1.1%
Kohl's Corp. ................................ 21,804 932,121 (a)
MULTI-UTILITIES -- 1.4%
DTE Energy Co. .............................. 12,936 413,952
SCANA Corp. ................................. 23,367 758,726
1,172,678
OIL, GAS & CONSUMABLE FUELS -- 4.0%
Marathon Oil Corp. .......................... 29,786 897,452
Peabody Energy Corp. ........................ 20,396 615,143
Southwestern Energy Co. ..................... 46,888 1,821,599 (a,c)
3,334,194
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 2.5%
Alberto-Culver Co. .......................... 55,406 $ 1,408,975 (c)
Mead Johnson Nutrition Co. (Class A) ........ 21,228 674,414 (a)
2,083,389
PROFESSIONAL SERVICES -- 1.4%
HIS, Inc. (Class A) ......................... 22,907 1,142,372 (a)
REAL ESTATE INVESTMENT TRUSTS (REIT'S) -- 0.5%
Douglas Emmett, Inc. (REIT) ................. 42,389 381,077
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 1.1%
CB Richard Ellis Group, Inc. (Class A) ...... 100,502 940,699 (a,c)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.2%
Hittite Microwave Corp. ..................... 40,701 1,414,360 (a)
Marvell Technology Group Ltd. ............... 107,080 1,246,411 (a)
2,660,771
SOFTWARE -- 8.0%
Activision Blizzard, Inc. ................... 145,826 1,841,782 (a,c)
Blackboard Inc. ............................. 24,845 717,027 (a)
Citrix Systems, Inc. ........................ 46,031 1,467,929 (a)
Macrovision Solutions Corp. ................. 121,558 2,651,180 (a,c)
6,677,918
SPECIALTY RETAIL -- 4.5%
Bed Bath & Beyond, Inc. ..................... 48,855 1,502,291 (a,c)
O'Reilly Automotive, Inc. ................... 46,922 1,786,790 (a,c)
Urban Outfitters, Inc. ...................... 21,216 442,778 (a)
3,731,859
TEXTILES APPAREL & LUXURY GOODS -- 1.4%
Coach, Inc. ................................. 42,405 1,139,846
THRIFTS & MORTGAGE FINANCE -- 0.8%
People's United Financial, Inc. ............. 43,019 647,006
WATER UTILITIES -- 1.3%
American Water Works
Company, Inc. ............................ 58,128 1,110,826
WIRELESS TELECOMMUNICATION SERVICES -- 3.1%
American Tower Corp. (Class A) .............. 41,434 1,306,414 (a)
NII Holdings, Inc. .......................... 21,598 411,874 (a)
Syniverse Holdings, Inc. .................... 53,646 859,945 (a)
2,578,233
TOTAL COMMON STOCK
(COST $88,892,043) ....................... 81,590,529
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
7
MID-CAP EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $35,741) ........................... $ 19,657 (d)
TOTAL INVESTMENTS IN SECURITIES
(COST $88,927,784) ....................... 81,610,186
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.9%
- --------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class
0.28% .................................... 2,457,550 (b,e)
(COST $2,457,550)
TOTAL INVESTMENTS
(COST $91,385,334) ....................... 84,067,736
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (0.4)% ............................ (371,692)
------------
NET ASSETS -- 100.0% ........................ $ 83,696,044
============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Mid-Cap Equity had the following long futures contracts open at June 30,
2009 (unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------
S&P Midcap 400
Emini Index
Futures September 2009 18 $1,038,060 $12,658
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
8
Notes to Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) At June 30, 2009, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(d) GEAM, the investment adviser of the Fund, also serves as the investment
adviser of the GEI Investment Fund.
(e) GEAM, the investment adviser of the Fund, also serves as investment
adviser of the GE Money Market Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2009.
Abbreviations:
ADR American Depository Receipt
REIT Real Estate Investment Trust
9
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
MID-CAP EQUITY FUND
--------------------------------------------------------------------- ---------------------------
CLASS 1 CLASS 4
--------------------------------------------------------------------- ---------------------------
6/30/09+ 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 6/30/09+ 12/31/08**
--------------------------------------------------------------------- ---------------------------
INCEPTION DATE -- -- -- -- -- 5/1/97 -- 5/1/08
Net asset value, beginning
of period .................. $ 10.50 $ 17.30 $ 18.19 $ 19.22 $ 18.33 $ 17.48 $ 10.51 $ 16.85
INCOME/(LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income ...... 0.08 0.10 0.08 0.23 0.05 0.17 (0.02) (0.01)
Net realized and
unrealized gains/
(losses) on investments .. 1.50 (6.65) 2.23 1.40 2.11 2.63 1.59 (6.12)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS ...... 1.58 (6.55) 2.31 1.63 2.16 2.80 1.57 (6.13)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ...... -- 0.05 0.07 0.22 0.06 0.14 -- 0.01
Net realized gains ......... -- 0.20 3.13 2.44 1.21 1.81 -- 0.20
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ........... -- 0.25 3.20 2.66 1.27 1.95 -- 0.21
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD .................. $ 12.08 $ 10.50 $ 17.30 $ 18.19 $ 19.22 $ 18.33 $ 12.08 $ 10.51
====================================================================================================================================
TOTAL RETURN (a) .............. 15.05% (37.82)% 12.60% 8.40% 11.74% 16.02% 14.94% (36.36)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ........... $ 83,689 $ 81,791 $191,339 $199,311 $229,097 $239,831 $ 7 $ 6
Ratios to average net
assets:
Net investment income* ... 0.32% 0.29% 0.35% 1.01% 0.24% 0.89% (0.09)% (0.05)%*
Expenses* ................ 0.80%(b) 0.73%(b) 0.70% 0.69% 0.70% 0.70% 1.21%(b) 1.18%(b)*
Portfolio turnover rate .... 12% 49% 65% 29% 27% 78% 12% 49%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges.
(b) Reflects GEAM's waiver of a portion of the Fund's management fee in an
amount equal to the management fee earned by GEAM with respect to the
Fund's investment in the GE Funds - GE Money Market Fund. Excluding
waiver, the expense ratios would be unchanged.
* Annualized for periods less than one year.
** Per share values have been calculated using the average share method.
+ Unaudited
10
MID-CAP
Statement of Assets EQUITY
and Liabilities JUNE 30, 2009 (UNAUDITED) FUND
- ------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $88,892,043) ............. $ 81,590,529
Investments in affiliated securities, at market (cost $35,741) ...... 19,657
Short-term affiliated investments (at amortized cost) ............... 2,457,550
Income receivables .................................................. 45,440
Receivable for fund shares sold ..................................... 1,107
- ------------------------------------------------------------------------------------------
TOTAL ASSETS ...................................................... 84,114,283
- ------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ................................... 182,688
Payable for fund shares redeemed .................................... 100,026
Payable to GEAM ..................................................... 81,340
Accrued other expenses .............................................. 39,299
Variation margin payable ............................................ 4,500
Other liabilities ................................................... 10,386
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES ................................................. 418,239
- ------------------------------------------------------------------------------------------
NET ASSETS ............................................................. $ 83,696,044
==========================================================================================
NET ASSETS CONSIST OF:
Capital paid in ..................................................... 105,249,728
Undistributed (distribution in excess of) net investment income ..... 157,543
Accumulated net realized loss ....................................... (14,406,287)
Net unrealized appreciation/(depreciation) on:
Investments ....................................................... (7,317,598)
Futures ........................................................... 12,658
- ------------------------------------------------------------------------------------------
NET ASSETS ............................................................. $ 83,696,044
==========================================================================================
CLASS 1:
NET ASSETS ............................................................. 83,688,731
Shares outstanding ($0.01 par value; unlimited shares authorized) ...... 6,925,597
Net asset value per share .............................................. $ 12.08
CLASS 4:
NET ASSETS ............................................................. 7,313
Shares outstanding ($0.01 par value; unlimited shares authorized) ...... 606
Net asset value per share .............................................. $ 12.08
See Notes to Financial Statements.
11
MID-CAP
Statement of Operations EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) FUND
- ------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend .......................................................... $ 382,663
Interest .......................................................... 48,932
Interest from affliated investments ............................... 4,845
- ------------------------------------------------------------------------------------------
TOTAL INCOME ........................................................ 436,440
- ------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees .................................. 253,122
Distributors Fees (Notes 4) Service Class ......................... 15
Transfer agent .................................................... 9,786
Directors's fees .................................................. 1,022
Custody and accounting expenses ................................... 21,860
Professional fees ................................................. 14,041
Registration expenses ............................................. 2,372
Other expenses .................................................... 12,512
- ------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ...................... 314,730
- ------------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser .......................... (2,103)
- ------------------------------------------------------------------------------------------
NET EXPENSES ...................................................... 312,627
- ------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ............................................... 123,813
==========================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
REALIZED LOSS ON:
Investments ..................................................... (7,640,804)
Futures ......................................................... (111,182)
INCREASE IN UNREALIZED APPRECIATION ON:
Investments ..................................................... 18,433,003
Futures ......................................................... 14,830
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments ................... 10,695,847
- ------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $ 10,819,660
==========================================================================================
See Notes to Financial Statements.
12
MID-CAP
Statements of EQUITY
Changes in Net Assets FUND
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2009 DECEMBER 31,
(UNAUDITED) 2008
- ------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income ....................................................... $ 123,813 $ 389,662
Net realized loss on investments and futures ................................. (7,751,986) (6,321,639)
Net unrealized gain/(loss) on investments and futures ........................ 18,447,833 (61,400,904)
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ...................................... 10,819,660 (67,332,881)
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 .................................................................... -- (364,388)
Class 4 .................................................................... -- (3)
Net realized gains
Class 1 .................................................................... -- (1,551,141)
Class 4 .................................................................... -- (121)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................................................ -- (1,915,653)
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ............ 10,819,660 (69,248,534)
- ------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 .................................................................... 803,368 4,009,071
Class 4 .................................................................... -- 10,000
Value of distributions reinvested
Class 1 .................................................................... -- 1,915,529
Class 4 .................................................................... -- 124
Cost of shares redeemed
Class 1 .................................................................... (9,724,165) (46,228,464)
Class 4 .................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------
Net decrease from share transactions ......................................... (8,920,797) (40,293,740)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................................ 1,898,863 (109,542,274)
NET ASSETS
Beginning of period ............................................................ 81,797,181 191,339,455
- ------------------------------------------------------------------------------------------------------------------------
End of period .................................................................. $ 83,696,044 $ 81,797,181
========================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD .... $ 157,543 $ 33,730
- ------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold ....................................................................... 72,627 263,663
Shares redeemed ................................................................... (938,521) (3,717,121)
- ------------------------------------------------------------------------------------------------------------------------
Net decrease in fund shares ....................................................... (865,894) (3,453,458)
========================================================================================================================
CLASS 4
Shares sold ....................................................................... -- 593
Issued for distributions reinvested ............................................... -- 12
- ------------------------------------------------------------------------------------------------------------------------
Net increase in fund shares ....................................................... -- 605
========================================================================================================================
See Notes to Financial Statements.
13
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of fourteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund (the "Fund"), Small-Cap
Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
The Company offers two share classes (Class 1 and Class 4) of the Fund as
investment options for variable life insurance and variable annuity contracts.
Class 4 shares were first offered on May 1, 2008, and Fund shares outstanding
prior to May 1, 2008 were designated as Class 1 shares. Each share class has
different fees and expenses, and as a result, each share class will have
different share price and performance. Not all variable contracts offer both
share classes of the Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on recent trading activity and other
relevant information which may include market interest rate curves, referenced
credit spreads and estimated prepayment rates where applicable. In the absence
of a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations. The Fund's written or
purchased options are valued at the last sales price, or if no sales occurred
that day, at the last reported bid price. Short-term investments with remaining
maturities of sixty days or less at the time of purchase are valued on the basis
of amortized cost, which approximates market value.
All assets and liabilities of the Fund that are initially expressed in foreign
currency values will be converted into U.S. dollars at the WM/Reuters exchange
rate computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
14
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Fund adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards 157, FAIR VALUE MEASUREMENTS ("SFAS
157"). SFAS 157 establishes a new framework for measuring fair value and expands
related disclosures. Broadly, the SFAS 157 framework requires fair value to be
determined based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants. SFAS 157 establishes a three-level valuation hierarchy
based upon observable and unobservable inputs.
For financial assets and liabilities, fair value is the price that would be
received to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets and liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect our market assumptions. Preference is given to
observable inputs. These two types of inputs create the following fair value
hierarchy:
Level 1 -- Quoted prices for identical investments in active markets.
Level 2 -- Quoted prices for similar investments in active markets; quoted
prices for identical or similar investments in markets that are not
active; and model-derived valuations whose significant value drivers are
observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
The Fund maintains policies and procedures to value investments using the best
and most relevant data available. The Fund performs periodic reviews of the
methodologies used by independent pricing services including obtaining price
validation for certain securities. The following section describes the valuation
methodologies that the Fund uses to measure investments at fair value.
When available, the Fund uses quoted market prices to determine fair value of
investment securities, and they are included in Level 1. Level 1 securities
primarily include publicly-traded equity securities.
When quoted market prices are unobservable, the Fund uses quotes from
independent pricing vendors based on recent trading activity and other relevant
information including market interest rate curves, referenced credit spreads and
estimated prepayment rates where applicable. These investments are included in
level 2 and primarily include long-term US government, agency and corporate
debt, notes, bonds, and mortgage backed securities. In infrequent circumstances,
the Fund's pricing vendors may provide valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
classified in Level 3.
Other financial instruments are derivative instruments that are not reflected in
Total Investments, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------------
Investments in Securities $ 84,048,079 $ 19,657 $ -- $84,067,736
Other Financial Instruments 12,658 -- -- 12,658
15
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's or a third party custodian takes possession
of the collateral pledged for investments in repurchase agreements on behalf of
the Fund. The Fund values the underlying collateral daily on a mark-to-market
basis to determine that the value, including accrued interest, is at least equal
to 102% of the repurchase price. In the event the seller defaults and the value
of the security declines, or if the seller enters an insolvency proceeding,
realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values.
16
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Writing puts and buying calls tend to increase the Fund's exposure to the
underlying instrument while buying puts and writing calls tend to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
The Fund will not enter into a transaction involving options for speculative
purposes. The Fund's risks in using these contracts include changes in the value
of the underlying instruments, non-performance of the counterparties under the
contracts' terms and changes in the liquidity of the secondary market for the
contracts. Options are valued at the last sale price, or if no sales occurred on
that day, at the last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2009, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- --------------------------------------------------------------------------------
$94,458,597 $7,398,247 $(17,747,031) $(10,348,784)
As of December 31, 2008, the Fund has capital loss carryovers as indicated
below.
Amount Expires
- ------------------------------------------------
$2,257,504 12/31/16
Capital loss carryovers are available to offset future realized capital gains to
the extent provided in the Internal Revenue Code and regulations thereunder. To
the extent that these carryover losses are used to offset future capital gains,
it is probable that the gains so offset will not be distributed to shareholders
because they would be taxable as ordinary income.
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund incurred $1,367,783 losses after October 31, 2008.
The tax composition of distributions paid during the years ended December 31,
2008 and December 31, 2007 were as follows:
Ordinary Long-Term
Income Capital Gains Total
- ------------------------------------------------
2008 $ 366,920 $ 1,548,733 $ 1,915,653
2007 3,939,151 26,044,439 29,983,590
17
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures,
distributions from Real Estate Investment Trusts (REITS), and losses deferred
due to wash sale transactions. Reclassifications due to permanent book/tax
differences are made to the Fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryovers) under income
tax regulations. These reclassifications have no impact on net investment
income, realized gains or losses, or the net asset value of the Fund. The
calculation of net investment income per share in the Financial Highlights table
excludes these adjustments.
The reclassifications for the year ended December 31, 2008 were as follows:
Undistributed
(Distribution in Excess of) Accumulated
Net Investment Income Net Realized Gain
- --------------------------------------------------------------------------------
$(14,101) $14,101
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2005, 2006, 2007 and 2008 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Fund specific expenses are allocated to the Fund that incurs such
expense and pro rata across share classes. Expenses, other than those incurred
by a specific Fund, are allocated pro rata among Funds and share classes. Such
expenses may include custodial fees, legal and accounting fees, printing costs
and registration fees. All expenses of the Fund are paid by GEAM and reimbursed
by the Fund. Certain class specific expenses (such as transfer agency fees or
distribution fees) are allocated to the class that incurs such expense.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
On March 19, 2008, the FASB issued Statement of Financial Accounting Standards
No. 161 ("FAS No. 161"), "Disclosure about Derivative Instruments and Hedging
Activities." This new accounting statement requires enhanced disclosures about
an entity's derivative and hedging activities. Entities are required to provide
enhanced disclosures about (a) how and why an entity invests in derivatives, (b)
how derivatives are accounted for under FAS No. 133, and (c) how derivatives
affect an entity's financial position, financial performance, and cash flows.
FAS No. 161 also requires enhanced disclosures regarding credit-risk-related
contingent features of derivative instruments.
The Fund is subject to equity price risk in the normal course of pursuing its
investment objectives. The Fund may use futures contracts to gain exposure to,
or hedge against changes in the value of equities. A futures contract represents
a commitment for the future purchase or sale of an asset at a specified price on
a specified date. Upon entering into such contracts, the Fund is required to
deposit with the broker, either in cash or securities, an initial margin in an
amount equal to a certain percentage of the contract amount. Subsequent payments
(variation margin) are made or received by the Funds each day, depending on the
daily fluctuations in the value of the contract, and are recorded for financial
statement purposes as unrealized gains or losses by the Fund. Upon entering into
such contracts, the Fund bears the risk of securities prices moving
unexpectedly, in which case, the Fund may not achieve the anticipated benefits
of the futures contracts and may realize a loss. With futures contracts, there
is minimal counterparty credit risk to the Fund since futures contracts are
exchange traded and the exchange's clearinghouse, as counterparty to all traded
futures, guarantees the futures against default.
18
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Shown below are the derivative contracts entered into by the Fund, summarized by
primary risk exposure.
Asset Derivatives June 30, 2009 Liability Derivatives June 30, 2009
Derivatives not -------------------------------------------------- --------------------------------------
accounted for as Location in Notional Location in Notional
hedging instruments the Statements Value/No. of the Statements Value/No. of
under FASB of Assets Contracts Fair of Assets Contracts Fair
Statement 133 and Liabilities Long/(Short) Value and Liabilities Long/(Short) Value
- -----------------------------------------------------------------------------------------------------------------
Equity Contracts Receivables, Net Assets - 1,800 12,600* -- -- --
Unrealized Appreciation/
(Depreciation)
- -----------------------------------------------------------------------------------------------------------------
* INCLUDES CUMULATIVE APPRECIATION/DEPRECIATION OF FUTURES CONTRACTS AS
REPORTED IN THE SCHEDULE OF INVESTMENTS. ONLY THE CURRENT DAY'S VARIATION
MARGIN IS REPORTED WITHIN THE STATEMENT OF ASSETS AND LIABILITIES.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Change in Unrealized
Derivatives not accounted Location in the Realized Gain or Appreciation/(Depreciation)
for as hedging instruments Statements of (Loss) on Derivatives on Derivatives
under FASB Statement 133 Operations Recognized in Income Recognized in Income
- ---------------------------------------------------------------------------------------------------------------
Equity Contracts Net realized gain/(loss) on (111,182) 14,830
futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on futures
- ---------------------------------------------------------------------------------------------------------------
3. LINE OF CREDIT
The Company shares a revolving credit facility of up to $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established on November 7, 2007. Generally, borrowings under
the credit facilities would accrue interest at the Federal Funds Rate plus 50
basis points and would be borne by the borrowing Fund. The maximum amount
allowed to be borrowed by any one Fund is the lesser of (i) its prospectus
limitation or (ii) 20% of its net assets. The credit facilities were not
utilized by the Fund during the fiscal year ended June 30, 2009.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund at an
annualized rate of 0.65%.
DISTRIBUTION AND SERVICE (12b-1) FEES The Company has adopted a Distribution and
Service (12b-1) Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with
respect to Class 4 shares of the Fund. Under the Plan, the Fund may compensate
GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and
the Fund's principal distributor, for certain sales services provided by GEID or
other broker dealers and investor services provided by GEID or other service
providers relating to the Fund's Class 4 shares, including services to owners or
prospective owners of variable contracts issued by insurance companies that
offer such share class as an investment option. The amount of compensation paid
under the Plan by the Fund's Class 4 shares may not exceed 0.45% of the average
daily net assets of the Fund attributable to such share class. The Plan
continues in effect from year to year for so long as such continuance is
approved annually by the Board of Directors, including by those directors who
are not interested persons of the Company and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related to
it.
19
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2009, $714 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2009 were as follows:
U.S. Government Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$ -- $ --
Other Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$9,188,704 $19,489,335
SECURITY LENDING At June 30, 2009 the Fund did not participate in securities
lending.
20
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 60
POSITION(S) HELD WITH FUND Chairman of the Board and President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 11 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS President and Chief Executive
Officer - Mutual Funds and Intermediary Business since March 2007; Executive
Vice President of GEAM from February 1997 to March 2007; Director of GEAM since
1988; Vice President, GE Capital Corporation, an indirect wholly-owned
subsidiary of GE, since December 1999; Executive Vice President - Sales and
Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, from
March 1993 to March 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds since its inception; Trustee of
General Electric Savings & Security Trust, General Electric S&S Income Fund,
General Electric S&S Program Mutual Fund ("GE Savings & Security Funds"), Elfun
Funds, General Electric Insurance Plan Trust, General Relief Loan Fund, and
General Electric Pension Trust since 1988; Trustee of Fordham University since
2002; Trustee of GE Volunteers since 1993; Director, GE Asset Management
(Ireland) since February 1999; Director, GE Asset Management Funds Plc., GE
Asset Canada Company, and GE Asset Management Limited since 1998.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Director and Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds since July 2007.
21
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 43
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years (Vice President); one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
from September 2003 to July 2007; Vice President and Secretary of GE Funds and
GE Institutional Funds since July 2007; Vice President and Assistant Secretary
of Elfun Funds and GE Savings & Security Funds since October 2003.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
22
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 63
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since its inception; Trustee of Fordham University since
2002 and Marymount College from 2001 through 2002; Neuroscience Research
Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn &
Queens since 2001; Gregorian University Foundation since 1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 73
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception; Trustee, St. Francis Hospital Corp.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
23
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J. Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE
OFFICER - MUTUAL FUNDS & INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Ralph R. Layman, PRESIDENT - PUBLIC EQUITIES
(SINCE JULY 2009)
Maureen B. Mitchell, PRESIDENT - INSTITUTIONAL SALES AND
MARKETING (SINCE JULY 2009)
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST (SINCE JULY 2009)
Don W. Torey, PRESIDENT - ALTERNATIVE INVESTMENTS
John J. Walker, EVP, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT - INVESTMENT STRATEGIES
24
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii)
on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
- --------------------------------------------------------------------------------
[GE LOGO]
GE Investments Funds, Inc.
Small-Cap Equity Fund Letter from the Chairman
- --------------------------------------------------------------------------------
[PHOTO OF MICHAEL J. COSGROVE]
MICHAEL J. COSGROVE
CHAIRMAN,
GE INVESTMENTS FUNDS, INC.
DEAR SHAREHOLDER:
Attached is the semi-annual report for the GE Investments Funds, Inc. --
Small-Cap Equity Fund (the "Fund") for the six-month period ended June 30, 2009.
The report contains information about the performance of the Fund, and other
Fund specific data, along with portfolio manager commentary. We have provided
you with an overview of the investment markets, along with our investment
outlook for the coming months.
MARKET OVERVIEW
Despite investors' hopes that the new U.S. administration and Congress would
help stabilize the nation's financial crisis, asset values continued to fall in
the first quarter of 2009. Global equities experienced sharp price declines in
January and February as troubles in the United States continued to cast a cloud
over world markets. U.S. Treasury Secretary Geithner indicated that some U.S.
banks would need large amounts of assistance to survive and talks of stress
tests and bank nationalization spooked investors. The markets also booed
government plans to take a 36% stake in Citigroup even as the financial status
of institutions already on government life-support, such as AIG, remained
uncertain. Similarly, news of troubled automakers GM and Chrysler worried
international bondholders and shareholders alike. Financial services and small
cap stocks were hardest hit in the downswing as equity indexes broke the
November 2008 lows in February. Government debt issues also had a rough February
as U.S. and U.K. debt auctions saw weak support for long and non-inflation
indexed government securities. These poor showings were soon followed by a
warmer reception for shorter-dated debt.
U.S. stocks abruptly reversed course and posted three straight weeks of gains
through the end of March after the three largest U.S. banks announced they had
turned a profit. Equity indexes around the globe followed the U.S. path,
regaining much of their losses since January. In late March, the U.S. Treasury
Secretary unveiled his Public-Private Investment Partnership (PPIP) plan to
remove toxic assets from the balance sheets of the nation's banks, and the
markets seemed convinced of a financial sector backstop. Another policy move to
support the markets came on March 18th when the Federal Reserve announced that
it would buy $300 billion of 2- and 10-year Treasuries, increase its purchase
plan of agency mortgage-backed securities from $500 billion to $1.25 trillion,
double its purchases of agency debt to $200 billion and expand the eligible
collateral in the Term Asset-Backed Securities Loan Facility (TALF) program. In
response, the yield on the U.S. Treasury 10-year note fell 47 basis points to
2.53%, recording the largest one-day drop in over four decades.
The rebound in global equities continued into the second quarter, as markets
experienced strong gains in April and May, before tailing off into a flat June
as investors started to question the strength and timing of an economic
recovery. Despite a double-digit rally since mid-March, the S&P 500 Index ended
the second quarter approximately where it started at the beginning of 2009
(priced in the low 900s). Emerging markets equities continued to outperform
their developed peers during the second quarter. The MSCI Emerging Markets Index
gained 34.7%, its best quarterly return since data collection began in 1988.
Speculation persists that developing markets are better positioned to weather
the global recession given that their financial systems are generally better
capitalized and less leveraged than the developed countries.
During the second quarter, U.S. government stress tests concluded and the banks
that needed capital swiftly and successfully raised it. The Federal Reserve also
announced that it would allow 10 large banks to repay bailout funds from the
government's controversial Troubled Asset Relief Program. In this environment,
financial stocks enjoyed a notably strong quarter, bolstered by growing
speculation that the worst of the global banking crisis was over. However,
financial risks remain as the European Central Bank said that European banks
might need to write down an additional $283 billion by the end of next year. In
late June, The European Central Bank also injected (euro)442 billion ($621
billion) into Europe's banking system in one-year funds to spur lending and help
stabilize the economy.
[GE LOGO]
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Small-Cap Equity Fund Letter from the Chairman (Continued)
- --------------------------------------------------------------------------------
Against this backdrop, financial markets posted improved results for the six-
and 12-month periods ended June 30.
TOTAL RETURNS AS OF
JUNE 30, 2009 6-MONTH 12-MONTH
- --------------------------------------------------------------------------------
U.S. equities (S&P 500 Index) 3.16 -26.21
Global equities (MSCI World Index) 6.35 -29.50
International equities
(MSCI EAFE Index) 7.95 -31.35
Emerging Markets equities
(MSCI EM Index) 36.01 -28.07
Small-cap U.S. equities
(Russell 2000 Index) 2.64 -25.01
Mid-cap U.S. equities
(Russell Mid Cap Index) 9.96 -30.36
U.S. fixed income (Barclays Capital
U.S. Aggregate Bond Index) 1.90 6.05
U.S. short-term government
fixed income (Barclays Capital
U.S. Treasury Bond Index 1-3 Year) 0.47 4.94
U.S. tax-exempt income
(Barclays Capital U.S. Municipal
Bond Index 10 year) 4.38 5.58
- --------------------------------------------------------------------------------
OUTLOOK
Uncertainty will likely continue around the strength and timing of a U.S.
economic recovery. With unemployment at a 25-year high of 9.5%, and American
consumers having suffered a collapse in wealth of at least $15 trillion since
early 2007, it is hard to have much confidence in a consumer-driven recovery in
the short term. We believe the economy will work below its potential for many
quarters to come as deleveraging continues among consumers and global financial
institutions.
While equity markets have enjoyed a bounce off of the bottom over the first half
of the year, the positive earnings surprises in April and May came mostly from
productivity gains and cost containment programs. Earnings in the second quarter
will be heavily scrutinized for evidence that a real recovery is sustainable and
that restocking is giving way to growth in final demand. We believe companies
are going to have to show evidence of a top-line recovery -- increased demand
and improving fundamentals -- in order for stocks to work their way higher.
Given the economic headwinds we're facing, consolidation of the second quarter's
gains seems a real possibility.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. We encourage
long-term investors to maintain a diversified investment approach that is
consistent with their goals, time horizon and risk tolerance. While diversified
portfolios are not immune to market downturns, history suggests they can put you
in a position to benefit from the inevitable return to better times.
Thank you for investing with GE Investments Funds.
Sincerely,
/s/ Michael J. Cosgrove
Michael J. Cosgrove
CHAIRMAN, GE INVESTMENTS FUNDS, INC.
JUNE 2009
MIKE COSGROVE IS PRESIDENT AND CHIEF EXECUTIVE OFFICER -MUTUAL FUNDS &
INTERMEDIARY BUSINESS AT GE ASSET MANAGEMENT. MR. COSGROVE ALSO SERVES AS A
TRUSTEE OF THE GE PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM. PREVIOUSLY
CHIEF FINANCIAL OFFICER OF GE ASSET MANAGEMENT AND ASSISTANT TREASURER - GE
COMPANY, MIKE JOINED GE IN 1970 AND HELD A NUMBER OF MANAGERIAL POSITIONS IN
FINANCE AND SALES AT GE'S INTERNATIONAL OPERATION AND IN GE TRADING COMPANY.
MIKE HAS A B.S. IN ECONOMICS FROM FORDHAM UNIVERSITY AND AN M.B.A. FROM ST.
JOHN'S UNIVERSITY.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC.
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
[SIDE BAR]
GE Investments Funds, Inc.
Small-Cap Equity Fund
Semi-Annual Report
JUNE 30, 2009
[GE LOGO]
GE Investments Funds, Inc.
Small-Cap Equity Fund Contents
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE ..................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................... 2
NOTES TO SCHEDULE OF INVESTMENTS ......................................... 11
FINANCIAL STATEMENTS
Financial Highlights .................................................. 12
Statement of Assets and Liabilities ................................... 13
Statement of Operations ............................................... 14
Statements of Changes in Net Assets ................................... 15
Notes to Financial Statements ......................................... 16
ADDITIONAL INFORMATION ................................................... 23
INVESTMENT TEAM .......................................................... 26
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
Notes to Performance June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any. Total returns shown
are net of Fund expenses but do not reflect fees and charges associated with the
variable contracts such as administrative fees, account charges and surrender
charges, which, if reflected, would reduce the Fund's total returns for all
periods shown.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
An investment in a Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. An investment in a Fund is subject to risk, including
possible loss of principal invested.
The Russell 2000 Index (Russell 2000(R))* is an unmanaged index and does not
reflect the actual cost of investing in the instruments that comprise the index.
The Russell 2000 Index is a market capitalization-weighted index consisting of
2,000 of the smallest U.S.-domiciled publicly traded common stocks that are
included in the Russell 3000(R) Index. The Russell 3000(R) Index is comprised of
the 3,000 largest U.S. domiciled companies. The results shown for the foregoing
index assume the reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer group average
return calculation is based on the blend of Morningstar peer categories, as
shown. Morningstar is an independent mutual fund rating service. A Fund's
performance may be compared to or ranked within a universe of mutual funds with
investment objectives and policies similar but not necessarily identical to the
Fund's.
(C)2009 Morningstar, Inc. All Rights Reserved. The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is no warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are responsible for any
damage or losses relating from any use of this information. Past performance is
no guarantee or future results.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUND.
* RUSSELL INVESTMENT GROUP OWNS THE RUSSELL INDEX DATA, INCLUDING ALL
APPLICABLE TRADEMARKS AND COPYRIGHTS, USED BY GE ASSET MANAGEMENT
INCORPORATED IN THESE MATERIALS. ANY UNAUTHORIZED USE OR REDISTRIBUTION OF
SUCH RUSSELL INDEX DATA IS STRICTLY PROHIBITED. RUSSELL INVESTMENT GROUP
IS NOT RESPONSIBLE FOR THE CONFIGURATION OF THIS MATERIAL OR FOR ANY
INACCURACY IN GE ASSET MANAGEMENT INCORPORATED'S PRESENTATION THEREOF.
1
Small-Cap Equity Fund
- --------------------------------------------------------------------------------
EFFECTIVE OCTOBER 1, 2008, THE SMALL-CAP EQUITY FUND WAS RESTRUCTURED FROM A
FUND THAT UTILIZED A SINGLE SUB-ADVISER TO MANAGE THE FUND'S ASSETS, TO A
MULTIPLE SUB-ADVISER FUND STRUCTURE THAT UTILIZES SEVERAL SUB-ADVISERS TO MANAGE
THE FUND'S ASSETS. THE SMALL-CAP EQUITY FUND IS MANAGED BY DAVID WIEDERECHT, WHO
IS VESTED WITH OVERSIGHT AUTHORITY OVER THE FUND'S SUBADVISERS THAT PROVIDE
DAY-TO-DAY MANAGEMENT OF THE ASSETS OF THE FUND ALLOCATED TO THEM. MR.
WIEDERECHT HAS FULL DISCRETION IN DETERMINING THE ASSETS THAT ARE ALLOCATED TO
EACH SUB-ADVISER. THE CURRENT SUB-ADVISERS OF THE FUND ARE AS FOLLOWS: PALISADE
CAPITAL MANAGEMENT L.L.C. (WHICH WAS PREVIOUSLY THE SOLE SUB-ADVISER); CHAMPLAIN
INVESTMENT PARTNERS, LLC; GLOBEFLEX CAPITAL, LP; AND SOUTHERNSUN ASSET
MANAGEMENT, INC. PLEASE REFER TO THE FUND PROSPECTUS FOR MORE INFORMATION
REGARDING EACH SUB-ADVISER.
[PHOTO OF DAVID WIEDERECHT]
DAVID WIEDERECHT
DAVID WIEDERECHT IS A DIRECTOR AND PRESIDENT --INVESTMENT STRATEGIES AT GE ASSET
MANAGEMENT SINCE FEBRUARY 2008. HE HAS SERVED AS PORTFOLIO MANAGER OF THE
SMALL-CAP EQUITY FUND SINCE SEPTEMBER 2008. MR. WIEDERECHT JOINED GE ASSET
MANAGEMENT IN 1988 AND HAS HELD VARIOUS POSITIONS AT GE ASSET MANAGEMENT
INCLUDING VICE PRESIDENT -- ALTERNATIVE INVESTMENTS/PRIVATE EQUITY/HEDGE FUND
FROM 1998 TO 2004, AND MANAGING DIRECTOR -- ALTERNATIVE INVESTMENTS FROM 2004 TO
2008, RESPONSIBLE IN BOTH POSITIONS FOR PORTFOLIO MANAGEMENT WITHIN THOSE
STRATEGIES.
Q. HOW DID THE SMALL-CAP EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND
MORNINGSTAR PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009?
A. For the six-month period ended June 30, 2009, the Small-Cap Equity Fund
returned 8.56% for the Class 1 shares and 8.41% for the Class 4 shares.
The Russell 2000 Index, the Fund's benchmark, returned 2.64% and the
Fund's Morningstar peer group of 147 US Insurance Small Blend funds
returned an average of 4.89% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The U.S. equity markets almost made a round trip in the first half of
2009. Stocks fell sharply through early March against a backdrop of severe
global economic recession and continued concerns about the global
financial system. However, clarity emerged in the U.S. financial sector
with the resolution of the government bank stress tests and improving
credit spreads.
Sector performance was mostly positive with seven Russell 2000 sectors
achieving year-to-date gains: Information Technology (+28%), Consumer
Discretionary (+22%), Telecommunication Services (+11%), Materials (+7%),
Health Care (+5%), Energy (+3%) and Consumer Staples (+3%). Industrials,
although they rallied almost 22% in the second quarter, are down 7%
year-to-date. Financials (-18%) and Utilities (-6%) have also lagged. In
this environment, growth outperformed value as evidenced by the returns of
the Russell 2000 Growth (+11.36%) and Russell 2000 Value (-5.17%).
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund outperformed the Russell 2000 Index for the first six months of
2009, returning 8.56% compared to the benchmark return of 2.64%. The Fund
outperformed eight of ten sectors, with only Information Technology and
Telecom Services detracting from performance. The largest positive impact
to performance in the first half of 2009 was a significant underweight to
Financials. The underweight position was enhanced by very strong security
selection within the Financials sector.
Detractors to performance over the last six months resided mainly in the
Information Technology and Telecom Services sectors
2
- --------------------------------------------------------------------- [Q&A LOGO]
where underweight positions and lagging security selection led to relative
underperformance. In addition, the Fund's cash holdings had a negative
impact on performance during the period.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. There have been no significant changes to the Fund's position over the
last six months. The largest portfolio underweight positions continue to
be in Financials and Utilities. Overweight positions in Consumer Staples,
Energy and Materials remain consistent over the last six months while an
overweight position in Health Care has increased. We continue to believe
that over the long-term, the active security selection of the Fund's
multiple sub-advisers will have a positive impact on returns.
3
Small-Cap Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2009.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2009 - JUNE 30, 2009
- --------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ---------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,085.56 7.76
Class 4 1,000.00 1,084.11 10.13
- ---------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ---------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,017.21 7.50
Class 4 1,000.00 1,014.96 9.79
- ---------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.50% FOR
CLASS 1 SHARES AND 1.96% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1,
2009 - JUNE 30, 2009), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE
PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE ONE-HALF YEAR PERIOD)
** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009 WERE AS
FOLLOWS: 8.56% FOR CLASS 1 SHARES, AND 8.41% FOR CLASS 4 SHARES.
4
Small-Cap Equity Fund (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
CLASS 1 SHARES
================================================================================
[LINE GRAPH]
Small-Cap Equity Fund Russell 2000 Index
04/28/00 $10,000 $10,000
12/00 $11,326 $ 9,650
12/01 $12,455 $ 9,896
12/02 $10,730 $ 7,876
12/03 $13,317 $11,601
12/04 $15,334 $13,728
12/05 $16,796 $14,348
12/06 $19,024 $16,983
12/07 $19,478 $16,712
12/08 $12,156 $11,065
06/09 $13,196 $11,357
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2009
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 4/28/00)
- --------------------------------------------------------------------------------
SIX ONE FIVE SINCE ENDING VALUE OF A
MONTHS YEAR YEAR INCEPTION $10,000 INVESTMENT
- ---------------------------------------------------------------------------------------------
Small-Cap Equity 8.56% -28.37% -1.52% 3.07% $13,196
- ---------------------------------------------------------------------------------------------
Russell 2000 Index 2.64% -25.01% -1.72% 1.40% $11,357
- ---------------------------------------------------------------------------------------------
Morningstar peer group average* 4.89% -26.54% -2.23%
=============================================================================================
CLASS 4 SHARES
================================================================================
[LINE GRAPH]
Small-Cap Equity Fund Russell 2000 Index
05/01/08 $10,000.00 $10,000.00
06/08 $ 9,535.65 $ 9,654.09
09/08 $ 8,756.22 $ 9,546.67
12/08 $ 6,280.21 $ 7,053.10
06/09 $ 6,808.46 $ 7,239.42
- --------------------------------------------------------------------------------
TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 2009
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
SIX ONE SINCE ENDING VALUE OF A
MONTHS YEAR INCEPTION $10,000 INVESTMENT
- --------------------------------------------------------------------------------------
Small-Cap Equity 8.41% -28.60% -28.06% $6,808
- --------------------------------------------------------------------------------------
Russell 2000 Index 2.64% -25.01% -24.19% $7,239
- --------------------------------------------------------------------------------------
Morningstar peer group average** 4.89% -26.45%
======================================================================================
INVESTMENT PROFILE
A Fund designed for investors who seek long-term growth of capital by investing
at least 80% of its net assets in equity securities of small-cap companies under
normal circumstances. The Fund uses a multi-sub-adviser investment strategy that
combines growth, value and core investment management styles.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Market Value of $49,763 (in thousands)
[PIE CHART]
Healthcare 19.1%
Industrials 16.7%
Information Technology 14.4%
Consumer Discretionary 13.1%
Financials 11.4%
Consumer Staples 7.2%
Energy 6.6%
Short-Term 5.7%
Materials 4.1%
Utilities 1.1%
Telecommunication Services 0.6%
Other Investments 0.0%***
TOP TEN LARGEST EQUITY HOLDINGS
AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
HMS Holdings Corp. 1.14%
- --------------------------------------------------------------------------------
Omega Healthcare Investors, Inc. (REIT) 1.04%
- --------------------------------------------------------------------------------
Genesee & Wyoming Inc. (Class A) 0.97%
- --------------------------------------------------------------------------------
LKQ Corp. 0.96%
- --------------------------------------------------------------------------------
Oil States International, Inc. 0.91%
- --------------------------------------------------------------------------------
Varian, Inc. 0.88%
- --------------------------------------------------------------------------------
Aaron Rents, Inc. (Class B) 0.87%
- --------------------------------------------------------------------------------
Compass Minerals International, Inc. 0.86%
- --------------------------------------------------------------------------------
Interactive Data Corp. 0.86%
- --------------------------------------------------------------------------------
Waste Connections, Inc. 0.82%
================================================================================
* MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS, ONE YEAR AND FIVE-YEAR PERIODS INDICATED IN
THE SMALL BLEND PEER GROUP CONSISTING OF 147, 141 AND 102 UNDERLYING
ANNUITY FUNDS, RESPECTIVELY.
** MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS AND ONE YEAR PERIODS INDICATED IN THE SMALL
BLEND PEER GROUP CONSISTING OF 147 AND 141 UNDERLYING ANNUITY FUNDS,
RESPECTIVELY.
*** LESS THAN 0.01%.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
5
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SMALL-CAP EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 95.0% +
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 1.6%
Applied Signal Technology, Inc. ................ 2,700 $ 68,877
DynCorp International, Inc. (Class A) .......... 3,500 58,765 (a)
Esterline Technologies Corp. ................... 2,583 69,922 (a)
Hexcel Corp. ................................... 5,500 52,415 (a)
Stanley, Inc. .................................. 3,689 121,294 (a)
Teledyne Technologies Inc. ..................... 12,000 393,000 (a)
Triumph Group, Inc. ............................ 1,000 40,000
804,273
AIR FREIGHT & LOGISTICS -- 0.4%
Forward Air Corp. .............................. 5,085 108,412
UTi Worldwide, Inc. ............................ 9,750 111,150
219,562
AIRLINES -- 0.1%
Hawaiian Holdings, Inc. ........................ 6,700 40,334 (a)
AUTO COMPONENTS -- 0.3%
Wonder Auto Technology, Inc. ................... 13,430 136,046 (a)
BIOTECHNOLOGY -- 1.1%
Alexion Pharmaceuticals, Inc. .................. 1,200 49,344 (a)
Alkermes, Inc. ................................. 8,300 89,806 (a)
Cubist Pharmaceuticals, Inc. ................... 4,700 86,151 (a)
Emergent Biosolutions, Inc. .................... 3,200 45,856 (a)
Martek Biosciences Corp. ....................... 4,927 104,206
Myriad Genetics, Inc. .......................... 1,500 53,475 (a)
Myriad Pharmaceuticals, Inc. ................... 375 1,744 (a)
OSI Pharmaceuticals, Inc. ...................... 1,127 31,815 (a)
PDL BioPharma, Inc. ............................ 8,440 66,676
529,073
BUILDING PRODUCTS -- 0.1%
Ameron International Corp. ..................... 500 33,520
Apogee Enterprises, Inc. ....................... 2,000 24,600
58,120
CAPITAL MARKETS -- 1.5%
Affiliated Managers Group Inc. ................. 4,140 240,907 (a)
GFI Group Inc. ................................. 26,700 179,958
Raymond James Financial, Inc. .................. 12,200 209,962
Waddell & Reed Financial, Inc. (Class A) ....... 4,900 129,213
760,040
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
CHEMICALS -- 2.3%
Arch Chemicals, Inc. ........................... 10,185 $ 250,449
Koppers Holdings Inc. .......................... 8,475 223,486
NewMarket Corp. ................................ 1,921 129,341
Sensient Technologies Corp. .................... 24,300 548,451
1,151,727
COMMERCIAL BANKS -- 2.1%
Cullen/Frost Bankers, Inc. ..................... 8,500 392,020
Fulton Financial Corp. ......................... 14,500 75,545
Sandy Spring Bancorp, Inc. ..................... 4,100 60,270
Sterling Bancorp ............................... 6,400 53,440
SVB Financial Group ............................ 8,200 223,204 (a)
Westamerica Bancorporation ..................... 5,100 253,011
1,057,490
COMMERCIAL SERVICES & SUPPLIES -- 3.3%
ABM Industries Inc. ............................ 18,700 337,909
American Reprographics Co. ..................... 7,500 62,400 (a)
Bowne & Company Inc. ........................... 9,900 64,449
Copart, Inc. ................................... 4,400 152,548 (a)
Healthcare Services Group, Inc. ................ 15,500 277,140
Herman Miller, Inc. ............................ 4,900 75,166
Ritchie Bros Auctioneers Inc. .................. 7,300 171,185
Schawk, Inc. (Class A) ......................... 7,300 54,823
SYKES Enterprises, Inc. ........................ 3,100 56,079 (a)
Waste Connections, Inc. ........................ 15,800 409,378 (a)
1,661,077
COMMUNICATIONS EQUIPMENT -- 1.6%
BigBand Networks, Inc. ......................... 10,100 52,217 (a)
Cogo Group, Inc. ............................... 8,562 51,115 (a)
CommScope, Inc. ................................ 9,700 254,722 (a)
Comtech Telecommunications Corp. ............... 1,398 44,568 (a)
Digi International Inc. ........................ 4,900 47,775 (a)
Oplink Communications, Inc. .................... 3,500 39,900 (a)
PC-Tel Inc. .................................... 10,600 56,710 (a)
Starent Networks Corp. ......................... 4,963 121,147 (a)
Viasat, Inc. ................................... 4,500 115,380 (a)
783,534
COMPUTERS & PERIPHERALS -- 0.2%
Cray Inc. ...................................... 8,400 66,192 (a)
Super Micro Computer, Inc. ..................... 4,700 36,002 (a)
102,194
CONSTRUCTION & ENGINEERING -- 1.5%
Aecom Technology Corp. ......................... 3,100 99,200 (a)
Chicago Bridge & Iron Company N.V. ............. 17,800 220,720
Michael Baker Corp. ............................ 1,965 83,237 (a)
Quanta Services, Inc. .......................... 4,700 108,711 (a)
URS Corp. ...................................... 4,925 243,886 (a)
755,754
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
6
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 0.3%
Cash America International, Inc. ............... 1,800 $ 42,102
Ezcorp, Inc. (Class A) ......................... 4,100 44,198 (a)
First Cash Financial Services, Inc. ............ 2,700 47,304 (a)
133,604
CONTAINERS & PACKAGING -- 1.5%
AEP Industries, Inc. ........................... 1,700 44,863 (a)
Aptargroup, Inc. ............................... 10,900 368,093
Greif, Inc. (Class A) .......................... 2,000 88,440
Packaging Corporation of America ............... 11,700 189,540
Rock-Tenn Co. (Class A) ........................ 1,600 61,056
751,992
DISTRIBUTORS -- 1.0%
LKQ Corp. ...................................... 29,000 477,050 (a)
DIVERSIFIED CONSUMER SERVICES -- 1.4%
Brink's Home Security
Holdings, Inc. .............................. 5,300 150,043 (a)
K12, Inc. ...................................... 6,300 135,765 (a)
Matthews International Corp.
(Class A) ................................... 6,100 189,832
Pre-Paid Legal Services, Inc. .................. 700 30,513 (a)
Stewart Enterprises, Inc. (Class A) ............ 24,300 117,126
Universal Technical Institute, Inc. ............ 4,000 59,720 (a)
682,999
DIVERSIFIED FINANCIAL SERVICES -- 0.2%
MSCI Inc. (Class A) ............................ 4,900 119,756 (a)
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.2%
Alaska Communications Systems Group Inc. ....... 5,400 39,528
tw telecom inc. (Class A) ...................... 3,700 37,999 (a)
77,527
ELECTRIC UTILITIES -- 0.8%
IDACORP, Inc. .................................. 14,300 373,802
ELECTRICAL EQUIPMENT -- 0.9%
Baldor Electric Co. ............................ 7,400 176,046
Brady Corp. (Class A) .......................... 3,600 90,432
Woodward Governor Co. .......................... 8,500 168,300
434,778
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.7%
Benchmark Electronics, Inc. .................... 6,485 93,384 (a)
CPI International, Inc. ........................ 5,004 43,485 (a)
FARO Technologies, Inc. ........................ 6,908 107,281 (a)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
National Instruments Corp. ..................... 12,200 $ 275,232
Newport Corp. .................................. 27,315 158,154 (a)
Trimble Navigation Ltd. ........................ 7,300 143,299 (a)
820,835
ENERGY EQUIPMENT & SERVICES -- 3.2%
Cal Dive International, Inc. ................... 6,000 51,780 (a)
Dril-Quip, Inc. ................................ 10,200 388,620 (a)
Geokinetics Inc. ............................... 3,000 40,950 (a)
Gulf Island Fabrication, Inc. .................. 1,600 25,328
Gulfmark Offshore, Inc. ........................ 1,600 44,160 (a)
Oceaneering International, Inc. ................ 4,853 219,356 (a)
Oil States International, Inc. ................. 18,700 452,727 (a)
Parker Drilling Company. ....................... 8,900 38,626 (a)
PHI, Inc. ...................................... 2,502 42,884 (a)
Pioneer Drilling Co. ........................... 16,000 76,640 (a)
Superior Energy Services, Inc. ................. 9,700 167,519 (a)
T-3 Energy Services Inc. ....................... 2,761 32,884 (a)
Union Drilling, Inc. ........................... 4,000 26,480 (a)
1,607,954
FOOD & STAPLES RETAILING -- 0.2%
Spartan Stores, Inc. ........................... 7,700 95,557
FOOD PRODUCTS -- 4.0%
Cal-Maine Foods, Inc. .......................... 1,500 37,440
Darling International Inc, ..................... 40,700 268,620 (a)
Del Monte Foods Co. ............................ 38,185 358,175
Lancaster Colony Corp. ......................... 3,400 149,838
Lance, Inc. .................................... 8,800 203,544
Ralcorp Holdings, Inc. ......................... 6,200 377,704 (a)
Smithfield Foods, Inc. ......................... 25,325 353,790 (a)
The Hain Celestial Group, Inc. ................. 14,600 227,906 (a)
1,977,017
HEALTHCARE EQUIPMENT & SUPPLIES -- 5.6%
American Medical Systems
Holdings, Inc. .............................. 20,400 322,320 (a)
Angiodynamics, Inc. ............................ 7,900 104,833 (a)
Conmed Corp. ................................... 2,750 42,680 (a)
ev3, Inc. ...................................... 9,700 103,984 (a)
Gen-Probe Inc. ................................. 3,200 137,536 (a)
Greatbatch, Inc. ............................... 3,600 81,396 (a)
Haemonetics Corp. .............................. 1,700 96,900 (a)
Immucor, Inc. .................................. 10,175 140,008 (a)
Integra LifeSciences
Holdings Corp. .............................. 8,500 225,335 (a)
Masimo Corp. ................................... 4,900 118,139 (a)
Medical Action Industries, Inc. ................ 22,600 258,770 (a)
Meridian Bioscience, Inc. ...................... 11,000 248,380
NuVasive, Inc. ................................. 2,485 110,831 (a)
SonoSite, Inc. ................................. 5,000 100,300 (a)
STERIS Corp. ................................... 2,241 58,445
SurModics, Inc. ................................ 3,600 81,468 (a)
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
7
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Teleflex Inc. ................................. 3,130 $ 140,318
Thoratec Corp. ................................ 4,000 107,120 (a)
West Pharmaceutical Services, Inc. ............ 8,000 278,800
Zoll Medical Corp. ............................ 1,000 19,340 (a)
2,776,903
HEALTHCARE PROVIDERS & SERVICES -- 6.5%
Amedisys, Inc. ................................ 2,563 84,630 (a)
AMN Healthcare Services, Inc. ................. 13,800 88,044 (a)
Bio-Reference Laboratories, Inc. .............. 8,900 281,329 (a)
Chemed Corp. .................................. 2,175 85,869
Corvel Corp. .................................. 505 11,499 (a)
Genoptix, Inc. ................................ 1,400 44,786 (a)
Gentiva Health Services, Inc. ................. 2,700 44,442 (a)
Healthways, Inc. .............................. 16,200 217,890 (a)
HMS Holdings Corp. ............................ 13,900 566,008 (a)
inVentiv Health, Inc. ......................... 12,100 163,713 (a)
IPC The Hospitalist Company, Inc. ............. 2,600 69,394 (a)
Mednax, Inc. .................................. 11,500 484,495 (a)
Molina Healthcare, Inc. ....................... 15,200 363,584 (a)
National Healthcare Corp. ..................... 800 30,352
Owens & Minor, Inc. ........................... 8,400 368,088
Sun Healthcare Group, Inc. .................... 17,173 144,940 (a)
VCA Antech, Inc. .............................. 6,100 162,870 (a)
3,211,933
HEALTHCARE TECHNOLOGY -- 1.6%
athenahealth, Inc. ............................ 3,700 136,937 (a)
Computer Programs &
Systems, Inc. .............................. 10,100 386,931
Eclipsys Corp. ................................ 1,785 31,737 (a)
MedAssets, Inc. ............................... 8,000 155,600 (a)
Phase Forward Inc. ............................ 4,745 71,697 (a)
782,902
HOTELS RESTAURANTS & LEISURE -- 1.1%
Bally Technologies, Inc. ...................... 1,400 41,888 (a)
Cracker Barrel Old Country
Store, Inc. ................................ 8,300 231,570
Denny's Corp. ................................. 36,880 79,292 (a)
Dover Downs Gaming &
Entertainment, Inc. ........................ 1,500 6,975
Shuffle Master, Inc. .......................... 12,300 81,303 (a)
Wendy's/Arby's Group, Inc. .................... 26,600 106,400
547,428
HOUSEHOLD DURABLES -- 0.9%
Jarden Corp. .................................. 21,800 408,750 (a)
Tupperware Brands Corp. ....................... 1,500 39,030
447,780
HOUSEHOLD PRODUCTS -- 0.4%
WD-40 Co. ..................................... 7,300 211,700
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
INSURANCE -- 4.0%
Alleghany Corp. ............................... 585 $ 158,535 (a)
Allied World Assurance Company
Holdings Ltd. .............................. 6,100 249,063
Amtrust Financial Services, Inc. .............. 2,400 27,360
Argo Group International
Holdings Ltd. .............................. 8,000 225,760 (a)
Arthur J Gallagher & Co. ...................... 9,700 206,998
First Mercury Financial Corp. ................. 12,230 168,407 (a)
HCC Insurance Holdings, Inc. .................. 23,000 552,230
National Interstate Corp. ..................... 5,600 85,008
Navigators Group, Inc. ........................ 6,100 271,023 (a)
Tower Group, Inc. ............................. 1,600 39,648
1,984,032
INTERNET & CATALOG RETAIL -- 0.2%
priceline.com Inc. ............................ 1,100 122,705 (a)
INTERNET SOFTWARE & SERVICES -- 1.5%
Art Technology Group, Inc. .................... 10,800 41,040 (a)
AsiaInfo Holdings, Inc. ....................... 3,500 60,235 (a)
comScore, Inc. ................................ 7,300 97,236 (a)
Constant Contact, Inc. ........................ 6,100 121,024 (a)
j2 Global Communications, Inc. ................ 4,187 94,459 (a)
NIC Inc. ...................................... 12,200 82,594
Omniture, Inc. ................................ 8,500 106,760 (a)
S1 Corp. ...................................... 5,100 35,190 (a)
Vocus, Inc. ................................... 6,100 120,536 (a)
759,074
IT SERVICES -- 2.4%
CACI International Inc. (Class A) ............. 1,300 55,523 (a)
CSG Systems International, Inc. ............... 1,800 23,832 (a)
Euronet Worldwide, Inc. ....................... 9,685 187,792 (a)
Global Cash Access Holdings, Inc. ............. 30,900 245,964 (a)
iGate Corp. ................................... 13,437 88,953
NeuStar, Inc. (Class A) ....................... 7,258 160,837 (a)
RightNow Technologies, Inc. ................... 6,500 76,700 (a)
Sapient Corp. ................................. 9,300 58,497 (a)
SRA International Inc. (Class A) .............. 2,300 40,388 (a)
VeriFone Holdings, Inc. ....................... 5,200 39,052 (a)
Virtusa Corp. ................................. 9,085 72,953 (a)
Wright Express Corp. .......................... 4,900 124,803 (a)
1,175,294
LEISURE EQUIPMENT & PRODUCTS -- 0.5%
Polaris Industries, Inc. ...................... 7,775 249,733
LIFE SCIENCES TOOLS & SERVICES -- 4.3%
Bio-Rad Laboratories, Inc (Class A) ........... 4,300 324,564 (a)
Bruker Corp. .................................. 26,370 244,186 (a)
Cambrex Corp. ................................. 5,400 22,248 (a)
Dionex Corp. .................................. 2,400 146,472 (a)
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
8
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
ICON PLC ADR .................................. 15,600 $ 336,648 (a)
Luminex Corp. ................................. 6,328 117,321 (a)
Mettler-Toledo International, Inc. ............ 3,700 285,455 (a)
Techne Corp. .................................. 3,200 204,192
Varian, Inc. .................................. 11,100 437,673 (a)
2,118,759
MACHINERY -- 5.7%
AGCO Corp. .................................... 9,510 276,456 (a)
Cascade Corp. ................................. 8,990 141,413
Chart Industries, Inc. ........................ 3,252 59,121 (a)
CLARCOR, Inc. ................................. 8,800 256,872
Flowserve Corp. ............................... 1,975 137,875
Harsco Corp. .................................. 6,200 175,460
IDEX Corp. .................................... 13,400 329,238
Kaydon Corp. .................................. 7,300 237,688
Kennametal, Inc. .............................. 4,900 93,982
Lincoln Electric Holdings, Inc. ............... 2,400 86,496
Mueller Industries, Inc. ...................... 5,500 114,400
Nordson Corp. ................................. 5,550 214,563
Pall Corp. .................................... 6,100 162,016
RBC Bearings Inc. ............................. 7,300 149,285 (a)
Timken Co. .................................... 8,300 141,764
Trinity Industries, Inc. ...................... 16,200 220,644
2,797,273
MEDIA -- 3.1%
Arbitron, Inc. ................................ 16,400 260,596
Interactive Data Corp. ........................ 26,900 622,466
John Wiley & Sons, Inc. (Class A) ............. 12,900 428,925
Morningstar, Inc. ............................. 5,300 218,519 (a)
1,530,506
METALS & MINING -- 1.3%
Commercial Metals Co. ......................... 13,900 222,817
Compass Minerals
International, Inc. ........................ 7,800 428,298
651,115
MULTI-UTILITIES -- 0.5%
OGE Energy Corp. .............................. 8,720 246,950
OFFICE ELECTRONICS -- 0.3%
Zebra Technologies Corp. (Class A) ............ 6,300 149,058 (a)
OIL, GAS & CONSUMABLE FUELS -- 3.1%
Comstock Resources, Inc. ...................... 3,700 122,285 (a)
CVR Energy, Inc. .............................. 6,900 50,577 (a)
Encore Acquisition Co. ........................ 6,100 188,185 (a)
Goodrich Petroleum Corp. ...................... 4,900 120,491 (a)
James River Coal Co. .......................... 12,650 191,395 (a)
Plains Exploration & Production Co. ........... 7,400 202,464 (a)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Ship Finance International Ltd. ............... 3,700 $ 40,811
St Mary Land & Exploration Co. ................ 11,500 240,005
USEC Inc. ..................................... 34,450 183,274 (a)
Whiting Petroleum Corp. ....................... 4,900 172,284 (a)
1,511,771
PERSONAL PRODUCTS -- 1.8%
Alberto-Culver Co. ............................ 14,600 371,278
American Oriental
Bioengineering, Inc. ....................... 13,423 71,008 (a)
Bare Escentuals, Inc. ......................... 12,200 108,214 (a)
Chattem, Inc. ................................. 4,900 333,690 (a)
884,190
PHARMACEUTICALS -- 0.3%
Caraco Pharmaceutical
Laboratories Ltd. .......................... 6,900 21,183 (a)
Noven Pharmaceuticals, Inc. ................... 4,400 62,920 (a)
The Medicines Co. ............................. 5,743 48,184 (a)
132,287
PROFESSIONAL SERVICES -- 0.9%
Administaff, Inc. ............................. 5,300 123,331
CoStar Group, Inc. ............................ 3,700 147,519 (a)
First Advantage Corp. (Class A) ............... 3,800 57,798 (a)
HIS, Inc. (Class A) ........................... 2,400 119,688 (a)
448,336
REAL ESTATE INVESTMENT TRUSTS (REIT'S) -- 3.1%
BioMed Realty Trust, Inc. (REIT) .............. 25,200 257,796
Digital Realty Trust, Inc. (REIT) ............. 9,800 351,330
DuPont Fabros Technology,
Inc. (REIT) ................................ 9,500 89,490
Healthcare Realty Trust Inc. (REIT) ........... 18,200 306,306
Omega Healthcare
Investors, Inc. (REIT) ..................... 33,400 518,368
1,523,290
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.2%
FirstService Corp. ............................ 7,300 86,359 (a)
ROAD & RAIL -- 2.0%
Genesee & Wyoming Inc. (Class A) .............. 19,250 510,317 (a)
Landstar System, Inc. ......................... 3,700 132,867
Old Dominion Freight Line, Inc. ............... 10,300 345,771 (a)
988,955
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.9%
Ceva, Inc. .................................... 4,407 38,253 (a)
Hittite Microwave Corp. ....................... 2,500 86,875 (a)
IXYS Corp. .................................... 10,266 103,892
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
9
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Microsemi Corp. ............................... 13,000 $ 179,400 (a)
Rudolph Technologies, Inc. .................... 20,200 111,504 (a)
Semtech Corp. ................................. 16,700 265,697 (a)
Tessera Technologies, Inc. .................... 1,900 48,051 (a)
Varian Semiconductor Equipment
Associates, Inc. ........................... 4,400 105,556 (a)
939,228
SOFTWARE -- 5.4%
ACI Worldwide, Inc. ........................... 5,900 82,364 (a)
Actuate Corp. ................................. 14,800 70,744 (a)
Blackbaud, Inc. ............................... 24,500 380,975
Blackboard Inc. ............................... 5,400 155,844 (a)
Concur Technologies, Inc. ..................... 6,800 211,344 (a)
Deltek, Inc. .................................. 9,200 39,928 (a)
Factset Research Systems, Inc. ................ 3,200 159,584
Interactive Intelligence, Inc. ................ 7,000 85,820 (a)
Jack Henry & Associates, Inc. ................. 7,300 151,475
Kenexa Corp. .................................. 5,800 67,106 (a)
Micros Systems Inc. ........................... 14,400 364,608 (a)
NetSuite, Inc. ................................ 8,500 100,385 (a)
Parametric Technology Corp. ................... 23,700 277,053 (a)
Pegasystems Inc. .............................. 3,900 102,882
Solera Holdings, Inc. ......................... 7,500 190,500 (a)
Symyx Technologies ............................ 13,200 77,220 (a)
Ultimate Software Group, Inc. ................. 5,500 133,320 (a)
2,651,152
SPECIALTY RETAIL -- 3.7%
Aaron Rents, Inc. (Class B) ................... 14,500 432,390
Aeropostale, Inc. ............................. 9,600 328,992 (a)
American Eagle Outfitters, Inc. ............... 12,800 181,376
JOS A Bank Clothiers, Inc. .................... 700 24,122 (a)
Systemax Inc. ................................. 4,132 49,212 (a)
The Buckle, Inc. .............................. 12,150 386,006
The Cato Corp. (Class A) ...................... 3,200 55,808
The Men's Wearhouse, Inc. ..................... 1,600 30,688
The Wet Seal Inc. (Class A) ................... 17,731 54,434 (a)
Tractor Supply Co. ............................ 6,400 264,448 (a)
1,807,476
TEXTILES APPAREL & LUXURY GOODS -- 0.8%
Columbia Sportswear Co. ....................... 6,199 191,673
Deckers Outdoor Corp. ......................... 723 50,805 (a)
FGX International Holdings Ltd. ............... 1,700 19,346 (a)
Fossil, Inc. .................................. 2,400 57,792 (a)
True Religion Apparel, Inc. ................... 1,800 40,140 (a)
Wolverine World Wide Inc. ..................... 2,200 48,532
408,288
TRADING COMPANIES & DISTRIBUTORS -- 0.3%
Applied Industrial Technologies, Inc. ......... 4,700 92,590
Textainer Group Holdings Ltd. ................. 3,500 40,215
132,805
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.1%
Syniverse Holdings, Inc. ...................... 2,300 $ 36,869 (a)
TOTAL COMMON STOCK
(COST $56,694,917) ......................... 46,926,246
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $18) ................................. 10 (c)
TOTAL INVESTMENTS IN SECURITIES
(COST $56,694,935) ......................... 46,926,256
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 5.8%
- --------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class 0.28% .................. 2,837,224 (b,d)
(COST $2,837,224)
TOTAL INVESTMENTS
(COST $59,532,159) ......................... 49,763,480
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (0.8)% .............................. (372,504)
-----------
NET ASSETS -- 100.0% $49,390,976
===========
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
10
Notes to Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) GEAM, the investment adviser of the Fund, also serves as the investment
adviser of the GEI Investment Fund.
(d) GEAM, the investment adviser of the Fund, also serves as investment
adviser of the GE Funds - GE Money Market Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2009.
Abbreviations:
ADR American Depository Receipt
REIT Real Estate Investment Trust
11
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
SMALL-CAP EQUITY FUND
--------------------------------------------------------------- ------------------------
CLASS 1 CLASS 4
--------------------------------------------------------------- ------------------------
6/30/09+ 12/31/08(c) 12/31/07 12/31/06 12/31/05 12/31/04 6/30/09+ 12/31/08(c)**
--------------------------------------------------------------- ------------------------
INCEPTION DATE -- -- -- -- -- 4/28/00 -- 5/1/08
Net asset value, beginning of period .. $ 7.48 $ 12.17 $ 14.39 $ 14.44 $ 13.62 $ 12.74 $ 7.49 $ 12.06
INCOME/(LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income .............. 0.04 0.09 0.06 0.05 0.02 0.08 (0.02) 0.02
Net realized and unrealized gains/
(losses) on investments ......... 0.60 (4.67) 0.31 1.87 1.28 1.85 0.65 (4.51)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT
OPERATIONS ......................... 0.64 (4.58) 0.37 1.92 1.30 1.93 0.63 (4.49)
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .............. -- 0.05 0.06 0.04 0.03 0.07 -- 0.02
Net realized gains ................. -- 0.06 2.53 1.93 0.45 0.98 -- 0.06
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................... -- 0.11 2.59 1.97 0.48 1.05 -- 0.08
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ........ $ 8.12 $ 7.48 $ 12.17 $ 14.39 $ 14.44 $ 13.62 $ 8.12 $ 7.49
===================================================================================================================================
TOTAL RETURN (a) ...................... 8.56% (37.59)% 2.39% 13.27% 9.53% 15.15% 8.41% (37.20)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) ...................... $49,384 $50,210 $104,010 $127,381 $128,142 $117,158 $ 7 $ 6
Ratios to average net assets:
Net investment income* .......... 0.03% 0.46% 0.31% 0.31% 0.11% 0.67% (0.45)% (0.01)%*
Expenses* ....................... 1.50%(b) 0.94%(b) 0.87% 0.86% 0.86% 0.88% 1.96%(b) 1.39%(b)*
Portfolio turnover rate ............ 21% 85% 25% 52% 33% 101% 21% 85%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges.
(b) Reflects GEAM's waiver of a portion of the Fund's management fee in an
amount equal to the management fee earned by GEAM with respect to the
Fund's investment in the GE Funds - GE Money Market Fund. Excluding
waiver, the expense ratios would be unchanged.
(c) Less than $0.01 per share of the distribution paid was from Return of
Capital.
* Annualized for periods less than one year.
** Per share values have been calculated using the average share method.
+ Unaudited
See Notes to Financial Statements.
12
SMALL-CAP
Statement of Assets EQUITY
and Liabilities JUNE 30, 2009 (UNAUDITED) FUND
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at market
(cost $$56,694,917) ...................................... $ 46,926,246
Investments in affiliated securities, at market
(cost $18) ............................................... 10
Short-term affiliated investments (at amortized cost) ....... 2,837,224
Receivable for investments sold ............................. 16,448
Income receivables .......................................... 28,329
Receivable for fund shares sold ............................. 1,157
- --------------------------------------------------------------------------------
TOTAL ASSETS .............................................. 49,809,414
- --------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ........................... 178,119
Payable for fund shares redeemed ............................ 56,903
Payable to GEAM ............................................. 54,630
Accrued other expenses ...................................... 64,073
Options written, at market (premium $36,069) ................ 58,450
Other liabilities ........................................... 6,263
- --------------------------------------------------------------------------------
TOTAL LIABILITIES ......................................... 418,438
- --------------------------------------------------------------------------------
NET ASSETS ..................................................... $ 49,390,976
================================================================================
NET ASSETS CONSIST OF:
Capital paid in ............................................. 70,628,161
Undistributed (distribution in excess of) net investment
income ................................................... 21,303
Accumulated net realized loss ............................... (11,467,418)
Net unrealized depreciation on:
Investments ................................................. (9,768,679)
Futures ................................................... (10)
Written options ........................................... (22,381)
- --------------------------------------------------------------------------------
NET ASSETS ..................................................... $ 49,390,976
================================================================================
CLASS 1:
NET ASSETS ..................................................... 49,384,170
Shares outstanding ($0.01 par value; unlimited shares
authorized) ................................................. 6,078,926
Net asset value per share ...................................... $ 8.12
CLASS 4:
NET ASSETS ..................................................... 6,806.00
Shares outstanding ($0.01 par value; unlimited shares
authorized) ................................................. 838.00
Net asset value per share ...................................... $ 8.12
See Notes to Financial Statements.
13
Statement of Operations SMALL-CAP
EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend .................................................. $ 304,877
Interest .................................................. 31,251
Interest from affliated investments ....................... 6,455
Less: Foreign taxes withheld .............................. (225)
- --------------------------------------------------------------------------------
TOTAL INCOME ................................................ 342,358
- --------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees .......................... 213,779
Distributors Fees (Notes 4) Service Class ................. 14
Transfer agent ............................................ 9,776
Directors's fees .......................................... 649
Custody and accounting expenses ........................... 70,020
Professional fees ......................................... 28,930
Registration expenses ..................................... 1,692
Other expenses ............................................ 14,723
- --------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT .............. 339,583
- --------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser .................. (2,954)
- --------------------------------------------------------------------------------
Net expenses .............................................. 336,629
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME ....................................... 5,729
================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ............................................. (6,526,200)
Written options ......................................... 86,293
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ............................................. 10,211,053
Futures ................................................. (10)
Written options ......................................... (60,037)
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments ........... 3,711,099
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $ 3,716,828
================================================================================
See Notes to Financial Statements.
14
SMALL-CAP
Statements of EQUITY
Changes in Net Assets FUND
- -------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2009 DECEMBER 31,
(UNAUDITED) 2008
- -------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income .......................................................... $ 5,729 $ 331,703
Net realized loss on investments, futures and written options ................... (6,439,907) (4,974,150)
Net increase (decrease) in unrealized appreciation/(depreciation) on investments,
futures and written options ................................................... 10,151,006 (29,522,691)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ......................................... 3,716,828 (34,165,138)
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 ....................................................................... -- (359,420)
Class 4 ....................................................................... -- (20)
Net realized gains
Class 1 ....................................................................... -- (379,020)
Class 4 ....................................................................... -- (47)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................................................... -- (738,507)
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ............... 3,716,828 (34,903,645)
- -------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 ....................................................................... 1,459,443 11,808,695
Class 4 ....................................................................... -- 10,000
Value of distributions reinvested
Class 1 ....................................................................... -- 738,440
Class 4 ....................................................................... -- 67
Cost of shares redeemed
Class 1 ....................................................................... (6,001,278) (31,447,731)
Class 4 ....................................................................... -- --
- -------------------------------------------------------------------------------------------------------------------------
Net decrease from share transactions ............................................ (4,541,835) (18,890,529)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS ...................................................... (825,007) (53,794,174)
NET ASSETS
Beginning of period ............................................................... 50,215,983 104,010,157
- -------------------------------------------------------------------------------------------------------------------------
End of period ..................................................................... $49,390,976 $ 50,215,983
=========================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ....... $ 21,303 $ 15,574
- -------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold .......................................................................... 205,369 1,338,034
Issued for distributions reinvested .................................................. -- 101,854
Shares redeemed ...................................................................... (842,154) (2,946,942)
- -------------------------------------------------------------------------------------------------------------------------
Net decrease in fund shares .......................................................... (636,785) (1,507,054)
=========================================================================================================================
CLASS 4
Shares sold .......................................................................... -- 829
Issued for distributions reinvested .................................................. -- 9
- -------------------------------------------------------------------------------------------------------------------------
Net increase in fund shares .......................................................... -- 838
=========================================================================================================================
See Notes to Financial Statements.
15
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of fourteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund
(the "Fund"), International Equity Fund, Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
The Company offers two share classes (Class 1 and Class 4) of the Fund as
investment options for variable life insurance and variable annuity contracts.
Class 4 shares were first offered on May 1, 2008, and Fund shares outstanding
prior to May 1, 2008 were designated as Class 1 shares. Each share class has
different fees and expenses, and as a result, each share class will have
different share price and performance. Not all variable contracts offer both
share classes of the Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on recent trading activity and other
relevant information which may include market interest rate curves, referenced
credit spreads and estimated prepayment rates where applicable. In the absence
of a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations. The Fund's written or
purchased options are valued at the last sales price, or if no sales occurred
that day, at the last reported bid price. Short-term investments with remaining
maturities of sixty days or less at the time of purchase are valued on the basis
of amortized cost, which approximates market value.
All assets and liabilities of the Fund that are initially expressed in foreign
currency values will be converted into U.S. dollars at the WM/Reuters exchange
rate computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
16
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Fund adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards 157, FAIR VALUE MEASUREMENTS ("SFAS
157"). SFAS 157 establishes a new framework for measuring fair value and expands
related disclosures. Broadly, the SFAS 157 framework requires fair value to be
determined based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants. SFAS 157 establishes a three-level valuation hierarchy
based upon observable and unobservable inputs.
For financial assets and liabilities, fair value is the price that would be
received to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets and liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect our market assumptions. Preference is given to
observable inputs. These two types of inputs create the following fair value
hierarchy:
Level 1 -- Quoted prices for identical investments in active markets.
Level 2 -- Quoted prices for similar investments in active markets; quoted
prices for identical or similar investments in markets that are not
active; and model-derived valuations whose significant value drivers are
observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
The Fund maintains policies and procedures to value investments using the best
and most relevant data available. The Fund performs periodic reviews of the
methodologies used by independent pricing services including obtaining price
validation for certain securities. The following section describes the valuation
methodologies that the Fund uses to measure investments at fair value.
When available, the Fund uses quoted market prices to determine fair value of
investment securities, and they are included in Level 1. Level 1 securities
primarily include publicly-traded equity securities.
When quoted market prices are unobservable, the Fund uses quotes from
independent pricing vendors based on recent trading activity and other relevant
information including market interest rate curves, referenced credit spreads and
estimated prepayment rates where applicable. These investments are included in
level 2 and primarily include long-term US government, agency and corporate
debt, notes, bonds, and mortgage backed securities. In infrequent circumstances,
the Fund's pricing vendors may provide valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
classified in Level 3.
Other financial instruments are derivative instruments that are not reflected in
Total Investments, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------------
Investments in Securities $49,763,470 $ 10 $ -- $49,763,480
Other Financial Instruments -- -- -- --
17
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Funds's investment
objectives or policies. The Fund's custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
18
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
At June 30, 2009, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- --------------------------------------------------------------------------------
$59,638,314 $2,749,240 $(12,682,534) $(9,933,294)
As of December 31, 2008, the Fund has capital loss carryovers as follows:
Amount Expires
- --------------------------------------------------------------------------------
$430,701 12/31/16
Capital loss carryovers are available to offset future realized capital gain to
the extent provided in the Internal Revenue Code and regulations thereunder. To
the extent that these carryover losses are used to offset future capital gains,
it is probable that gains so offset will not be distributed to shareholders
because they would be taxable as ordinary income.
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund incurred $4,486,586 losses after October 31, 2008.
The tax composition of distributions paid during the years ended December 31,
2008 and December 31, 2007 were as follows:
Long-Term
Ordinary Capital Return of
Income Gains Capital Total
- ---------------------------------------------------------
2008 $ 348,614 $ 379,085 $10,808 $ 738,507
2007 3,273,697 15,060,783 -- 18,334,480
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) distributions
from Real Estate Investment Trusts (REITS) and losses deferred due to wash sale
transactions. Reclassifications due to permanent book/tax differences are made
to the Fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryovers) under income tax
regulations. These reclassifications have no impact on net investment income,
realized gains or losses, or the net asset value of the Fund. The calculation of
net investment income per share in the Financial Highlights table excludes these
adjustments.
The reclassifications for the year ended December 31, 2008 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated Paid In
Income Net Realized Gain Capital
- --------------------------------------------------------------------------------
$6,851 $3,957 $(10,808)
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Fund's 2005, 2006, 2007 and 2008 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
19
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
EXPENSES Fund specific expenses are allocated to the Fund that incurs such
expense and pro rata across share classes. Expenses, other than those incurred
by a specific Fund, are allocated pro rata among Funds and share classes. Such
expenses may include custodial fees, legal and accounting fees, printing costs
and registration fees. All expenses of the Fund are paid by GEAM and reimbursed
by the Fund. Certain class specific expenses (such as transfer agency fees or
distribution fees) are allocated to the class that incurs such expense.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES On March 19, 2008, the FASB issued
Statement of Financial Accounting Standards No. 161 ("FAS No. 161"), "Disclosure
about Derivative Instruments and Hedging Activities." This new accounting
statement requires enhanced disclosures about an entity's derivative and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity invests in derivatives, (b) how derivatives are accounted for
under FAS No. 133, and (c) how derivatives affect an entity's financial
position, financial performance, and cash flows. FAS No. 161 also requires
enhanced disclosures regarding credit-risk-related contingent features of
derivative instruments.
The Fund is subject to equity price risk in the normal course of pursuing its
investment objectives. The Fund may use futures contracts to gain exposure to,
or hedge against changes in the value of equities. A futures contract represents
a commitment for the future purchase or sale of an asset at a specified price on
a specified date. Upon entering into such contracts, the Fund is required to
deposit with the broker, either in cash or securities, an initial margin in an
amount equal to a certain percentage of the contract amount. Subsequent payments
(variation margin) are made or received by the Fund each day, depending on the
daily fluctuations in the value of the contract, and are recorded for financial
statement purposes as unrealized gains or losses by the Fund. Upon entering into
such contracts, the Fund bears the risk of securities prices moving
unexpectedly, in which case, the Fund may not achieve the anticipated benefits
of the futures contracts and may realize a loss. With futures contracts, there
is minimal counterparty credit risk to the Fund since futures contracts are
exchange traded and the exchange's clearinghouse, as counterparty to all traded
futures, guarantees the futures against default.
Shown below are the derivative contracts entered into by the Fund, summarized by
primary risk exposure.
Asset Derivatives June 30, 2009 Liability Derivatives June 30, 2009
Derivatives not --------------------------------------- ---------------------------------------------------
accounted for as Location in Notional Location in Notional
hedging instruments the Statements Value/No. of the Statements Value/No. of
under FASB of Assets Contracts Fair of Assets Contracts Fair
Statement 133 and Liabilities Long/(Short) Value and Liabilities Long/(Short) Value
- -------------------------------------------------------------------------------------------------------------------
Equity Contracts -- -- -- Payables, Net Assets - (150) (58,450)
Unrealized Appreciation/
(Depreciation)
- -------------------------------------------------------------------------------------------------------------------
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Change in Unrealized
Derivatives not accounted Location in the Realized Gain or Appreciation/(Depreciation)
for as hedging instruments Statements of (Loss) on Derivatives on Derivatives
under FASB Statement 133 Operations Recognized in Income Recognized in Income
- ---------------------------------------------------------------------------------------------------------------
Equity Contracts Net realized gain/(loss) on 86,293 (60,055)
futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on futures
- ---------------------------------------------------------------------------------------------------------------
20
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
3. LINE OF CREDIT
The Company shares a revolving credit facility of up to $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established on November 7, 2007. Generally, borrowings under
the credit facilities would accrue interest at the Federal Funds Rate plus 50
basis points and would be borne by the borrowing Fund. The maximum amount
allowed to be borrowed by any one Fund is the lesser of (i) its prospectus
limitation or (ii) 20% of its net assets. The credit facilities were not
utilized by the Fund during the fiscal year ended June 30, 2009.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective March 16, 2000 to act as investment adviser and
administrator of the Fund. GEAM's compensation for investment advisory and
administrative services is paid monthly based on the average daily net assets of
the Fund at an annualized rate of 0.95%.
DISTRIBUTION AND SERVICE (12b-1) FEES The Company has adopted a Distribution and
Service (12b-1) Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with
respect to Class 4 shares of the Fund. Under the Plan, the Fund may compensate
GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and
the Fund's principal distributor, for certain sales services provided by GEID or
other broker dealers and investor services provided by GEID or other service
providers relating to the Fund's Class 4 shares, including services to owners or
prospective owners of variable contracts issued by insurance companies that
offer such share class as an investment option. The amount of compensation paid
under the Plan by the Fund's Class 4 shares may not exceed 0.45% of the average
daily net assets of the Fund attributable to such share class. The Plan
continues in effect from year to year for so long as such continuance is
approved annually by the Board of Directors, including by those directors who
are not interested persons of the Company and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related to
it.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2009, $421 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. SUB-ADVISORY FEES
Pursuant to investment sub-advisory agreements with GEAM, the assets of the
Small-Cap Equity Fund are allocated to and managed by each of the following
sub-advisers: (i) Palisade Capital Management, L.L.C.; (ii) Champlain Investment
Partners, LLC; (iii) GlobeFlex Capital, LP; and (iv) SouthernSun Asset
Management, Inc. GEAM is responsible for allocating the Fund's assets among the
sub-advisers in its discretion (Allocated Assets), and for managing the Fund's
cash position, while each sub-adviser is responsible for the day-to-day
management of their portion of the Allocated Assets, under the general
supervision and oversight of GEAM and the Board.
For their services, GEAM pays each sub-adviser an investment sub-advisory fees,
which are calculated as a percentage of the average daily net assets of the
respective Allocated Assets that they manage.
21
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
6. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2009 were as follows:
U.S. Government Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$ -- $ --
Other Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$9,115,946 $13,909,089
SECURITY LENDING At June 30, 2009, the Fund did not participate in securities
lending.
OPTIONS During the period ended June 30, 2009, the following option contracts
were written.
Number of
Contracts Premium
- --------------------------------------------------------------------------------
Balance as of
December 31, 2008 117 $38,259
Written 485 84,721
Closed and expired 452 86,911
- --------------------------------------------------------------------------------
Balance as of
June 30, 2009 150 $36,069
- --------------------------------------------------------------------------------
22
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 60
POSITION(S) HELD WITH FUND Chairman of the Board and President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 11 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS President and Chief Executive
Officer - Mutual Funds and Intermediary Business since March 2007; Executive
Vice President of GEAM from February 1997 to March 2007; Director of GEAM since
1988; Vice President, GE Capital Corporation, an indirect wholly-owned
subsidiary of GE, since December 1999; Executive Vice President - Sales and
Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, from
March 1993 to March 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds since its inception; Trustee of
General Electric Savings & Security Trust, General Electric S&S Income Fund,
General Electric S&S Program Mutual Fund ("GE Savings & Security Funds"), Elfun
Funds, General Electric Insurance Plan Trust, General Relief Loan Fund, and
General Electric Pension Trust since 1988; Trustee of Fordham University since
2002; Trustee of GE Volunteers since 1993; Director, GE Asset Management
(Ireland) since February 1999; Director, GE Asset Management Funds Plc., GE
Asset Canada Company, and GE Asset Management Limited since 1998.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Director and Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds since July 2007.
23
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 43
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years (Vice President); one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
from September 2003 to July 2007; Vice President and Secretary of GE Funds and
GE Institutional Funds since July 2007; Vice President and Assistant Secretary
of Elfun Funds and GE Savings & Security Funds since October 2003.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
24
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 63
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since its inception; Trustee of Fordham University since
2002 and Marymount College from 2001 through 2002; Neuroscience Research
Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn &
Queens since 2001; Gregorian University Foundation since 1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 73
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception; Trustee, St. Francis Hospital Corp.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
25
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J. Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE
OFFICER - MUTUAL FUNDS & INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Ralph R. Layman, PRESIDENT - PUBLIC EQUITIES
(SINCE JULY 2009)
Maureen B. Mitchell, PRESIDENT - INSTITUTIONAL SALES AND
MARKETING (SINCE JULY 2009)
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST (SINCE JULY 2009)
Don W. Torey, PRESIDENT - ALTERNATIVE INVESTMENTS
John J. Walker, EVP, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT - INVESTMENT STRATEGIES
26
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii)
on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
- --------------------------------------------------------------------------------
[GE LOGO]
GE Investments Funds, Inc.
International Equity Fund Letter from the Chairman
- --------------------------------------------------------------------------------
[PHOTO OF MICHAEL J. COSGROVE]
MICHAEL J. COSGROVE
CHAIRMAN,
GE INVESTMENTS FUNDS, INC.
DEAR SHAREHOLDER:
Attached is the semi-annual report for the GE Investments Funds, Inc. --
International Equity Fund (the "Fund") for the six-month period ended June 30,
2009. The report contains information about the performance of the Fund, and
other Fund specific data, along with portfolio manager commentary. We have
provided you with an overview of the investment markets, along with our
investment outlook for the coming months.
MARKET OVERVIEW
Despite investors' hopes that the new U.S. administration and Congress would
help stabilize the nation's financial crisis, asset values continued to fall in
the first quarter of 2009. Global equities experienced sharp price declines in
January and February as troubles in the United States continued to cast a cloud
over world markets. U.S. Treasury Secretary Geithner indicated that some U.S.
banks would need large amounts of assistance to survive and talks of stress
tests and bank nationalization spooked investors. The markets also booed
government plans to take a 36% stake in Citigroup even as the financial status
of institutions already on government life-support, such as AIG, remained
uncertain. Similarly, news of troubled automakers GM and Chrysler worried
international bondholders and shareholders alike. Financial services and small
cap stocks were hardest hit in the downswing as equity indexes broke the
November 2008 lows in February. Government debt issues also had a rough February
as U.S. and U.K. debt auctions saw weak support for long and non-inflation
indexed government securities. These poor showings were soon followed by a
warmer reception for shorter-dated debt.
U.S. stocks abruptly reversed course and posted three straight weeks of gains
through the end of March after the three largest U.S. banks announced they had
turned a profit. Equity indexes around the globe followed the U.S. path,
regaining much of their losses since January. In late March, the U.S. Treasury
Secretary unveiled his Public-Private Investment Partnership (PPIP) plan to
remove toxic assets from the balance sheets of the nation's banks, and the
markets seemed convinced of a financial sector backstop. Another policy move to
support the markets came on March 18th when the Federal Reserve announced that
it would buy $300 billion of 2- and 10-year Treasuries, increase its purchase
plan of agency mortgage-backed securities from $500 billion to $1.25 trillion,
double its purchases of agency debt to $200 billion and expand the eligible
collateral in the Term Asset-Backed Securities Loan Facility (TALF) program. In
response, the yield on the U.S. Treasury 10-year note fell 47 basis points to
2.53%, recording the largest one-day drop in over four decades.
The rebound in global equities continued into the second quarter, as markets
experienced strong gains in April and May, before tailing off into a flat June
as investors started to question the strength and timing of an economic
recovery. Despite a double-digit rally since mid-March, the S&P 500 Index ended
the second quarter approximately where it started at the beginning of 2009
(priced in the low 900s). Emerging markets equities continued to outperform
their developed peers during the second quarter. The MSCI Emerging Markets Index
gained 34.7%, its best quarterly return since data collection began in 1988.
Speculation persists that developing markets are better positioned to weather
the global recession given that their financial systems are generally better
capitalized and less leveraged than the developed countries.
During the second quarter, U.S. government stress tests concluded and the banks
that needed capital swiftly and successfully raised it. The Federal Reserve also
announced that it would allow 10 large banks to repay bailout funds from the
government's controversial Troubled Asset Relief Program. In this environment,
financial stocks enjoyed a notably strong quarter, bolstered by growing
speculation that the worst of the global banking crisis was over. However,
financial risks remain as the European Central Bank said that European banks
might need to write down an additional $283 billion by the end of next year. In
late June, The European Central Bank also injected (euro)442 billion ($621
billion) into Europe's banking system in one-year funds to spur lending and help
stabilize the economy.
[GE LOGO]
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
International Equity Fund Letter from the Chairman (Continued)
- --------------------------------------------------------------------------------
Against this backdrop, financial markets posted improved results for the six-
and 12-month periods ended June 30.
TOTAL RETURNS AS OF
JUNE 30, 2009 6-MONTH 12-MONTH
- --------------------------------------------------------------------------------
U.S. equities (S&P 500 Index) 3.16 -26.21
Global equities (MSCI World Index) 6.35 -29.50
International equities
(MSCI EAFE Index) 7.95 -31.35
Emerging Markets equities
(MSCI EM Index) 36.01 -28.07
Small-cap U.S. equities
(Russell 2000 Index) 2.64 -25.01
Mid-cap U.S. equities
(Russell Mid Cap Index) 9.96 -30.36
U.S. fixed income (Barclays Capital
U.S. Aggregate Bond Index) 1.90 6.05
U.S. short-term government
fixed income (Barclays Capital
U.S. Treasury Bond Index 1-3 Year) 0.47 4.94
U.S. tax-exempt income
(Barclays Capital U.S. Municipal
Bond Index 10 year) 4.38 5.58
- --------------------------------------------------------------------------------
OUTLOOK
Uncertainty will likely continue around the strength and timing of a U.S.
economic recovery. With unemployment at a 25-year high of 9.5%, and American
consumers having suffered a collapse in wealth of at least $15 trillion since
early 2007, it is hard to have much confidence in a consumer-driven recovery in
the short term. We believe the economy will work below its potential for many
quarters to come as deleveraging continues among consumers and global financial
institutions.
While equity markets have enjoyed a bounce off of the bottom over the first half
of the year, the positive earnings surprises in April and May came mostly from
productivity gains and cost containment programs. Earnings in the second quarter
will be heavily scrutinized for evidence that a real recovery is sustainable and
that restocking is giving way to growth in final demand. We believe companies
are going to have to show evidence of a top-line recovery -- increased demand
and improving fundamentals -- in order for stocks to work their way higher.
Given the economic headwinds we're facing, consolidation of the second quarter's
gains seems a real possibility.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. We encourage
long-term investors to maintain a diversified investment approach that is
consistent with their goals, time horizon and risk tolerance. While diversified
portfolios are not immune to market downturns, history suggests they can put you
in a position to benefit from the inevitable return to better times.
Thank you for investing with GE Investments Funds.
Sincerely,
/s/ Michael J. Cosgrove
Michael J. Cosgrove
CHAIRMAN, GE INVESTMENTS FUNDS, INC.
JUNE 2009
MIKE COSGROVE IS PRESIDENT AND CHIEF EXECUTIVE OFFICER -MUTUAL FUNDS &
INTERMEDIARY BUSINESS AT GE ASSET MANAGEMENT. MR. COSGROVE ALSO SERVES AS A
TRUSTEE OF THE GE PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM. PREVIOUSLY
CHIEF FINANCIAL OFFICER OF GE ASSET MANAGEMENT AND ASSISTANT TREASURER - GE
COMPANY, MIKE JOINED GE IN 1970 AND HELD A NUMBER OF MANAGERIAL POSITIONS IN
FINANCE AND SALES AT GE'S INTERNATIONAL OPERATION AND IN GE TRADING COMPANY.
MIKE HAS A B.S. IN ECONOMICS FROM FORDHAM UNIVERSITY AND AN M.B.A. FROM ST.
JOHN'S UNIVERSITY.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC.
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
[SIDE BAR]
GE Investments Funds, Inc.
International Equity Fund
Semi-Annual Report
JUNE 30, 2009
[GE LOGO]
GE Investments Funds, Inc.
International Equity Fund Contents
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE ................................................ 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS .......................... 2
NOTES TO SCHEDULE OF INVESTMENTS .................................... 9
FINANCIAL STATEMENTS
Financial Highlights ............................................. 10
Statement of Assets and Liabilities .............................. 11
Statement of Operations .......................................... 12
Statements of Changes in Net Assets .............................. 13
Notes to Financial Statements .................................... 14
ADDITIONAL INFORMATION .............................................. 22
INVESTMENT TEAM ..................................................... 25
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
Notes to Performance June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any. Total returns shown
are net of Fund expenses but do not reflect fees and charges associated with the
variable contracts such as administrative fees, account charges and surrender
charges, which, if reflected, would reduce the Fund's total returns for all
periods shown.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in a Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. An investment in a Fund is subject to risk, including
possible loss of principal invested.
The Morgan Stanley Capital International EAFE Index (MSCI(R) EAFE(R) Index) is
an unmanaged index and do not reflect the actual cost of investing in the
instruments that comprise the index. The MSCI(R) EAFE(R) Index is a market
capitalization-weighted index of equity securities of companies domiciled in
various countries. The Index is designed to represent the performance of
developed stock markets outside the U.S. and Canada and excludes certain market
segments unavailable to U.S. based investors. The results shown for the
foregoing index assume the reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer group average
return calculation is based on the blend of Morningstar peer categories, as
shown. Morningstar is an independent mutual fund rating service. A Fund's
performance may be compared to or ranked within a universe of mutual funds with
investment objectives and policies similar but not necessarily identical to the
Fund's.
(C)2009 Morningstar, Inc. All Rights Reserved. The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is no warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are responsible for any
damage or losses relating from any use of this information. Past performance is
no guarantee or future results.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUND.
1
International Equity Fund
- --------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT
INCLUDES BRIAN HOPKINSON, RALPH R. LAYMAN, PAUL NESTRO, JONATHAN L. PASSMORE,
MICHAEL J. SOLECKI AND MAKOTO SUMINO. AS LEAD PORTFOLIO MANAGER FOR THE FUND,
MR. LAYMAN OVERSEES THE ENTIRE TEAM AND ASSIGNS A PORTION OF THE FUND TO EACH
MANAGER, INCLUDING HIMSELF. EACH PORTFOLIO MANAGER IS LIMITED TO THE MANAGEMENT
OF HIS OR HER PORTION OF THE FUND, THE SIZE OF THE PORTION WHICH MR. LAYMAN
DETERMINES ON AN ANNUAL BASIS. THE PORTFOLIO MANAGERS DO NOT OPERATE
INDEPENDENTLY OF EACH OTHER, RATHER, THE TEAM OPERATES COLLABORATIVELY,
COMMUNICATING PURCHASES OR SALES OF SECURITIES ON BEHALF OF THE FUND.
[PHOTO OF RALPH R. LAYMAN]
RALPH R. LAYMAN
RALPH R. LAYMAN IS PRESIDENT AND CHIEF INVESTMENT OFFICER - PUBLIC EQUITIES AND
A DIRECTOR AT GE ASSET MANAGEMENT. HE MANAGES THE OVERALL PUBLIC EQUITY
INVESTMENTS FOR GE ASSET MANAGEMENT. MR. LAYMAN HAS LED THE TEAM OF PORTFOLIO
MANAGERS FOR THE INTERNATIONAL EQUITY FUND SINCE 1997. MR. LAYMAN JOINED GE
ASSET MANAGEMENT IN 1991 AS SENIOR VICE PRESIDENT FOR INTERNATIONAL INVESTMENTS
AND BECAME AN EXECUTIVE VICE PRESIDENT IN 1992, PRESIDENT -INTERNATIONAL
EQUITIES IN MARCH 2007 AND PRESIDENT - PUBLIC EQUITIES SINCE JULY 2009.
BRIAN HOPKINSON IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A
PORTFOLIO MANAGER FOR THE FUND SINCE OCTOBER 1996. PRIOR TO JOINING GE ASSET
MANAGEMENT, MR. HOPKINSON WORKED FOR FIDUCIARY TRUST INTERNATIONAL IN BOTH
LONDON AND NEW YORK.
PAUL NESTRO IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A
MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE INTERNATIONAL EQUITY FUND SINCE
FEBRUARY 2007. MR. NESTRO JOINED GE ASSET MANAGEMENT IN 1993 AS A PERFORMANCE
AND ATTRIBUTION ANALYST IN U.S. EQUITIES. HE BECAME A SENIOR PERFORMANCE AND
ATTRIBUTION ANALYST IN 1994 AND SINCE 1996 HAS BEEN AN ANALYST AND PORTFOLIO
MANAGER IN THE INTERNATIONAL EQUITIES GROUP.
JONATHAN L. PASSMORE IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS
SERVED AS A PORTFOLIO MANAGER OF THE INTERNATIONAL EQUITY FUND SINCE JANUARY
2002. PRIOR TO JOINING GE ASSET MANAGEMENT IN JANUARY 2001, HE WAS WITH MERRILL
LYNCH FOR SIX YEARS, MOST RECENTLY AS DIRECTOR, INTERNATIONAL EQUITY.
MICHAEL J. SOLECKI IS A SENIOR VICE PRESIDENT AT GE ASSET MANAGEMENT. HE HAS
SERVED AS A PORTFOLIO MANAGER OF THE INTERNATIONAL EQUITY FUND SINCE SEPTEMBER
1997. HE JOINED GE ASSET MANAGEMENT IN 1990 AS AN INTERNATIONAL EQUITY ANALYST.
HE BECAME A VICE PRESIDENT FOR INTERNATIONAL EQUITY PORTFOLIOS IN 1996 AND
SENIOR VICE PRESIDENT IN 2000.
MAKOTO SUMINO IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A
MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE INTERNATIONAL EQUITY FUND SINCE
FEBRUARY 2007. MR. SUMINO JOINED GE ASSET MANAGEMENT IN SEPTEMBER 1996 AS A
SECURITIES ANALYST AND PORTFOLIO MANAGER. HE BECAME DEPUTY DIRECTOR OF THE
INTERNATIONAL EQUITY RESEARCH TEAM IN JANUARY 2001 AND DIRECTOR IN APRIL 2005.
Q. HOW DID THE INTERNATIONAL EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK
AND MORNINGSTAR PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009?
A. For the six-month period ended June 30, 2009, the International Equity
Fund returned 7.69% for the Class 1 shares and 7.50% for the Class 4
shares. The MSCI EAFE Index, the Fund's benchmark, returned 7.95% and the
Fund's Morningstar peer group of 137 US Insurance Foreign Large Blend
funds returned an average of 6.22% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. There were two distinct parts to this period: the first 10 weeks of the
year when markets reached new multi-year lows, driven by fear
2
- --------------------------------------------------------------------- [Q&A LOGO]
of a collapsing global economy; and the remainder of the period which saw
risk aversion give way to some measure of risk acceptance as the allure of
attractive valuations plus heavy weights of cash brought investors back in
from the sidelines.
Q. WHAT DOMESTIC OR WORLD EVENTS HAD A MAJOR IMPACT ON THE FINANCIAL MARKETS?
A. The most glaring point about this period was the uniformity of the
problem. In the past, individual countries have experienced recessions but
used trade with other parts of the world to help them recover.
However, this period has been marked by the absence of even one economy
that could act as an anchor for the rest, with the exception, perhaps, of
China which is growing domestically even while its export trade has
diminished substantially.
Q. WHICH STOCKS AND SECTORS SIGNIFICANTLY AFFECTED FUND PERFORMANCE?
A. Much of the underperformance came from a rotation by the market out of
defensive consumer staples (overweight in the Fund) into more cyclical
consumer discretionary stocks (underweight). In addition, the growing
weight in financial stocks performed poorly at the start of the period.
Consumer staples stocks Shiseido (Japan) and Danone (France) performed
poorly, as did financial holdings Sony Financial, Royal Bank of Scotland,
and Lloyds Banking Group. Positive attribution came from holdings in
energy and telecom services, notably Paladin Resources (Australia),
Petrobras (Brazil) and Saipem (Italy).
Q. DID THE WEIGHTINGS/COUNTRY ALLOCATIONS OF THE FUND CHANGE? WHY?
A. By the end of the period, the underweight in the Fund's positions in
Energy, Materials, Healthcare and Utilities had all been reduced due to
growing optimism that the worst of the economic crisis may be behind us
(for the first two) but reflecting continued concern that the crisis has
not been completely solved (the latter two). The overweight in Consumer
Staples has been reduced on valuation concerns and the weight in
Financials modestly increased as clarity and confidence slowly grew.
Q. WHAT WERE THE MAJOR BUYS AND SELLS FOR THE PERIOD AND WHY?
A. Several new holdings were established including ENI (Italy - energy) for
its attractive valuation and HSBC (UK - banking) for its diversification
across several major markets. Telefonica (Spain - telecom) was added for
its higher beta Latin American operations while National Grid was
increased for the relative safety of its regulated returns.
Diageo (UK) was eliminated due to its position in the higher, more
expensive end of the beverage market while East Japan Rail and France
Telecom were sold for disappointing performance by supposedly defensive
names in a difficult environment.
3
International Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2009.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2009 - JUNE 30, 2009
- --------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ---------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,076.92 8.70
Class 4 1,000.00 1,075.00 10.86
- ---------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ---------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,016.28 8.45
Class 4 1,000.00 1,014.23 10.54
- ---------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.69% FOR
CLASS 1 SHARES AND 2.11% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1,
2009 - JUNE 30, 2009), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE
PERIOD, MULTIPLIED BY 181/365 (TO REFLECT SIX MONTHS PERIOD)
** ACTUAL FUND RETURNS FOR SIX-MONTH PERIOD ENDED JUNE 30, 2009 WERE AS
FOLLOWS: 7.69% FOR CLASS 1 SHARES, AND 7.50% FOR CLASS 4 SHARES.
4
International Equity Fund (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
International Equity Fund MSCI EAFE
06/99 $10,000 $10,000
12/99 $12,299 $12,212
12/00 $10,734 $10,482
12/01 $ 8,495 $ 8,216
12/02 $ 6,471 $ 6,907
12/03 $ 8,924 $ 9,572
12/04 $10,338 $11,510
12/05 $12,219 $13,067
12/06 $15,236 $16,509
12/07 $18,737 $18,355
12/08 $10,149 $10,393
06/09 $10,930 $11,219
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2009
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 5/1/95)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS YEAR YEAR YEAR $10,000 INVESTMENT
- --------------------------------------------------------------------------------------
International Equity Fund 7.69% -35.47% 3.87% 0.89% $10,930
- --------------------------------------------------------------------------------------
MSCI EAFE Index 7.95% -31.35% 2.31% 1.16% $11,219
- --------------------------------------------------------------------------------------
Morningstar peer group average* 6.22% -32.84% 2.07% 0.69%
======================================================================================
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
International Equity Fund MSCI EAFE
05/01/08 $10,000 $10,000
06/08 $ 9,234 $ 9,272
09/08 $ 7,298 $ 7,365
12/08 $ 5,521 $ 5,896
06/09 $ 5,935 $ 6,365
- --------------------------------------------------------------------------------
TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 2009
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
SIX ONE SINCE ENDING VALUE OF A
MONTHS YEAR INCEPTION $10,000 INVESTMENT
- ------------------------------------------------------------------------------------
International Equity Fund 7.50% -35.72% -36.04% $5,935
- ------------------------------------------------------------------------------------
MSCI EAFE Index 7.95% -31.35% -32.11% $6,365
- ------------------------------------------------------------------------------------
Morningstar peer group average** 6.22% -32.84%
====================================================================================
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital by investing
at least 80% of its net assets in equity securities under normal circumstances.
The Fund invests primarily in developed and developing countries outside the
United States.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Market Value of $17,037 (in thousands)
[PIE CHART]
Continental Europe 47.8%
United Kingdom 18.0%
Japan 17.3%
Pacific Rim 4.7%
Emerging Asia 4.3%
Latin America 2.9%
United States 2.1%
Canada 1.9%
Emerging Europe 1.0%
TOP TEN LARGEST EQUITY HOLDINGS
AS OF JUNE 30, 2009
as a % of Market Value
- --------------------------------------------------------------------------------
Roche Holding AG 3.41%
- --------------------------------------------------------------------------------
Banco Santander S.A. (Regd.) 3.32%
- --------------------------------------------------------------------------------
Nestle S.A. (Regd.) 2.78%
- --------------------------------------------------------------------------------
BNP Paribas 2.72%
- --------------------------------------------------------------------------------
Mitsubishi UFJ Financial Group Inc. 2.55%
- --------------------------------------------------------------------------------
Nomura Holdings Inc. 2.44%
- --------------------------------------------------------------------------------
Groupe Danone 2.30%
- --------------------------------------------------------------------------------
Vodafone Group PLC 2.29%
- --------------------------------------------------------------------------------
Reckitt Benckiser Group PLC 2.28%
- --------------------------------------------------------------------------------
Total S.A. 2.25%
================================================================================
* MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS
INDICATED IN THE FOREIGN LARGE BLEND PEER GROUP CONSISTING OF 137, 134, 94
AND 46 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS AND ONE YEAR PERIODS INDICATED IN THE FOREIGN
LARGE BLEND PEER GROUP CONSISTING OF 137 AND 134 UNDERLYING ANNUITY FUNDS,
RESPECTIVELY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
5
INTERNATIONAL EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 97.3% +
- --------------------------------------------------------------------------------
AUSTRALIA -- 2.9%
Brambles Ltd. ................................. 58,794 $ 283,291
Paladin Energy Ltd. ........................... 32,399 129,131 (a)
Telstra Corporation Ltd. ...................... 29,963 82,118
494,540
BRAZIL -- 2.0%
Petroleo Brasileiro S.A. ADR .................. 4,918 164,064 (d)
Vale S.A. ..................................... 12,039 184,799 (d)
348,863
CANADA -- 1.8%
Kinross Gold Corp. ............................ 3,688 67,323
Potash Corp of Saskatchewan Inc. .............. 2,673 249,699
317,022
CHILE -- 0.7%
Sociedad Quimica y Minera de
Chile S.A. ADR (Series B) .................. 1,172 42,415
China Mobile Ltd. ............................. 6,990 69,990
112,405
DENMARK -- 0.4%
G4S PLC ....................................... 20,765 71,183
FINLAND -- 1.3%
Nokia OYJ ..................................... 15,309 224,180
FRANCE -- 15.3%
Alstom S.A. ................................... 911 53,738 (d)
AXA S.A. ...................................... 4,966 93,269 (d)
BNP Paribas ................................... 7,145 463,515 (d)
Cie Generale d'Optique Essilor
International S.A. ......................... 4,590 218,769
Credit Agricole S.A. .......................... 17,299 215,371
GDF Suez ...................................... 2,796 104,085
Groupe Danone ................................. 7,935 391,258 (d)
Total S.A. .................................... 7,088 382,568
Unibail-Rodamco (REIT) ........................ 307 45,714
Veolia Environnement .......................... 9,108 268,154 (d)
Vinci S.A. .................................... 3,434 154,062 (d)
Vivendi ....................................... 9,960 237,986
2,628,489
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
GERMANY -- 7.6%
Adidas AG ..................................... 2,240 $ 85,146
Bayer AG ...................................... 5,046 270,513
Deutsche Boerse AG ............................ 1,355 105,065
E.ON AG ....................................... 5,183 183,348
Linde AG ...................................... 2,317 189,894
Metro AG ...................................... 3,214 153,366
RWE AG ........................................ 694 54,600
Siemens AG (Regd.) ............................ 3,634 250,580
1,292,512
GREECE -- 0.2%
Hellenic Telecommunications
Organization S.A. .......................... 2,102 32,137
HONG KONG -- 0.8%
Esprit Holdings Ltd. .......................... 12,614 70,719
Sun Hung Kai Properties Ltd. .................. 5,930 74,297
145,016
INDIA -- 1.3%
ICICI Bank Ltd. ............................... 2,644 40,048
Larsen & Toubro Ltd. .......................... 5,548 181,866
221,914
IRELAND -- 0.7%
CRH PLC ....................................... 5,398 123,037
ITALY -- 2.6%
ENI S.p.A. .................................... 9,340 220,748
Intesa Sanpaolo S.p.A. ........................ 49,415 159,071
Saipem S.p.A. ................................. 2,678 65,134
444,953
JAPAN -- 17.2%
East Japan Railway Co. ........................ 2,864 172,460
Mitsubishi Estate Company Ltd. ................ 17,982 300,244
Mitsubishi Heavy Industries Ltd. .............. 35,000 145,100
Mitsubishi UFJ Financial Group Inc. ........... 70,190 435,027
Nintendo Company Ltd. ......................... 400 110,401
Nomura Holdings Inc. .......................... 49,263 415,609
Shiseido Company Ltd. ......................... 17,647 289,346
Sony Financial Holdings Inc. .................. 96 265,359 (a)
Sumitomo Metal Industries Ltd. ................ 65,002 173,141 (d)
Sumitomo Mitsui Financial
Group Inc. ................................. 3,477 141,624
The Bank of Yokohama Ltd. ..................... 24,506 131,312
Toray Industries Inc. ......................... 17,159 87,498 (d)
Toyota Motor Corp. ............................ 7,546 287,027
2,954,148
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
6
INTERNATIONAL EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
MEXICO -- 0.6%
America Movil SAB de C.V.
ADR (Series L) ............................. 2,455 $ 95,058
NETHERLANDS -- 2.3%
Heineken N.V. ................................. 2,118 78,548
Koninklijke Ahold N.V. ........................ 7,597 87,208
Koninklijke Philips Electronics N.V. .......... 11,894 218,966
384,722
SINGAPORE -- 1.0%
CapitaLand Ltd. ............................... 39,500 101,251
Singapore Telecommunications Ltd. ............. 30,314 62,833
164,084
SOUTH AFRICA -- 1.0%
MTN Group Ltd. ................................ 11,241 172,214
SOUTH KOREA -- 1.4%
KB Financial Group Inc. ....................... 1,620 54,426
KB Financial Group Inc.ADR .................... 551 18,354
Samsung Electronics Company Ltd. .............. 80 37,176
Samsung Electronics Company
Ltd. GDR ................................... 564 131,553 (b,d)
241,509
SPAIN -- 5.3%
Banco Santander S.A. (Regd.) .................. 47,050 564,915 (d)
Iberdrola S.A. ................................ 15,708 127,350
Iberdrola S.A. ................................ 3,721 29,228 (a)
Telefonica S.A. ............................... 8,431 190,631
912,124
SWEDEN -- 0.5%
Hennes & Mauritz AB (Series B) ................ 1,874 93,121
SWITZERLAND -- 11.3%
ABB Ltd. (Regd.) .............................. 10,782 169,332 (a)
Credit Suisse Group AG (Regd.) ................ 6,076 277,109
Nestle S.A. (Regd.) ........................... 12,607 474,349
Novartis AG (Regd.) ........................... 6,402 259,247
Roche Holding AG .............................. 4,273 580,315
Syngenta AG ................................... 745 172,798
1,933,150
TAIWAN -- 1.2%
Taiwan Semiconductor Manufacturing
Company Ltd. ............................... 123,019 205,094
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
UNITED KINGDOM -- 17.9%
BG Group PLC .................................. 13,943 $ 233,753
BHP Billiton PLC .............................. 12,806 287,662 (d)
BP PLC ........................................ 14,167 111,475
Diageo PLC .................................... 3,947 56,649
G4S PLC ....................................... 32,613 111,982
HSBC Holdings PLC ............................. 25,992 215,095
Lloyds Banking Group PLC ...................... 218,107 251,181 (d)
National Grid PLC ............................. 33,358 300,772
Prudential PLC ................................ 28,266 192,484 (d)
Reckitt Benckiser Group PLC ................... 8,545 389,241
Rio Tinto PLC ................................. 1,513 17,392 (a)
Rio Tinto PLC (Regd.) ......................... 3,032 105,108
Tesco PLC ..................................... 53,773 313,134
The Capita Group PLC .......................... 8,216 96,676
Vodafone Group PLC ............................ 201,722 389,345 (d)
3,071,949
TOTAL COMMON STOCK
(COST $20,795,745) ......................... 16,683,424
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.1%%
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $17,827) ............................. 9,805 (e)
TOTAL INVESTMENTS IN SECURITIES
(COST $20,813,572) ......................... 16,693,229
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.0%
- --------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class
0.28%
(COST $343,671) ............................ 343,671 (c,f)
TOTAL INVESTMENTS
(COST $21,157,243) ......................... 17,036,900
OTHER ASSETS AND LIABILITIES,
NET -- 0.6% ................................ 102,544
-----------
NET ASSETS -- 100.0% .......................... $17,139,444
===========
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
7
INTERNATIONAL EQUITY FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI International Equity Fund had the following long futures contracts open
at June 30, 2009 (unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------------
DJ Euro Stoxx 50 Index Futures September 2009 3 $100,907 $351
FTSE 100 Index Futures September 2009 1 69,464 (519)
Topix Index Futures September 2009 1 95,818 456
----
$288
====
The GEI International Equity was invested in the following sectors at June 30,
2009 (unaudited):
SECTOR PERCENTAGE (BASED ON MARKET VALUE)
- --------------------------------------------------------------------------------
Commercial Banks 15.79%
Oil, Gas & Consumable Fuels 7.29%
Pharmaceuticals 6.52%
Food Products 5.08%
Metals & Mining 4.90%
Chemicals 4.37%
Multi-Utilities 4.27%
Wireless Telecommunication Services 4.26%
Capital Markets 4.07%
Food & Staples Retailing 3.25%
Insurance 3.24%
Real Estate Management & Development 2.79%
Industrial Conglomerates 2.76%
Commercial Services & Supplies 2.75%
Household Products 2.28%
Semiconductors & Semiconductor Equipment 2.19%
Diversified Telecommunication Services 2.16%
Short-Term 2.02%
Electric Utilities 2.00%
Construction & Engineering 1.97%
Personal Products 1.70%
Automobiles 1.68%
Media 1.41%
Communications Equipment 1.33%
Electrical Equipment 1.31%
Healthcare Equipment & Supplies 1.28%
Road & Rail 1.01%
Specialty Retail 0.96%
Machinery 0.85%
Beverages 0.79%
Construction Materials 0.72%
Software 0.65%
Diversified Financial Services 0.62%
Professional Services 0.57%
Textiles Apparel & Luxury Goods 0.50%
Energy Equipment & Services 0.39%
Real Estate Investment Trusts (REIT's) 0.27%
-------
100.00%
=======
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
8
Notes to Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may
be resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 2009, these securities amounted to
$131,553; or 0.77% of net assets. These securities have been determined to
be liquid using procedures established by the Board of Trustees.
(c) Coupon amount represents effective yield.
(d) At June 30, 2009, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(e) GEAM, the investment adviser of the Fund, also serves as the investment
adviser of the GEI Investment Fund.
(f) GEAM, the investment adviser of the Fund, also serves as investment
adviser of the GE Funds - GE Money Market Fund.
+ Percentages are based on net assets as of June 30, 2009.
Abbreviations:
ADR American Depository Receipt
GDR Global Depository Receipt
REGD. Registered
REIT Real Estate Investment Trust
9
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------- ----------------------------
CLASS 1 CLASS 4
--------------------------------------------------------------------- ----------------------------
6/30/09+ 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 6/30/09+ 12/31/08**
--------------------------------------------------------------------- ----------------------------
INCEPTION DATE ............... -- -- -- -- -- 5/1/95 -- 5/1/08
Net asset value, beginning
of period ................. $ 0.39 $ 14.67 $ 14.08 $ 11.42 $ 9.76 $ 8.52 $ 0.40 $ 14.36
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income
(loss) ................. 0.01 0.51 0.23 0.15 0.13 0.11 (0.02) 0.10
Net realized and
unrealized gains/
(losses) on
investments ............ 0.02 (7.04) 2.98 2.67 1.65 1.24 0.05 (6.35)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS ..... 0.03 (6.53) 3.21 2.82 1.78 1.35 0.03 (6.25)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ..... -- 0.51 0.23 0.16 0.12 0.11 -- 0.47
Net realized gains ........ -- 7.24 2.39 -- -- -- -- 7.24
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .......... -- 7.75 2.62 0.16 0.12 0.11 -- 7.71
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD .................... $ 0.42 $ 0.39 $ 14.67 $ 14.08 $ 11.42 $ 9.76 $ 0.43 $ 0.40
====================================================================================================================================
TOTAL RETURN (a) ............. 7.69% (45.83)% 22.98% 24.69% 18.19% 15.85% 7.50% (44.79)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands) .. $ 17,134 $ 17,920 $ 84,272 $ 80,648 $ 65,450 $ 55,714 $ 6 $ 6
Ratios to average net
assets:
Net investment
income* ............. 2.90% 2.57% 1.30% 1.16% 1.19% 1.31% 2.53% 1.63%
Gross Expenses* ........ 1.89% 1.29% 1.13% 1.13% 1.25% 1.15% 2.32% 1.74%
Net Expenses* .......... 1.69%(b,c) 1.18%(b,c) 1.13% 1.13% 1.25% 1.15% 2.11%(b,c) 1.56%(b,c)
Portfolio turnover rate ... 22% 41% 32% 34% 53% 38% 22% 41%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges.
(b) Reflects GEAM's waiver of a portion of the Fund's management fee in an
amount equal to the management fee earned by GEAM with respect to the
Fund's investment in the GE Funds - GE Money Market Fund ("GE Money Market
Fund").
(c) Reflects GEAM's contractual arrangement with GE Investments Funds, Inc. to
limit the Fund's management fee to 0.80% of the average daily net assets
of the Fund until April 30, 2010. Please see Note 4 of the Notes to
Financial Statements for further details.
* Annualized for periods less than one year.
** Per share values have been calculated using the average share method.
+ Unaudited
See Notes to Financial Statements.
10
Statement of Assets INTERNATIONAL
and Liabilities JUNE 30, 2009 (UNAUDITED) EQUITY FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $20,795,745) ... $ 16,683,424
Investments in affiliated securities, at market
(cost $17,827) ......................................... 9,805
Short-term affiliated investments (at amortized cost) ..... 343,671
Foreign cash (cost $26,805) ............................... 26,596
Receivable for investments sold ........................... 72,545
Income receivables ........................................ 93,233
Variation margin receivable ............................... 612
Other assets .............................................. 70,659
- -------------------------------------------------------------------------------
TOTAL ASSETS ........................................... 17,300,545
- -------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ......................... 39,313
Payable for fund shares redeemed .......................... 16,613
Payable to GEAM ........................................... 39,021
Accrued other expenses .................................... 60,227
Variation margin payable .................................. 412
Other liabilities ......................................... 5,515
- -------------------------------------------------------------------------------
TOTAL LIABILITIES ...................................... 161,101
- -------------------------------------------------------------------------------
NET ASSETS ................................................... $ 17,139,444
===============================================================================
NET ASSETS CONSIST OF:
Capital paid in ........................................... 27,000,352
Undistributed (distribution in excess of) net investment
income ................................................. 279,070
Accumulated net realized loss ............................. (6,023,198)
Net unrealized appreciation/(depreciation) on:
Investments ............................................ (4,120,343)
Futures ................................................ 288
Foreign currency related transactions .................. 3,275
- -------------------------------------------------------------------------------
NET ASSETS ................................................... $ 17,139,444
===============================================================================
CLASS 1:
NET ASSETS ................................................... 17,133,553
Shares outstanding ($0.01 par value; unlimited shares
authorized) ............................................... 41,073,353
Net asset value per share .................................... $ 0.42
CLASS 4:
NET ASSETS ................................................... 5,891
Shares outstanding ($0.01 par value; unlimited shares
authorized) ............................................... 13,803
Net asset value per share .................................... $ 0.43
See Notes to Financial Statements.
11
Statement of Operations INTERNATIONAL
FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) EQUITY FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ............................................... $ 404,581
Interest ............................................... 1,223
Interest from affliated investments .................... 1,517
Less: Foreign taxes withheld ........................... (44,641)
- -------------------------------------------------------------------------------
TOTAL INCOME .............................................. 362,680
- -------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ....................... 79,056
Distributors Fees (Notes 4)
Service Class ....................................... 12
Transfer agent ......................................... 9,794
Directors's fees ....................................... 22
Custody and accounting expenses ........................ 40,464
Professional fees ...................................... 10,462
Registration expenses .................................. 1,385
Other expenses ......................................... 8,730
- -------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ............ 149,925
- -------------------------------------------------------------------------------
Less: Expenses Waived or borne by the adviser .......... (15,792)
Less: Expenses reimbursed by the adviser ............... (536)
- -------------------------------------------------------------------------------
Net expenses ........................................... 133,597
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME ..................................... 229,083
===============================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ......................................... (3,441,830)
Futures ............................................. (18,214)
Foreign currency transactions ....................... 16,528
INCREASE IN UNREALIZED APPRECIATION ON:
Investments ......................................... 3,979,239
Futures ............................................. 5,165
Foreign currency related transactions ............... 1,456
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments ........ 542,344
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...... $ 771,427
===============================================================================
See Notes to Financial Statements.
12
Statements of INTERNATIONAL
Changes in Net Assets EQUITY FUND
- ---------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2009 DECEMBER 31,
(UNAUDITED) 2008
- ---------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS OPERATIONS:
Net investments income .................................. $ 229,083 $ 1,124,727
Net realized gain (loss) on investments,
futures and foreign currency related transactions .... (3,443,516) 10,493,070
Net increase (decrease) in unrealized appreciation/
(depreciation) on investments, futures and foreign
currency related transactions ........................ 3,985,860 (33,294,597)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ................. 771,427 (21,676,800)
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 .............................................. -- (1,127,691)
Class 4 .............................................. -- (329)
Net realized gains
Class 1 .............................................. -- (16,150,682)
Class 4 .............................................. -- (5,045)
- ---------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ........................................ -- (17,283,747)
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and
distributions ........................................... 771,427 (38,960,547)
- ---------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 .............................................. 245,604 12,325,832
Class 4 .............................................. -- 10,000
Value of distributions reinvested
Class 1 .............................................. -- 17,278,373
Class 4 .............................................. -- 5,374
Cost of shares redeemed
Class 1 .............................................. (1,802,768) (57,006,212)
Class 4 .............................................. -- --
- ---------------------------------------------------------------------------------------------------
Net decrease from share transactions .................... (1,557,164) (27,386,633)
- ---------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS ............................... (785,737) (66,347,180)
NET ASSETS
Beginning of period ........................................ 17,925,181 84,272,361
- ---------------------------------------------------------------------------------------------------
End of period .............................................. $ 17,139,444 $ 17,925,181
===================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT
INCOME, END OF PERIOD ...................................... $ 279,070 $ 49,987
- ---------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold ................................................... 664,678 935,718
Issued for distributions reinvested ........................... -- 43,195,968
Shares redeemed ............................................... (5,012,772) (4,456,499)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ........................ (4,348,094) 39,675,187
===================================================================================================
CLASS 4
Shares sold ................................................... -- 696
Issued for distributions reinvested ........................... -- 13,106
- ---------------------------------------------------------------------------------------------------
Net increase in fund shares ................................... -- 13,802
===================================================================================================
See Notes to Financial Statements.
13
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of fourteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund (the "Fund"), Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
The Company offers two share classes (Class 1 and Class 4) of the Fund as
investment options for variable life insurance and variable annuity contracts.
Class 4 shares were first offered on May 1, 2008, and Fund shares outstanding
prior to May 1, 2008 were designated as Class 1 shares. Each share class has
different fees and expenses, and as a result, each share class will have
different share price and performance. Not all variable contracts offer both
share class of the Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on recent trading activity and other
relevant information which may include market interest rate curves, referenced
credit spreads and estimated prepayment rates where applicable. In the absence
of a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations. The Fund's written or
purchased options are valued at the last sales price, or if no sales occurred
that day, at the last reported bid price. Short-term investments with remaining
maturities of sixty days or less at the time of purchase are valued on the basis
of amortized cost, which approximates market value.
All assets and liabilities of the Fund that are initially expressed in foreign
currency values will be converted into U.S. dollars at the WM/Reuters exchange
rate computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
14
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Fund adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards 157, FAIR VALUE MEASUREMENTS ("SFAS
157"). SFAS 157 establishes a new framework for measuring fair value and expands
related disclosures. Broadly, the SFAS 157 framework requires fair value to be
determined based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants. SFAS 157 establishes a three-level valuation hierarchy
based upon observable and unobservable inputs.
For financial assets and liabilities, fair value is the price that would be
received to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets and liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect our market assumptions. Preference is given to
observable inputs. These two types of inputs create the following fair value
hierarchy:
Level 1 -- Quoted prices for identical investments in active markets.
Level 2 -- Quoted prices for similar investments in active markets; quoted
prices for identical or similar investments in markets that are not
active; and model-derived valuations whose significant value drivers are
observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
The Fund maintains policies and procedures to value investments using the best
and most relevant data available. The Fund performs periodic reviews of the
methodologies used by independent pricing services including obtaining price
validation for certain securities. The following section describes the valuation
methodologies that the Fund uses to measure investments at fair value.
When available, the Fund uses quoted market prices to determine fair value of
investment securities, and they are included in Level 1. Level 1 securities
primarily include publicly-traded equity securities.
When quoted market prices are unobservable, the Fund uses quotes from
independent pricing vendors based on recent trading activity and other relevant
information including market interest rate curves, referenced credit spreads and
estimated prepayment rates where applicable. These investments are included in
level 2 and primarily include long-term US government,
15
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
agency and corporate debt, notes, bonds, and mortgage backed securities. In
infrequent circumstances, the Fund's pricing vendors may provide valuations that
are based on significant unobservable inputs, and in those circumstances the
investment securities are classified in Level 3.
Other financial instruments are derivative instruments that are not reflected in
Total Investments, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------------
Investments in Securities $17,027,094 $ 9,805 $ -- $17,036,900
Other Financial Instruments 288 -- -- 288
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
obectives or policies. The Fund's custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund
16
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
will not enter into a transaction involving futures for speculative purposes.
The Fund's risks in using these contracts include changes in the value of the
underlying instruments, non-performance of the counterparties under the
contracts' terms and changes in the liquidity of the secondary market for the
contracts. Futures contracts are valued at the settlement price established each
day by the board of trade or exchange on which they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. The Fund will not enter
into a transaction involving options for speculative purposes. The Fund's risks
in using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Options
are valued at the last sale price, or if no sales occurred on that day, at the
last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts to facilitate transactions in foreign
denominated securities and to manage the Fund's currency exposure. Forward
foreign currency exchange contracts are valued at the mean between the bid and
the offered forward rates as last quoted by a recognized dealer. The aggregate
principal amounts of the contracts are not recorded in the Fund's financial
statements. Such amounts appear under the caption forward foreign currency
contracts in the Schedule of Investments. Fluctuations in the value of the
contracts are recorded in the Statement of Assets and Liabilities as an asset
(or liability) and in the Statement of Operations as unrealized appreciation
(depreciation) until the contracts are closed, when they are recorded as
realized gains or losses on foreign currency related transactions. The Fund's
risks in using these contracts include changes in the value of foreign currency
or the possibility that the counterparties do not perform under the contracts'
terms. When the Fund enters into a forward foreign currency exchange contract,
it is required to segregate cash or liquid securities with its custodian in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract. If the value of the segregated securities
declines, additional cash or securities is segregated so that the value of the
account will equal the amount of the Fund's commitment with respect to the
contract.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
17
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2009, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- --------------------------------------------------------------------------------
$22,571,207 $533,388 $(6,067,695) $(5,534,307)
As of December 31, 2008, the Fund has no capital loss carryovers. Capital loss
carryovers are available to offset future realized capital gains to the extent
provided in the Internal Revenue Code and regulations thereunder. To the extent
that these carryover losses are used to offset future capital gains, it is
probable that the gains so offset will not be distributed to shareholders
because they would be taxable as ordinary income.
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund elected to defer losses incurred after October 31, 2008 as follows:
Capital Currency
- --------------------------------------------------------------------------------
$1,416,970 $4,964
The tax composition of distributions paid during the years ended December 31,
2008 and December 31, 2007 were as follows:
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
2008 $1,428,534 $15,855,213 $17,283,747
2007 1,502,823 11,262,539 12,765,362
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures,
treatment of realized gains and losses on foreign currency contracts, and losses
deferred due to wash sale transactions. Reclassifications due to permanent
book/tax differences are made to the Fund's capital accounts to reflect income
and gains available for distribution (or available capital loss carryovers)
under income tax regulations. These reclassifications have no impact on net
investment income, realized gains or losses, or the net asset value of the Fund.
The calculation of net investment income per share in the Financial Highlights
table excludes these adjustments.
The reclassifications for the year ended December 31, 2008 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated
Income Net Realized Gain
- --------------------------------------------------------------------------------
$80,327 $(80,327)
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax
18
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
positions taken or expected to be taken in the course of preparing
the Fund's tax returns to determine whether the tax positions are "more likely
than not" of being sustained by the applicable tax authority. The adoption of
FIN48 did not have an impact on the Fund's net assets and financial statements.
The Fund's 2005, 2006, 2007 and 2008 calendar years tax returns are still open
to examination by the Federal and applicable state tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Fund specific expenses are allocated to the Fund that incurs such
expense and pro rata across share classes. Expenses, other than those incurred
by a specific Fund, are allocated pro rata among Funds and share classes. Such
expenses may include custodial fees, legal and accounting fees, printing costs
and registration fees. All expenses of the Fund are paid by GEAM and reimbursed
by the Fund. Certain class specific expenses (such as transfer agency fees or
distribution fees) are allocated to the class that incurs such expense.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES On March 19, 2008, the FASB issued
Statement of Financial Accounting Standards No. 161 ("FAS No. 161"), "Disclosure
about Derivative Instruments and Hedging Activities." This new accounting
statement requires enhanced disclosures about an entity's derivative and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity invests in derivatives, (b) how derivatives are accounted for
under FAS No. 133, and (c) how derivatives affect an entity's financial
position, financial performance, and cash flows. FAS No. 161 also requires
enhanced disclosures regarding credit-risk-related contingent features of
derivative instruments.
The Fund is subject to equity price risk and foreign currency exchange rate risk
in the normal course of pursuing its investment objectives. The Fund may use
futures contracts to gain exposure to, or hedge against changes in the value of
equities or foreign currencies. A futures contract represents a commitment for
the future purchase or sale of an asset at a specified price on a specified
date. Upon entering into such contracts, the Fund is required to deposit with
the broker, either in cash or securities, an initial margin in an amount equal
to a certain percentage of the contract amount. Subsequent payments (variation
margin) are made or received by the Fund each day, depending on the daily
fluctuations in the value of the contract, and are recorded for financial
statement purposes as unrealized gains or losses by the Fund. Upon entering into
such contracts, the Fund bears the risk of exchange rates or securities prices
moving unexpectedly, in which case, the Fund may not achieve the anticipated
benefits of the futures contracts and may realize a loss. With futures
contracts, there is minimal counterparty credit risk to the Fund since futures
contracts are exchange traded and the exchange's clearinghouse, as counterparty
to all traded futures, guarantees the futures against default.
Shown below are the derivative contracts entered into by the Fund, summarized by
primary risk exposure.
Asset Derivatives June 30, 2009 Liability Derivatives June 30, 2009
------------------------------------------------ --------------------------------------
Derivatives not
accounted for as Location in Notional Location in Notional
hedging instruments the Statements Value/No. of the Statements Value/No. of
under FASB of Assets Contracts Fair of Assets Contracts Fair
Statement 133 and Liabilities Long/(Short) Value and Liabilities Long/(Short) Value
- ------------------------------------------------------------------------------------------------------------------
Equity Contracts Receivables, Net Assets - 10,040 316* -- -- --
Unrealized Appreciation/
(Depreciation)
- ------------------------------------------------------------------------------------------------------------------
* INCLUDES CUMULATIVE APPRECIATION/DEPRECIATION OF FUTURES CONTRACTS AS
REPORTED IN THE SCHEDULE OF INVESTMENTS. ONLY THE CURRENT DAY'S VARIATION
MARGIN IS REPORTED WITHIN THE STATEMENT OF ASSETS AND LIABILITIES.
19
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Change in Unrealized
Derivatives not accounted Location in the Realized Gain or Appreciation/(Depreciation)
for as hedging instruments Statements of (Loss) on Derivatives on Derivatives
under FASB Statement 133 Operations Recognized in Income Recognized in Income
- ---------------------------------------------------------------------------------------------------------------
Equity Contracts Net realized gain/(loss) on (18,214) 5,215
futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on futures
- ---------------------------------------------------------------------------------------------------------------
3. LINE OF CREDIT
The Company shares a revolving credit facility of up to $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established on November 7, 2007. Generally, borrowings under
the credit facilities would accrue interest at the Federal Funds Rate plus 50
basis points and would be borne by the borrowing Fund. The maximum amount
allowed to be borrowed by any one Fund is the lesser of (i) its prospectus
limitation, or (ii) 20% of its net assets. The credit facilities were not
utilized by the Fund during the fiscal year ended June 30, 2009.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. Compensation of GEAM for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund. The
advisory and administrative fee is stated in the following schedule:
Annualized based on average daily net assets
- --------------------------------------------------------------------------------
Average Daily Advisory and
Net Assets of Fund Administration Fees
- --------------------------------------------------------------------------------
First $100 million 1.00%
Next $100 million 0.95%
Over $200 million 0.90%
GEAM has entered into a contractual arrangement with the Company to limit the
management fee charged to the Fund to 0.80% of the average daily net assets of
the Fund (the "Management Fee Waiver Agreement"). Unless terminated or amended,
the Management Fee Waiver Agreement will continue until April 30, 2010. The fee
waiver will terminate automatically if the management agreement terminates. In
addition, the Company may terminate the Management Fee Waiver Agreement without
penalty upon 60 days written notice to GEAM. The Management Fee Waiver Agreement
may be amended by the mutual written consent of the Company and GEAM.
DISTRIBUTION AND SERVICE (12b-1) FEES The Company has adopted a Distribution and
Service (12b-1) Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with
respect to Class 4 shares of the Fund. Under the Plan, the Fund may compensate
GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and
the Fund's principal distributor, for certain sales services provided by GEID or
other broker dealers and investor services provided by GEID or other service
providers relating to the Fund's Class 4 shares, including services to owners or
prospective owners of variable contracts issued by insurance companies that
offer such share class as an investment option. The amount of compensation paid
under the Plan by the Fund's Class 4 shares may not exceed 0.45% of the average
daily net assets of the Fund attributable to such share class. The Plan
continues in effect from year to year for so long as such continuance is
approved annually by the Board of Directors, including by those directors who
are not interested persons of the Company and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related to
it.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2009, $96 was charged to the
Fund.
20
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2009 were as follows:
U.S. Government Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$ -- $ --
Other Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$3,486,383 $4,726,651
SECURITY LENDING At June 30, 2009, the Fund did not participate in securities
lending.
21
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 60
POSITION(S) HELD WITH FUND Chairman of the Board and President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 11 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS President and Chief Executive
Officer - Mutual Funds and Intermediary Business since March 2007; Executive
Vice President of GEAM from February 1997 to March 2007; Director of GEAM since
1988; Vice President, GE Capital Corporation, an indirect wholly-owned
subsidiary of GE, since December 1999; Executive Vice President - Sales and
Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, from
March 1993 to March 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds since its inception; Trustee of
General Electric Savings & Security Trust, General Electric S&S Income Fund,
General Electric S&S Program Mutual Fund ("GE Savings & Security Funds"), Elfun
Funds, General Electric Insurance Plan Trust, General Relief Loan Fund, and
General Electric Pension Trust since 1988; Trustee of Fordham University since
2002; Trustee of GE Volunteers since 1993; Director, GE Asset Management
(Ireland) since February 1999; Director, GE Asset Management Funds Plc., GE
Asset Canada Company, and GE Asset Management Limited since 1998.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Director and Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds since July 2007.
22
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 43
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years (Vice President); one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
from September 2003 to July 2007; Vice President and Secretary of GE Funds and
GE Institutional Funds since July 2007; Vice President and Assistant Secretary
of Elfun Funds and GE Savings & Security Funds since October 2003.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
23
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 63
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since its inception; Trustee of Fordham University since
2002 and Marymount College from 2001 through 2002; Neuroscience Research
Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn &
Queens since 2001; Gregorian University Foundation since 1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 73
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception; Trustee, St. Francis Hospital Corp.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
24
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J. Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE
OFFICER - MUTUAL FUNDS & INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Ralph R. Layman, PRESIDENT - PUBLIC EQUITIES
(SINCE JULY 2009)
Maureen B. Mitchell, PRESIDENT - INSTITUTIONAL SALES AND
MARKETING (SINCE JULY 2009)
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST (SINCE JULY 2009)
Don W. Torey, PRESIDENT - ALTERNATIVE INVESTMENTS
John J. Walker, EVP, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT - INVESTMENT STRATEGIES
25
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii)
on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
- --------------------------------------------------------------------------------
[GE LOGO]
GE Investments Funds, Inc.
Total Return Fund Letter from the Chairman
- --------------------------------------------------------------------------------
[PHOTO OF MICHAEL J. COSGROVE]
MICHAEL J. COSGROVE
CHAIRMAN,
GE INVESTMENTS FUNDS, INC.
DEAR SHAREHOLDER:
Attached is the semi-annual report for the GE Investments Funds, Inc. -- Total
Return Fund (the "Fund") for the six-month period ended June 30, 2009. The
report contains information about the performance of the Fund, and other Fund
specific data, along with portfolio manager commentary. We have provided you
with an overview of the investment markets, along with our investment outlook
for the coming months.
MARKET OVERVIEW
Despite investors' hopes that the new U.S. administration and Congress would
help stabilize the nation's financial crisis, asset values continued to fall in
the first quarter of 2009. Global equities experienced sharp price declines in
January and February as troubles in the United States continued to cast a cloud
over world markets. U.S. Treasury Secretary Geithner indicated that some U.S.
banks would need large amounts of assistance to survive and talks of stress
tests and bank nationalization spooked investors. The markets also booed
government plans to take a 36% stake in Citigroup even as the financial status
of institutions already on government life-support, such as AIG, remained
uncertain. Similarly, news of troubled automakers GM and Chrysler worried
international bondholders and shareholders alike. Financial services and small
cap stocks were hardest hit in the downswing as equity indexes broke the
November 2008 lows in February. Government debt issues also had a rough February
as U.S. and U.K. debt auctions saw weak support for long and non-inflation
indexed government securities. These poor showings were soon followed by a
warmer reception for shorter-dated debt.
U.S. stocks abruptly reversed course and posted three straight weeks of gains
through the end of March after the three largest U.S. banks announced they had
turned a profit. Equity indexes around the globe followed the U.S. path,
regaining much of their losses since January. In late March, the U.S. Treasury
Secretary unveiled his Public-Private Investment Partnership (PPIP) plan to
remove toxic assets from the balance sheets of the nation's banks, and the
markets seemed convinced of a financial sector backstop. Another policy move to
support the markets came on March 18th when the Federal Reserve announced that
it would buy $300 billion of 2- and 10-year Treasuries, increase its purchase
plan of agency mortgage-backed securities from $500 billion to $1.25 trillion,
double its purchases of agency debt to $200 billion and expand the eligible
collateral in the Term Asset-Backed Securities Loan Facility (TALF) program. In
response, the yield on the U.S. Treasury 10-year note fell 47 basis points to
2.53%, recording the largest one-day drop in over four decades.
The rebound in global equities continued into the second quarter, as markets
experienced strong gains in April and May, before tailing off into a flat June
as investors started to question the strength and timing of an economic
recovery. Despite a double-digit rally since mid-March, the S&P 500 Index ended
the second quarter approximately where it started at the beginning of 2009
(priced in the low 900s). Emerging markets equities continued to outperform
their developed peers during the second quarter. The MSCI Emerging Markets Index
gained 34.7%, its best quarterly return since data collection began in 1988.
Speculation persists that developing markets are better positioned to weather
the global recession given that their financial systems are generally better
capitalized and less leveraged than the developed countries.
During the second quarter, U.S. government stress tests concluded and the banks
that needed capital swiftly and successfully raised it. The Federal Reserve also
announced that it would allow 10 large banks to repay bailout funds from the
government's controversial Troubled Asset Relief Program. In this environment,
financial stocks enjoyed a notably strong quarter, bolstered by growing
speculation that the worst of the global banking crisis was over. However,
financial risks remain as the European Central Bank said that European banks
might need to write down an additional $283 billion by the end of next year. In
late June, The European Central Bank also injected (euro)442 billion ($621
billion) into Europe's banking system in one-year funds to spur lending and help
stabilize the economy.
[GE LOGO]
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Total Return Fund Letter from the Chairman (Continued)
- --------------------------------------------------------------------------------
Against this backdrop, financial markets posted improved results for the six-
and 12-month periods ended June 30.
TOTAL RETURNS AS OF
JUNE 30, 2009 6-MONTH 12-MONTH
- --------------------------------------------------------------------------------
U.S. equities (S&P 500 Index) 3.16 -26.21
Global equities (MSCI World Index) 6.35 -29.50
International equities
(MSCI EAFE Index) 7.95 -31.35
Emerging Markets equities
(MSCI EM Index) 36.01 -28.07
Small-cap U.S. equities
(Russell 2000 Index) 2.64 -25.01
Mid-cap U.S. equities
(Russell Mid Cap Index) 9.96 -30.36
U.S. fixed income (Barclays Capital
U.S. Aggregate Bond Index) 1.90 6.05
U.S. short-term government
fixed income (Barclays Capital
U.S. Treasury Bond Index 1-3 Year) 0.47 4.94
U.S. tax-exempt income
(Barclays Capital U.S. Municipal
Bond Index 10 year) 4.38 5.58
- --------------------------------------------------------------------------------
OUTLOOK
Uncertainty will likely continue around the strength and timing of a U.S.
economic recovery. With unemployment at a 25-year high of 9.5%, and American
consumers having suffered a collapse in wealth of at least $15 trillion since
early 2007, it is hard to have much confidence in a consumer-driven recovery in
the short term. We believe the economy will work below its potential for many
quarters to come as deleveraging continues among consumers and global financial
institutions.
While equity markets have enjoyed a bounce off of the bottom over the first half
of the year, the positive earnings surprises in April and May came mostly from
productivity gains and cost containment programs. Earnings in the second quarter
will be heavily scrutinized for evidence that a real recovery is sustainable and
that restocking is giving way to growth in final demand. We believe companies
are going to have to show evidence of a top-line recovery -- increased demand
and improving fundamentals -- in order for stocks to work their way higher.
Given the economic headwinds we're facing, consolidation of the second quarter's
gains seems a real possibility.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. We encourage
long-term investors to maintain a diversified investment approach that is
consistent with their goals, time horizon and risk tolerance. While diversified
portfolios are not immune to market downturns, history suggests they can put you
in a position to benefit from the inevitable return to better times.
Thank you for investing with GE Investments Funds.
Sincerely,
/s/ Michael J. Cosgrove
Michael J. Cosgrove
CHAIRMAN, GE INVESTMENTS FUNDS, INC.
JUNE 2009
MIKE COSGROVE IS PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS &
INTERMEDIARY BUSINESS AT GE ASSET MANAGEMENT. MR. COSGROVE ALSO SERVES AS A
TRUSTEE OF THE GE PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM. PREVIOUSLY
CHIEF FINANCIAL OFFICER OF GE ASSET MANAGEMENT AND ASSISTANT TREASURER - GE
COMPANY, MIKE JOINED GE IN 1970 AND HELD A NUMBER OF MANAGERIAL POSITIONS IN
FINANCE AND SALES AT GE'S INTERNATIONAL OPERATION AND IN GE TRADING COMPANY.
MIKE HAS A B.S. IN ECONOMICS FROM FORDHAM UNIVERSITY AND AN M.B.A. FROM ST.
JOHN'S UNIVERSITY.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC.
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
[BARCODE]
GE Investments Funds, Inc.
Total Return Fund
Semi-Annual Report
JUNE 30, 2009
[GE LOGO]
GE Investments Funds, Inc.
Total Return Fund Contents
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE ...................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ................................ 2
NOTES TO SCHEDULE OF INVESTMENTS .......................................... 22
FINANCIAL STATEMENTS
Financial Highlights ................................................... 23
Statement of Assets and Liabilities .................................... 25
Statement of Operations ................................................ 26
Statements of Changes in Net Assets .................................... 27
Notes to Financial Statements .......................................... 29
ADVISORY AND ADMINISTRATIVE AGREEMENT APPROVALS ........................... 38
SPECIAL MEETING OF SHAREHOLDERS -- VOTING RESULTS ......................... 42
ADDITIONAL INFORMATION .................................................... 45
INVESTMENT TEAM ........................................................... 48
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
Notes to Performance June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any. Total returns shown
are net of Fund expenses but do not reflect fees and charges associated with the
variable contracts such as administrative fees, account charges and surrender
charges, which, if reflected, would reduce the Fund's total returns for all
periods shown.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in a Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. An investment in a Fund is subject to risk, including
possible loss of principal invested.
The Standard & Poor's ("S&P") 500(R) Composite Price Index of stocks (S&P 500
Index) and Barclays Captial U.S. Aggregate Bond Index (formerly Lehman Brothers
Aggregate Bond Index) are unmanaged indices and do not reflect the actual cost
of investing in the instruments that comprise each index.
The S&P 500 Index is an unmanaged, market capitalization-weighted index of
stocks of 500 large U.S. companies, which is widely used as a measure of
large-cap stock market performance. The Barclays Captial U.S. Aggregate Bond
Index is a market value-weighted index of taxable investment-grade debt issues,
including government, corporate, asset-backed and mortgage-backed securities,
with maturities of one year or more. This index is designed to represent the
performance of the U.S. investment-grade first rate bond market. The results
shown for the foregoing indices assume the reinvestment of net dividends or
interest.
The peer universe of the underlying annuity funds used in our peer group average
return calculation is based on the blend of Morningstar peer categories, as
shown. Morningstar is an independent mutual fund rating service. A Fund's
performance may be compared to or ranked within a universe of mutual funds with
investment objectives and policies similar but not necessarily identical to the
Fund's.
(C)2009 Morningstar, Inc. All Rights Reserved. The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is no warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are responsible for any
damage or losses relating from any use of this information. Past performance is
no guarantee or future results.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUND.
1
Total Return Fund
- --------------------------------------------------------------------------------
THE TOTAL RETURN FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES
PAUL M. COLONNA, RALPH R. LAYMAN, THOMAS R. LINCOLN, JUDITH A. STUDER, DIANE M.
WEHNER AND DAVID WIEDERECHT. MS. STUDER AND MR. WIEDERECHT ARE BOTH VESTED WITH
OVERSIGHT AUTHORITY FOR DETERMINING ASSET ALLOCATIONS FOR THE FUND, INCLUDING
THE FULL DISCRETION TO ALLOCATE THE FUND'S ASSETS TO SUB-ADVISER(S) RETAINED BY
GE ASSET MANAGEMENT. EACH OF THE OTHER PORTFOLIO MANAGERS IS RESPONSIBLE FOR
MANAGING ONE OF FOUR SUB-PORTFOLIOS: U.S. EQUITY, U.S. MID-CAP EQUITY,
INTERNATIONAL EQUITY AND FIXED INCOME. MR. LINCOLN MANAGES THE U.S. EQUITY
PORTION, MS. WEHNER MANAGES THE U.S. MID-CAP EQUITY PORTION, MR. LAYMAN MANAGES
THE INTERNATIONAL EQUITY PORTION AND MR. COLONNA MANAGES THE FIXED INCOME
PORTION, EACH WITH A TEAM OF PORTFOLIO MANAGERS AND ANALYSTS. GE ASSET
MANAGEMENT HAS ALSO RETAINED URDANG TO ACT AS SUB-ADVISER TO THAT PORTION OF THE
FUND'S ASSETS ALLOCATED TO REAL ESTATE-RELATED INVESTMENTS. THE SUB-PORTFOLIOS
UNDERLYING THE FUND ARE MANAGED INDEPENDENTLY OF EACH OTHER AND THE PORTFOLIO
MANAGERS HAVE FULL DISCRETION OVER THEIR PARTICULAR SUB-PORTFOLIO; HOWEVER, THE
PORTFOLIO MANAGEMENT TEAM IS COLLABORATIVE TO ENSURE STRICT ADHERENCE TO THE
FUND'S OBJECTIVES.
[PHOTO OF PAUL M. COLONNA]
PAUL M. COLONNA IS PRESIDENT AND CHIEF INVESTMENT OFFICER - FIXED INCOME AND A
DIRECTOR AT GE ASSET MANAGEMENT. SINCE JANUARY 2005, HE HAS BEEN RESPONSIBLE FOR
THE FIXED INCOME PORTION OF THE TOTAL RETURN FUND. PRIOR TO JOINING GE ASSET
MANAGEMENT IN FEBRUARY 2000, MR. COLONNA WAS A SENIOR PORTFOLIO MANAGER WITH THE
FEDERAL HOME LOAN MORTGAGE CORPORATION, OVERSEEING THE MORTGAGE INVESTMENT
GROUP. MR. COLONNA BECAME PRESIDENT - FIXED INCOME IN MARCH 2007.
[PHOTO OF RALPH R. LAYMAN]
RALPH R. LAYMAN IS PRESIDENT AND CHIEF INVESTMENT OFFICER - PUBLIC EQUITIES AND
A DIRECTOR AT GE ASSET MANAGEMENT. HE MANAGES THE OVERALL PUBLIC EQUITY
INVESTMENTS FOR GE ASSET MANAGEMENT. MR. LAYMAN HAS BEEN RESPONSIBLE FOR THE
INTERNATIONAL EQUITY PORTION OF THE TOTAL RETURN FUND SINCE 1997. MR. LAYMAN
JOINED GE ASSET MANAGEMENT IN 1991 AS SENIOR VICE PRESIDENT FOR INTERNATIONAL
INVESTMENTS AND BECAME AN EXECUTIVE VICE PRESIDENT IN 1992, PRESIDENT -
INTERNATIONAL EQUITIES IN MARCH 2007 AND PRESIDENT - PUBLIC EQUITIES SINCE JULY
2009.
[PHOTO OF THOMAS R. LINCOLN]
THOMAS R. LINCOLN IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN
A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE TOTAL RETURN FUND SINCE MAY
2007. MR. LINCOLN JOINED GE ASSET MANAGEMENT IN 1994 AS A FINANCIAL ANALYST IN
U.S. EQUITIES. MR. LINCOLN BECAME PART OF THE INVESTMENT MANAGEMENT TEAM FOR
U.S. EQUITIES IN 1997 AND PORTFOLIO MANAGER FOR U.S. EQUITIES IN 2003.
[PHOTO OF JUDITH A. STUDER]
JUDITH A. STUDER IS A DIRECTOR AND CHIEF MARKET STRATEGIST AT GE ASSET
MANAGEMENT. SHE HAS LED THE TEAM OF PORTFOLIO MANAGERS FOR THE TOTAL RETURN FUND
SINCE JULY 2004, AND HAS CO-LED THE FUND SINCE JANUARY 2009. MS. STUDER JOINED
GE ASSET MANAGEMENT IN AUGUST 1984. SHE BECAME SENIOR VICE PRESIDENT - U.S.
EQUITIES IN 1991, SENIOR VICE PRESIDENT - INTERNATIONAL EQUITIES IN 1995,
PRESIDENT - INVESTMENT STRATEGIES IN JULY 2006, PRESIDENT - U.S. EQUITIES IN
JUNE 2007 AND CHIEF MARKET STRATEGIST SINCE JULY 2009.
[PHOTO OF DIANE M. WEHNER]
DIANE M. WEHNER IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. SHE HAS BEEN
A PORTFOLIO MANAGER OF THE TOTAL RETURN FUND SINCE JANUARY 2006. BEFORE JOINING
GE ASSET MANAGEMENT, MS. WEHNER WAS A VICE PRESIDENT AND SENIOR PORTFOLIO
MANAGER FROM JANUARY 1997 TO JUNE 2001, AND ASSOCIATE PORTFOLIO MANAGER FROM MAY
1995 TO JANUARY 1997, WITH BENEFIT CAPITAL MANAGEMENT CORPORATION. MS. WEHNER
HAS SERVED AS AN ANALYST/ PORTFOLIO MANAGER IN THE INVESTMENT MANAGEMENT
INDUSTRY SINCE 1985.
[PHOTO OF DAVID WIEDERECHT]
DAVID WIEDERECHT IS PRESIDENT -- INVESTMENT STRATEGIES AND A DIRECTOR AT GE
ASSET MANAGEMENT SINCE FEBRUARY 2008. HE HAS CO-LED THE TEAM OF PORTFOLIO
MANAGERS FOR THE TOTAL RETURN FUND SINCE THE END OF JANUARY 2009. MR. WIEDERECHT
JOINED GE ASSET
2
- --------------------------------------------------------------------- [Q&A LOGO]
MANAGEMENT IN 1988 AND HAS HELD VARIOUS POSITIONS AT GE ASSET
MANAGEMENT INCLUDING VICE PRESIDENT -- ALTERNATIVE INVESTMENTS/PRIVATE
EQUITY/HEDGE FUND FROM 1998 TO 2004, AND MANAGING DIRECTOR -- ALTERNATIVE
INVESTMENTS FROM 2004 TO 2008, RESPONSIBLE IN BOTH POSITIONS FOR PORTFOLIO
MANAGEMENT WITHIN THOSE STRATEGIES.
Q. HOW DID THE TOTAL RETURN FUND PERFORM COMPARED TO ITS BENCHMARK AND
MORNINGSTAR PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009?
A. For the six-month period ended June 30, 2009, the Total Return Fund
returned 5.96% for the Class 1 shares, 5.98% for Class 2 shares, 5.89% for
Class 3 shares and 5.80% for Class 4 shares. The Fund's broad based
benchmarks, the S&P 500 Index and the Barclays Capital U.S. Aggregate Bond
Index returned 3.16% and 1.90% respectively. The Fund's Morningstar peer
group of 302 US Insurance Moderate Allocation funds returned an average of
6.43% for the same period.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE AND WHAT MARKET
CONDITIONS IMPACTED THE PERFORMANCE OF THE FUND?
A. The performance of the Total Return Fund for the six-month period ended
June 30, 2009 was driven by the Fund's underweight in equities and
overweight in fixed income and cash. U.S. equity performance contributed
positively to Fund performance.
During the first half of 2009, the equity market was extremely volatile.
Stocks fell sharply through early March against a backdrop of severe
global economic recession but picked up again as clarity emerged in the
U.S. financial sector with the resolution of the government bank stress
tests and improving credit spreads. Performance has been mixed with only
the information technology, materials, and consumer discretionary sectors
in the S&P 500 achieving year-to-date gains. The defensive health care
sector was flat on a total return basis. Financials, although they rallied
almost 36% in the second quarter, are down 3% year-to-date. Industrials
and telecom have also lagged. In this environment, growth outperformed
value.
A continued emphasis on quality large-cap stocks, with notable stock
selection strength from the financials, energy and consumer staples
sectors, benefited the Fund during the period. Within energy, emphasizing
services companies at the expense of large integrated oil companies helped
returns. In consumer staples, underweighting selected household products
companies and the more defensive food retailers helped performance as
investors embraced risk assets during the rally in the second half of the
period. Overweighting technology as that sector soared also enhanced
performance, with particular strength in communications equipment
companies whose fundamentals have remained intact throughout the global
slowdown. We took advantage of price declines in leading financial stocks
and increased our financial sector overweight by the end of the period. We
took profits in health care and the consumer sectors to fund this move.
Our largest underweights were in consumer staples and industrials at the
end of the period. We continued to seek large-cap, quality companies that
we felt had the potential to survive and grow market share during this
down-cycle. We maintained a consistent emphasis on companies with strong
balance sheets and earnings stability over more cyclical or leveraged
opportunities.
While we experienced the first leg of a rebound in the U.S. equity markets
during the period, investor expectations have also risen. We expect
volatility as the markets get whipsawed by economic data which generally
will not improve in a linear fashion. In our opinion, the majority of the
decline in corporate earnings expectations is behind us. We believe a
future market rally will be dominated by outperformance by market share
winners with the ability to meet or beat earnings and revenue
expectations. Amid rapidly changing market conditions we will maintain our
bottom-up stock selection approach with focus on a long-term investment
horizon.
Mid-cap equities outperformed during the six-month period, largely due to
solid stock selection within the consumer discretionary, information
technology, financials, and energy sectors. During the period we increased
the mid-cap equity weighting in each of these sectors, and we reduced our
exposure to consumer staples, industrials, and health care. We focused on
investing in attractively valued companies
3
Total Return Fund
- --------------------------------------------------------------------- [Q&A LOGO]
with strong balance sheets, experienced management teams, solid earnings
prospects, leading market shares, and superior long-term fundamentals.
With an emphasis on growth, we continued to look to invest in innovative
companies that provide prospects for above-average earnings growth.
Therefore, health care and information technology companies represent a
meaningful percentage of the Fund's holdings.
During the first ten weeks of this period, developed international equity
markets reached new multi-year lows, driven by fear of a collapsing global
economy. The remainder of the period saw risk aversion give way to some
measure of risk acceptance as the allure of attractive valuations plus
heavy weights of cash brought investors back in from the sidelines. The
most glaring point about this period was the uniformity of the problem. In
the past, individual countries have experienced recessions but used trade
with other parts of the world to help them recover. However, this period
has been marked by the absence of even one economy that could act as an
anchor for the rest, with the possible exception of China. China has been
the tale of two stories, which although it has been growing domestically,
it also has seen its export trade diminish substantially. Much of the
international equity underperformance came from a rotation by the market
out of the overweighted defensive consumer staples into the underweighted
more cyclical consumer discretionary stocks. In addition, the growing
weight in financial stocks performed poorly at the start of the period.
The overweight in consumer staples has been reduced on valuation concerns
and the weight in financials modestly increased as clarity and confidence
slowly grow. By the end of the period, the underweight in energy and
materials had been reduced due to growing optimism that the worst of the
economic crisis may be behind us. The underweight in health care and
utilities had also been reduced reflecting continued concern that the
crisis has not been completely solved.
Fixed income relative performance continued to be negatively impacted from
marked to market pricing on sub-prime and alt-A backed securities. A
second negative contributor to relative performance was our bias toward a
longer relative duration as interest rates increased. During this period,
allocations were made to the high yield and emerging market sectors, which
performed well. Despite the $787 billion stimulus bill signed into
legislation in February to revive the economy and create jobs,
unemployment continued to rise throughout the first half of 2009. The
unemployment rate hit 9.5% in June and, according to the Bureau of Labor
Statistics, the total jobs lost year-to-date was 3.38 million, adding up
to 6.46 million jobs lost since the recession began in December 2007.
Housing prices continued to decline and delinquencies headed higher even
for those borrowers with high credit quality. Consumers began to delever
in 2009 by increasing savings.
Given the weak economy, concerns about fiscal deficits and monetary policy
led to higher rates. As interest rates rose during the period, the Fed
kept its fed funds rate target steady at 0-0.25%. The U.S. Treasury 2-year
and 10-year note yields ended June at 1.1% and 3.5%, respectively, up 34
and 132 basis points. The one downward spike in rates occurred in
mid-March when the Federal Reserve announced quantitative easing plans
regarding its buyback of up to $300 billion of U.S. Treasuries, $200
billion of U.S. agency debt and $1.25 trillion of agency mortgaged-backed
securities. The short end of the market improved as 3-month LIBOR
decreased 80 basis points to 0.60%. Although economic data has been
generally poor, there have been signs indicating that the economy is at
the beginning of a recovery. Credit markets, in general, opened up with
healthy new issuance from both high grade and high yield companies.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. During this period, we lowered the Fund's exposure to U.S. and
international equity and increased its exposure to cash. This defensive
positioning helped to dampen volatility and preserve capital. We reduced
exposure to U.S. large-cap growth equity and increased our allocation to
U.S. core value equity to increase diversification. At the end of the
period, we were underweight in U.S. and international equities and
overweight in fixed income and cash.
4
Total Return Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, distribution and service fees (for shareholders of Classes 2, 3
and 4), professional fees, administrative fees and other Fund expenses. The
following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2009.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2009 - JUNE 30, 2009
- --------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING PERIOD ($)*
- -------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- -------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,059.61 2.96
Class 2 1,000.00 1,059.80 3.27
Class 3 1,000.00 1,058.92 3.78
Class 4 1,000.00 1,057.99 4.49
- -------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- -------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,021.62 2.91
Class 2 1,000.00 1,021.33 3.21
Class 3 1,000.00 1,020.85 3.71
Class 4 1,000.00 1,020.17 4.41
- -------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.58% FOR
CLASS 1 SHARES, 0.64% FOR CLASS 2 SHARES, 0.74% FOR CLASS 3 SHARES, AND
0.88% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1, 2009 - JUNE 30, 2009),
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
181/365 (TO REFLECT THE SIX MONTH PERIOD).
** ACTUAL FUND RETURNS FOR SIX-MONTH PERIOD ENDED JUNE 30, 2009 WERE AS
FOLLOWS: 5.96% FOR CLASS 1 SHARES, 5.98% FOR CLASS 2 SHARES, 5.89% FOR
CLASS 3 SHARES, AND 5.80% FOR CLASS 4 SHARES.
5
Total Return Fund (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek the highest total return, composed of
current income and capital appreciation, as is consistent with prudent
investment risk by investing primarily in a combination of equity securities and
investment grade debt securities.
- --------------------------------------------------------------------------------
TOP TEN LARGEST HOLDINGS (EXCLUDING SHORT-TERM HOLDINGS) AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Federal National Mortgage Assoc. 5.56%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 1.13%
- --------------------------------------------------------------------------------
Microsoft Corp. 1.03%
- --------------------------------------------------------------------------------
Amgen Inc. 0.97%
- --------------------------------------------------------------------------------
State Street Corp. 0.94%
- --------------------------------------------------------------------------------
QUALCOMM Inc. 0.89%
- --------------------------------------------------------------------------------
Transocean Ltd. 0.89%
- --------------------------------------------------------------------------------
PepsiCo, Inc. 0.85%
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 0.84%
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 0.79%
================================================================================
MORNINGSTAR PERFORMANCE COMPARISON
Moderate Allocation Peer Group
Based on average annual total returns for the periods ended 6/30/09
NUMBER OF PEER GROUP
FUNDS IN AVERAGE ANNUAL
PEER GROUP TOTAL RETURN
---------- --------------
Six-Months 302 6.43%
One Year 463 -26.22%
Three Year 406 -8.36%
Five Year 323 -2.14%
Ten Year 161 -2.07%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
Barclays Capital
U.S. Aggregate
Total Return Fund S&P 500 Index Bond Index
06/99 $10,000 $10,000 $10,000
12/99 $10,609 $10,784 $10,056
12/00 $11,133 $ 9,794 $11,225
12/01 $10,811 $ 8,627 $12,173
12/02 $ 9,805 $ 6,720 $13,421
12/03 $11,796 $ 8,651 $13,972
12/04 $12,762 $ 9,592 $14,578
12/05 $13,230 $10,064 $14,932
12/06 $15,049 $11,654 $15,579
12/07 $16,807 $12,294 $16,664
12/08 $11,885 $ 7,746 $17,538
06/09 $12,594 $ 7,991 $17,871
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2009
ENDING
VALUE OF A
SIX ONE FIVE TEN $10,000
MONTHS YEAR YEAR YEAR INVESTMENT
------ ------- ----- ----- ----------
Total Return Fund 5.96% -19.49% 1.01% 2.33% $12,594
S&P 500 Index 3.16% -26.21% -2.24% -2.22% $ 7,991
Barclays Capital U.S. Aggregate
Bond Index 1.90% 6.05% 5.02% 5.98% $17,871
Inception date 7/1/85
================================================================================
- --------------------------------------------------------------------------------
CLASS 2 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
Barclays Capital
U.S. Aggregate
Total Return Fund S&P 500 Index Bond Index
05/01/06 $10,000 $10,000 $10,000
06/06 $ 9,701 $ 9,725 $10,010
09/06 $10,100 $10,276 $10,392
12/06 $10,705 $10,965 $10,520
03/07 $10,874 $11,035 $10,679
06/07 $11,492 $11,728 $10,623
09/07 $11,988 $11,966 $10,925
12/07 $11,950 $11,567 $11,253
03/08 $11,197 $10,475 $11,497
06/08 $11,113 $10,189 $11,380
09/08 $10,051 $ 9,336 $11,324
12/08 $ 8,445 $ 7,288 $11,843
03/09 $ 8,039 $ 6,485 $11,857
06/09 $ 8,950 $ 7,518 $12,068
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2009
ENDING
VALUE OF A
SIX ONE THREE SINCE $10,000
MONTHS YEAR YEAR INCEPTION INVESTMENT
------ ------- ----- --------- -----------
Total Return Fund 5.98% -19.47% -2.65% -3.44% $ 8,950
S&P 500 Index 3.16% -26.21% -8.22% -8.61% $ 7,518
Barclays Capital U.S. Aggregate
Bond Index 1.90% 6.05% 6.43% 6.12% $12,068
Inception date 5/1/06
================================================================================
- --------------------------------------------------------------------------------
CLASS 3 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
Barclays Capital
U.S. Aggregate
Total Return Fund S&P 500 Index Bond Index
05/01/06 $10,000 $10,000 $10,000
06/06 $ 9,701 $ 9,725 $10,010
09/06 $10,106 $10,276 $10,392
12/06 $10,717 $10,965 $10,520
03/07 $10,875 $11,035 $10,679
06/07 $11,499 $11,728 $10,623
09/07 $11,996 $11,966 $10,925
12/07 $11,956 $11,567 $11,253
03/08 $11,198 $10,475 $11,497
06/08 $11,120 $10,189 $11,380
09/08 $10,046 $ 9,336 $11,324
12/08 $ 8,445 $ 7,288 $11,843
03/09 $ 8,034 $ 6,485 $11,857
06/09 $ 8,943 $ 7,518 $12,068
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2009
ENDING
VALUE OF A
SIX ONE THREE SINCE $10,000
MONTHS YEAR YEAR INCEPTION INVESTMENT
------ ------- ----- --------- -----------
Total Return Fund 5.89% -19.58% -2.67% -3.46% $ 8,943
S&P 500 Index 3.16% -26.21% -8.22% -8.61% $ 7,518
Barclays Capital U.S. Aggregate
Bond Index 1.90% 6.05% 6.43% 6.12% $12,068
Inception date 5/1/06
================================================================================
- --------------------------------------------------------------------------------
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
Barclays Capital
U.S. Aggregate
Total Return Fund S&P 500 Index Bond Index
05/01/06 $10,000 $10,000 $10,000
06/06 $ 9,689 $ 9,725 $10,010
09/06 $10,088 $10,276 $10,392
12/06 $10,689 $10,965 $10,520
03/07 $10,846 $11,035 $10,679
06/07 $11,469 $11,728 $10,623
09/07 $11,971 $11,966 $10,925
12/07 $11,937 $11,567 $11,253
03/08 $11,180 $10,475 $11,497
06/08 $11,096 $10,189 $11,380
09/08 $10,025 $ 9,336 $11,324
12/08 $ 8,426 $ 7,288 $11,843
03/09 $ 8,010 $ 6,485 $11,857
06/09 $ 8,915 $ 7,518 $12,068
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2009
ENDING
VALUE OF A
SIX ONE THREE SINCE $10,000
MONTHS YEAR YEAR INCEPTION INVESTMENT
------ ------- ----- --------- -----------
Total Return Fund 5.80% -19.66% -2.74% -3.56% $ 8,915
S&P 500 Index 3.16% -26.21% -8.22% -8.61% $ 7,518
Barclays Capital U.S. Aggregate
Bond Index 1.90% 6.05% 6.43% 6.12% $12,068
Inception date 5/1/06
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPHS AND TABLES
DO NOT REFLECT THE DEDUCTION OF TAXES.
6
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN FUND
- --------------------------------------------------------------------------------
Portfolio Composition as a % of the Market Value of $2,327,369 (in thousands) as
of June 30, 2009
[PIE CHART]
Domestic Equity 31.9%
Bonds & Notes 27.9%
Foreign Equity 20.4%
Short-Term & Others 19.6%
Other Investements 0.2%
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
DOMESTIC EQUITY -- 32.9% +
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.6%
Alliant Techsystems, Inc. ...................... 37,826 $ 3,115,349 (a)
Hexcel Corp. ................................... 327,786 3,123,800 (a)
Honeywell International Inc. ................... 48,720 1,529,808
ITT Corp. ...................................... 90,391 4,022,399
Rockwell Collins, Inc. ......................... 41,760 1,742,645
13,534,001
BEVERAGES -- 1.2%
Molson Coors Brewing Co. (Class B) ............. 31,320 1,325,776
Pepsi Bottling Group, Inc. ..................... 178,674 6,046,328
PepsiCo, Inc. .................................. 359,413 19,753,338
27,125,442
BIOTECHNOLOGY -- 1.9%
Amgen Inc. ..................................... 426,410 22,574,145 (a)
Amylin Pharmaceuticals, Inc. ................... 115,683 1,561,721 (a)
Gilead Sciences, Inc. .......................... 323,526 15,153,958 (a)
Vertex Pharmaceuticals Inc. .................... 68,709 2,448,789 (a)
41,738,613
CAPITAL MARKETS -- 2.6%
Affiliated Managers Group Inc. ................. 51,459 2,994,399 (a)
Ameriprise Financial, Inc. ..................... 94,120 2,284,292
Greenhill & Company Inc. ....................... 16,293 1,176,518
Invesco Ltd. ................................... 65,056 1,159,298
Morgan Stanley ................................. 66,120 1,885,081
State Street Corp. ............................. 462,587 21,834,106 (e)
The Bank of New York Mellon Corp. .............. 132,241 3,875,984
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
The Charles Schwab Corp. ....................... 245,494 $ 4,305,964
The Goldman Sachs Group, Inc ................... 123,120 18,152,813
57,668,455
CHEMICALS -- 0.7%
Intrepid Potash, Inc. .......................... 77,371 2,172,578 (a)
Monsanto Co. ................................... 147,237 10,945,598
Praxair, Inc. .................................. 39,125 2,780,614
15,898,790
COMMERCIAL BANKS -- 0.3%
SunTrust Banks, Inc. ........................... 258,526 4,252,753
US Bancorp ..................................... 59,161 1,060,165
Wells Fargo & Co. .............................. 69,600 1,688,496
Zions Bancorporation ........................... 27,341 316,062
7,317,476
COMMERCIAL SERVICES & SUPPLIES -- 0.6%
Corrections Corporation
of America .................................. 421,060 7,153,809 (a)
Iron Mountain Inc. ............................. 215,422 6,193,383 (a)
13,347,192
COMMUNICATIONS EQUIPMENT -- 1.9%
Cisco Systems, Inc. ............................ 992,565 18,501,411 (a,h)
Harris Corp. ................................... 23,174 657,215
Harris Stratex Networks, Inc.
(Class A) ................................... 5,756 37,299 (a)
Juniper Networks, Inc. ......................... 119,764 2,826,430 (a)
QUALCOMM Inc. .................................. 459,051 20,749,105
42,771,460
COMPUTERS & PERIPHERALS -- 0.4%
Hewlett-Packard Co. ............................ 128,065 4,949,712
International Business
Machines Corp. .............................. 45,937 4,796,742
9,746,454
DIVERSIFIED FINANCIAL SERVICES -- 1.1%
Bank of America Corp. .......................... 139,201 1,837,453
CME Group Inc. ................................. 40,182 12,501,022
JPMorgan Chase & Co. ........................... 303,996 10,369,303
24,707,778
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.3%
AT&T Inc. ...................................... 156,601 3,889,969
Verizon Communications Inc. .................... 79,345 2,438,272
6,328,241
ELECTRIC UTILITIES -- 0.5%
American Electric Power
Comapny Inc. ................................ 25,057 723,897
Edison International ........................... 94,657 2,977,909
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
7
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Entergy Corp. .................................. 10,440 $ 809,309
ITC Holdings Corp. ............................. 89,327 4,051,873
Northeast Utilities ............................ 88,652 1,977,826
10,540,814
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.3%
Cogent, Inc. ................................... 160,595 1,723,184 (a)
Corning Inc. ................................... 273,849 4,398,015
6,121,199
ENERGY EQUIPMENT & SERVICES -- 1.1%
Dresser-Rand Group Inc. ........................ 79,564 2,076,620 (a)
Halliburton Co. ................................ 118,321 2,449,245
National Oilwell Varco, Inc. ................... 32,713 1,068,407 (a)
Noble Corp. .................................... 35,294 1,067,643
Schlumberger Ltd. .............................. 295,759 16,003,519
Weatherford International Ltd. ................. 96,279 1,883,217 (a)
24,548,651
FOOD PRODUCTS -- 0.4%
Archer-Daniels-Midland Co. ..................... 26,448 708,013
Danone ......................................... 10 -- (a)
Kraft Foods Inc. (Class A) ..................... 83,521 2,116,422
McCormick & Company Inc. ....................... 156,863 5,102,753
7,927,188
GAS UTILITIES -- 0.1%
EQT CORP. ...................................... 35,585 1,242,272
HEALTHCARE EQUIPMENT & SUPPLIES -- 1.5%
Becton Dickinson & Co. ......................... 17,957 1,280,514
Boston Scientific Corp. ........................ 261,002 2,646,560 (a)
Covidien Plc ................................... 177,286 6,637,588
DENTSPLY International Inc. .................... 40,843 1,246,528
Gen-Probe Inc. ................................. 42,521 1,827,553 (a)
Hologic, Inc. .................................. 295,981 4,211,810 (a)
Masimo Corp. ................................... 138,054 3,328,482 (a)
Medtronic, Inc. ................................ 157,385 5,491,163
ResMed, Inc. ................................... 153,320 6,244,724 (a)
32,914,922
HEALTHCARE PROVIDERS & SERVICES -- 1.2%
Aetna Inc. ..................................... 103,501 2,592,700
Cardinal Health, Inc. .......................... 96,049 2,934,297
Catalyst Health Solutions, Inc. ................ 81,220 2,025,627 (a)
Express Scripts, Inc. .......................... 132,449 9,105,869 (a)
McKesson Corp. ................................. 20,881 918,764
Psychiatric Solutions, Inc. .................... 54,921 1,248,904 (a)
UnitedHealth Group, Inc. ....................... 317,517 7,931,575
26,757,736
HOTELS RESTAURANTS & LEISURE -- 0.4%
Carnival Corp. ................................. 189,711 4,888,852
Life Time Fitness, Inc. ........................ 58,670 1,173,987 (a)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Penn National Gaming, Inc. ..................... 60,185 $ 1,751,985 (a)
The Cheesecake Factory Inc. .................... 95,605 1,653,966 (a)
9,468,790
HOUSEHOLD DURABLES -- 0.0%*
MDC Holdings, Inc. ............................. 20,690 622,976
HOUSEHOLD PRODUCTS -- 0.1%
Clorox Co. ..................................... 10,441 582,921
Kimberly-Clark Corp. ........................... 27,840 1,459,651
The Procter & Gamble Co. ....................... 20,880 1,066,968
3,109,540
INDUSTRIAL CONGLOMERATES -- 0.2%
McDermott International, Inc. .................. 46,987 954,306 (a)
Textron, Inc. .................................. 377,447 3,646,138
4,600,444
INSURANCE -- 1.2%
ACE Ltd. ....................................... 149,196 6,598,939
Aflac Inc. ..................................... 149,054 4,634,089
AON Corp. ...................................... 45,936 1,739,596
Chubb Corp. .................................... 13,920 555,130
HCC Insurance Holdings, Inc. ................... 204,200 4,902,842
MetLife, Inc. .................................. 95,353 2,861,544
PartnerRe Ltd. ................................. 13,920 904,104
Principal Financial Group, Inc. ................ 11,136 209,802
Prudential Financial, Inc. ..................... 47,878 1,782,019
The Travelers Companies, Inc. .................. 38,976 1,599,575
25,787,640
INTERNET SOFTWARE & SERVICES -- 0.6%
Equinix, Inc. .................................. 8,405 611,380 (a)
Google Inc. (Class A) .......................... 20,419 8,608,446 (a)
MercadoLibre, Inc. ............................. 109,885 2,953,709 (a)
12,173,535
IT SERVICES -- 1.3%
Affiliated Computer Services,
Inc. (Class A) .............................. 96,406 4,282,355 (a)
Cognizant Technology Solutions
Corp. (Class A) ............................. 132,043 3,525,548 (a)
Cybersource Corp. .............................. 51,952 794,866 (a)
DST Systems, Inc. .............................. 24,464 903,945 (a)
Fidelity National Information
Services, Inc. .............................. 44,236 882,951
Paychex, Inc. .................................. 156,797 3,951,284
The Western Union Co. .......................... 738,264 12,107,529
Visa, Inc. (Class A) ........................... 25,524 1,589,124
28,037,602
LIFE SCIENCES TOOLS & SERVICES -- 0.6%
Covance Inc. ................................... 63,275 3,113,130 (a)
Illumina, Inc. ................................. 65,750 2,560,305 (a)
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
8
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Life Technologies Corp. ........................ 36,888 $ 1,538,967 (a)
Mettler-Toledo International, Inc. ............. 27,004 2,083,359 (a)
Thermo Fisher Scientific, Inc. ................. 89,949 3,667,221 (a)
12,962,982
MACHINERY -- 0.3%
Deere & Co. .................................... 56,607 2,261,450
Eaton Corp. .................................... 32,016 1,428,234
Harsco Corp. ................................... 86,357 2,443,903
6,133,587
MEDIA -- 1.9%
Comcast Corp. (Class A) ........................ 816,607 11,514,159
Liberty Global, Inc. (Series C) ................ 282,149 4,460,776 (a)
Liberty Media Corp - Entertainment
(Series A) .................................. 308,411 8,249,994 (a)
Omnicom Group Inc. ............................. 264,819 8,362,984
Regal Entertainment Group
(Class A) ................................... 189,225 2,514,800
The Walt Disney Co. ............................ 59,160 1,380,203
Time Warner Inc. ............................... 211,833 5,336,073
Viacom, Inc. (Class B) ......................... 20,880 473,976 (a)
42,292,965
METALS & MINING -- 0.4%
Allegheny Technologies Inc. .................... 135,970 4,749,433
Freeport-McMoRan Copper &
Gold Inc. ................................... 97,258 4,873,598
9,623,031
MULTILINE RETAIL -- 0.4%
Kohl's Corp. ................................... 93,688 4,005,161 (a)
Target Corp. ................................... 132,456 5,228,039
9,233,200
MULTI-UTILITIES -- 0.2%
Dominion Resources, Inc. ....................... 83,521 2,791,272
DTE Energy Co. ................................. 26,205 838,560
SCANA Corp. .................................... 47,336 1,537,000
5,166,832
OIL, GAS & CONSUMABLE FUELS -- 1.9%
Apache Corp. ................................... 62,708 4,524,382
Chevron Corp. .................................. 29,928 1,982,730
Devon Energy Corp. ............................. 41,760 2,275,920
Exxon Mobil Corp. .............................. 178,589 12,485,157 (h)
Hess Corp. ..................................... 12,528 673,380
Marathon Oil Corp. ............................. 364,285 10,975,908
Occidental Petroleum Corp. ..................... 34,800 2,290,188
Peabody Energy Corp. ........................... 41,316 1,246,091
Southwestern Energy Co. ........................ 152,144 5,910,795 (a)
42,364,551
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.0%*
Weyerhaeuser Co. ............................... 27,840 $ 847,171
PERSONAL PRODUCTS -- 0.3%
Alberto-Culver Co. ............................. 196,174 4,988,705
Avon Products, Inc. ............................ 13,920 358,858
Mead Johnson Nutrition Co.
(Class A) ................................... 43,694 1,388,158 (a)
The Estee Lauder Companies Inc.
(Class A) ................................... 11,832 386,551
7,122,272
PHARMACEUTICALS -- 0.6%
Abbott Laboratories ............................ 96,469 4,537,902 (h)
Bristol-Myers Squibb Co. ....................... 160,081 3,251,245
Merck & Company Inc. ........................... 20,880 583,805
Pfizer Inc. .................................... 64,033 960,495
Wyeth .......................................... 74,647 3,388,227
12,721,674
PROFESSIONAL SERVICES -- 0.2%
HIS, Inc. (Class A) ............................ 46,403 2,314,118 (a)
Monster Worldwide, Inc. ........................ 122,041 1,441,304 (a)
3,755,422
REAL ESTATE INVESTMENT TRUSTS (REIT'S) -- 0.0%*
Douglas Emmett, Inc. (REIT) .................... 85,868 771,953
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.2%
CB Richard Ellis Group, Inc.
(Class A) ................................... 539,732 5,051,891 (a)
ROAD & RAIL -- 0.1%
Union Pacific Corp. ............................ 33,408 1,739,220
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.9%
Hittite Microwave Corp. ........................ 82,450 2,865,137 (a)
Intel Corp. .................................... 583,509 9,657,074 (h)
Kla-Tencor Corp. ............................... 40,434 1,020,958
Lam Research Corp. ............................. 52,200 1,357,200 (a)
Marvell Technology Group Ltd. .................. 216,957 2,525,379 (a)
MEMC Electronic Materials, Inc. ................ 13,920 247,915 (a)
Microchip Technology Inc. ...................... 52,200 1,177,110
Texas Instruments Inc. ......................... 59,161 1,260,129
20,110,902
SOFTWARE -- 2.1%
Activision Blizzard, Inc. ...................... 295,405 3,730,965 (a)
Blackboard Inc. ................................ 50,329 1,452,495 (a)
Citrix Systems, Inc. ........................... 93,247 2,973,647 (a)
Intuit, Inc. ................................... 292,955 8,249,613 (a)
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
9
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Macrovision Solutions Corp. .................... 246,243 $ 5,370,560 (a)
Microsoft Corp. ................................ 1,010,391 24,016,994 (h)
Oracle Corp. ................................... 83,521 1,789,020
47,583,294
SPECIALTY RETAIL -- 1.0%
Bed Bath & Beyond, Inc. ........................ 400,985 12,330,289 (a,h)
Lowe's Companies, Inc. ......................... 330,006 6,405,416
O'Reilly Automotive, Inc. ...................... 95,051 3,619,542 (a)
Urban Outfitters, Inc. ......................... 42,977 896,930 (a)
23,252,177
TEXTILES APPAREL & LUXURY GOODS -- 0.1%
Coach, Inc. .................................... 85,902 2,309,046
THRIFTS & MORTGAGE FINANCE -- 0.1%
People's United Financial, Inc. ................ 87,145 1,310,661
TOBACCO -- 0.2%
Altria Group, Inc. ............................. 20,881 342,240
Philip Morris International Inc. ............... 84,216 3,673,502
4,015,742
WATER UTILITIES -- 0.1%
American Water Works
Company, Inc. ............................... 117,752 2,250,241
WIRELESS TELECOMMUNICATION SERVICES -- 0.8%
American Tower Corp. (Class A) ................. 125,694 3,963,132 (a)
NII Holdings, Inc. ............................. 623,413 11,888,486 (a)
Syniverse Holdings, Inc. ....................... 108,672 1,742,012 (a)
17,593,630
TOTAL DOMESTIC EQUITY
(COST $866,694,893) ......................... 732,249,655
- --------------------------------------------------------------------------------
FOREIGN EQUITY -- 21.3%
- --------------------------------------------------------------------------------
COMMON STOCK -- 21.0%
AEROSPACE & DEFENSE -- 0.2%
CAE, Inc. ...................................... 718,808 4,270,698
Elbit Systems Ltd. ............................. 5,328 321,999
4,592,697
AUTO COMPONENTS -- 0.0%*
Hankook Tire Company Ltd. ...................... 36,620 478,608 (a)
AUTOMOBILES -- 0.3%
Toyota Motor Corp. ............................. 158,365 6,023,730
Toyota Motor Corp. ADR ......................... 4,872 367,982
6,391,712
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
BEVERAGES -- 0.2%
Coca-Cola Icecek AS (Class C) .................. 100,659 $ 576,617
Diageo PLC ..................................... 83,735 1,201,789
Heineken N.V. .................................. 44,989 1,668,466
3,446,872
CAPITAL MARKETS -- 0.7%
Credit Suisse Group AG (Regd.) ................. 129,085 5,887,192
Egyptian Financial Group-
Hermes Holding .............................. 92,970 373,941
Nomura Holdings Inc. ........................... 1,047,981 8,841,338
Woori Investment & Securities
Company Ltd. ................................ 34,590 407,277
Yuanta Financial Holding
Company Ltd. ................................ 651,251 438,666 (a)
15,948,414
CHEMICALS -- 0.9%
Linde AG ....................................... 49,242 4,035,720
Potash Corp of Saskatchewan Inc. ............... 56,765 5,302,804
Potash Corp of Saskatchewan Inc. ............... 17,400 1,619,070
Sinofert Holdings Ltd. ......................... 1,439,469 722,516
Sociedad Quimica y Minera de
Chile S.A. ADR (Series B) ................... 43,640 1,579,332
Syngenta AG .................................... 15,816 3,668,416
Taiwan Fertilizer Company Ltd. ................. 235,000 697,623
Toray Industries Inc. .......................... 368,929 1,881,257
19,506,738
COMMERCIAL BANKS -- 2.9%
Akbank TAS ..................................... 148,388 666,500
Banco do Brasil S.A. ........................... 42,692 461,382
Banco Santander Chile ADR ...................... 12,483 582,831
Banco Santander S.A. (Regd.) ................... 999,519 12,000,913
Bank of China Ltd. ............................. 893,000 425,180
BNP Paribas .................................... 151,783 9,846,555
China Construction Bank Corp. .................. 625,000 483,868
China Merchants Bank
Company Ltd. ................................ 283,450 646,628
Credit Agricole S.A. ........................... 367,517 4,575,559
Grupo Financiero Banorte
SAB de C.V. (Series O) ...................... 268,703 650,832
HSBC Holdings PLC .............................. 553,644 4,581,636
ICICI Bank Ltd. ................................ 56,145 850,408
Industrial & Commercial
Bank of China ............................... 1,270,576 886,938
Intesa Sanpaolo S.p.A. ......................... 1,049,751 3,379,235
KB Financial Group Inc. ........................ 90,121 3,027,732
Lloyds Banking Group PLC ....................... 4,589,016 5,284,903
Metropolitan Bank & Trust ...................... 624,300 408,633
Mitsubishi UFJ Financial Group Inc. ............ 1,490,506 9,237,939
Siam Commercial Bank PCL ....................... 141,147 310,714
Standard Bank Group Ltd. ....................... 41,899 481,248
State Bank of India Ltd. ....................... 7,444 271,631
State Bank of India Ltd. GDR ................... 5,284 375,164
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
10
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Sumitomo Mitsui Financial
Group Inc. .................................. 73,926 $ 3,011,133
The Bank of Yokohama Ltd. ...................... 528,012 2,829,271
65,276,833
COMMERCIAL SERVICES & SUPPLIES -- 0.4%
Brambles Ltd. .................................. 1,249,002 6,018,143
G4S PLC ........................................ 692,811 2,378,892
G4S PLC ........................................ 441,125 1,512,182
9,909,217
COMMUNICATIONS EQUIPMENT -- 0.9%
Nokia OYJ ...................................... 325,088 4,760,482
Research In Motion Ltd. ........................ 216,693 15,396,038 (a)
ZTE Corp. ...................................... 116,102 402,984
20,559,504
COMPUTERS & PERIPHERALS -- 0.1%
Asustek Computer Inc. .......................... 352,731 457,981
HTC Corp. ...................................... 52,713 745,469
1,203,450
CONSTRUCTION & ENGINEERING -- 0.4%
China Communications Construction
Company Ltd. ................................ 416,080 485,871
China State Construction
International Holdings Ltd. ................. 1,649,941 570,557
Doosan Heavy Industries and
Construction Company Ltd. ................... 5,920 284,859
Empresas ICA SAB de C.V. ....................... 205,245 351,731 (a)
Larsen & Toubro Ltd. ........................... 136,908 4,487,913
Murray & Roberts Holdings Ltd. ................. 83,397 539,961
Vinci S.A. ..................................... 72,956 3,273,082
9,993,974
CONSTRUCTION MATERIALS -- 0.1%
Cemex SAB de C.V. ADR .......................... 38,434 358,974 (a)
CRH PLC ........................................ 113,891 2,595,926
2,954,900
DIVERSIFIED FINANCIAL SERVICES -- 0.1%
Deutsche Boerse AG ............................. 28,762 2,230,163
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4%
Hellenic Telecommunications
Organization S.A. ........................... 44,646 682,588
Singapore Telecommunications Ltd. .............. 633,003 1,312,059
Telefonica S.A. ................................ 179,119 4,050,010
Telekomunikasi Indonesia
Tbk PT (Series B) ........................... 696,000 511,389
Telkom S.A. Ltd. ............................... 22,075 108,567
Telstra Corporation Ltd. ....................... 636,502 1,744,426
8,409,039
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 0.3%
CEZ AS ......................................... 7,117 $ 322,362
E.ON AG ........................................ 110,112 3,895,195
Iberdrola S.A. ................................. 333,691 2,705,340
Iberdrola S.A. ................................. 79,077 621,137 (a)
7,544,034
ELECTRICAL EQUIPMENT -- 0.4%
ABB Ltd. (Regd.) ............................... 222,215 3,489,892 (a)
ABB Ltd. ADR ................................... 180,961 2,855,565
Alstom S.A. .................................... 19,358 1,141,899
China High Speed Transmission
Equipment Group Company Ltd. ................ 163,259 323,988
Zhuzhou CSR Times Electric
Company Ltd. ................................ 260,473 367,012
8,178,356
ELECTRONIC EQUIPMENT, INSTRUMENTS &
COMPONENTS -- 0.1%
Delta Electronics, Inc. ........................ 294,991 669,821
HON HAI Precision Industry
Company Ltd. ................................ 149,127 461,335
1,131,156
ENERGY EQUIPMENT & SERVICES -- 1.0%
Saipem S.p.A. .................................. 56,885 1,383,555
Tesco Corp. .................................... 97,196 771,736 (a)
Transocean Ltd. ................................ 277,688 20,629,441 (a)
22,784,732
FOOD & STAPLES RETAILING -- 0.6%
Centros Comerciales
Sudamericanos S.A. .......................... 119,636 314,150
Koninklijke Ahold N.V. ......................... 161,422 1,853,010
Metro AG ....................................... 68,280 3,258,197
President Chain Store Corp. .................... 145,000 371,670 (a)
Shinsegae Company Ltd. ......................... 1,890 749,205
Tesco PLC ...................................... 1,142,362 6,652,271
X5 Retail Group N.V. GDR ....................... 20,449 311,847 (a)
13,510,350
FOOD PRODUCTS -- 1.0%
Cosan SA Industria e Comercio .................. 39,300 288,764 (a)
Groupe Danone .................................. 167,478 8,264,243
IOI Corp. Bhd .................................. 427,550 574,121
Nestle India Ltd. .............................. 7,178 298,178
Nestle S.A. (Regd.) ............................ 267,810 10,076,581
Nestle S.A. ADR ................................ 34,800 1,309,176
Perdigao S.A. .................................. 30,100 575,952 (a)
Uni-President Enterprises Corp. ................ 551,650 568,295
Want Want China Holdings Ltd. .................. 509,799 285,486
22,240,796
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
11
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
HEALTHCARE EQUIPMENT & SUPPLIES -- 0.2%
Cie Generale d'Optique Essilor
International S.A. .......................... 97,511 $ 4,647,575
HEALTHCARE PROVIDERS & SERVICES -- 0.0%*
Diagnosticos da America S.A. ................... 45,170 792,861 (a)
HOTELS RESTAURANTS & LEISURE -- 0.0%*
AGTech Holdings Ltd. ........................... 1,791,172 70,491 (a)
Alsea SAB de C.V. .............................. 664,405 377,347
China Travel International Inv. ................ 1,489,099 328,560
776,398
HOUSEHOLD DURABLES -- 0.0%*
Desarrolladora Homex SAB de C.V. ............... 98,302 457,167 (a)
HOUSEHOLD PRODUCTS -- 0.4%
LG Household & Health Care Ltd. ................ 2,110 357,753
Reckitt Benckiser Group PLC .................... 181,529 8,268,983
8,626,736
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.0%*
Huaneng Power International, Inc. .............. 516,000 363,528
INDUSTRIAL CONGLOMERATES -- 0.5%
Chongqing Machinery & Electric
Company Ltd. ................................ 1,097,754 177,056 (a)
Koninklijke Philips Electronics N.V. ........... 252,667 4,651,546
Siemens AG (Regd.) ............................. 77,192 5,322,720
10,151,322
INSURANCE -- 0.6%
AXA S.A. ....................................... 105,486 1,981,184
China Life Insurance Company Ltd. .............. 219,689 813,553
Prudential PLC .............................. 600,464 4,088,994
Samsung Fire & Marine Insurance
Company Ltd. ................................ 3,700 546,018
Sony Financial Holdings Inc. ................... 2,051 5,669,293 (a)
13,099,042
INTERNET SOFTWARE & SERVICES -- 0.3%
Baidu, Inc ADR ................................. 21,633 6,513,480 (a)
Sohu.com Inc. .................................. 2,540 159,588 (a)
6,673,068
MACHINERY -- 0.2%
China South Locomotive and
Rolling Stock Corp. ......................... 541,849 317,417 (a)
Mitsubishi Heavy Industries Ltd. ............... 741,000 3,071,980
3,389,397
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
MEDIA -- 0.2%
Focus Media Holding Ltd. ADR ................... 64,070 $ 516,404 (a)
Vivendi ........................................ 211,585 5,055,644
5,572,048
METALS & MINING -- 1.0%
Anglo American PLC ............................. 27,255 787,033
Anglo Platinum Ltd. ............................ 6,653 469,962
Barrick Gold Corp. ............................. 41,760 1,401,048
BHP Billiton PLC ............................... 272,053 6,111,134
Harmony Gold Mining
Company Ltd. ADR ............................ 40,159 414,441 (a)
Hidili Industry International
Development Ltd. ............................ 626,000 487,873
Kinross Gold Corp. ............................. 78,721 1,437,022
New World Resources N.V.
(Class A) ................................... 62,662 291,268
POSCO .......................................... 2,170 721,374
Rio Tinto PLC .................................. 32,149 369,553 (a)
Rio Tinto PLC (Regd.) .......................... 64,403 2,232,606
Sumitomo Metal
Industries Ltd. ............................. 1,378,049 3,670,608
Vale S.A. ...................................... 257,476 3,952,257
22,346,179
MULTI-UTILITIES -- 0.7%
GDF Suez ....................................... 59,394 2,211,021
National Grid PLC .............................. 708,660 6,389,634
RWE AG ......................................... 14,739 1,159,586
Veolia Environnement ........................... 193,469 5,696,043
15,456,284
OIL, GAS & CONSUMABLE FUELS -- 1.8%
BG Group PLC ................................... 296,217 4,966,057
BP PLC ......................................... 300,964 2,368,180
China Petroleum &
Chemical Corp. .............................. 589,275 450,127
China Shenhua Energy
Company Ltd. ................................ 163,000 596,261
CNOOC Ltd. ..................................... 475,000 588,996
ENI S.p.A. ..................................... 198,445 4,690,180
Gazprom OAO ADR ................................ 77,360 1,568,861
LUKOIL ADR ..................................... 15,068 668,567
Paladin Energy Ltd. ............................ 688,263 2,743,181 (a)
PetroChina Company Ltd. ........................ 530,000 588,125
Petroleo Brasileiro S.A. ADR ................... 179,015 5,971,941
Reliance Industries Ltd. ....................... 24,906 1,054,885
Suncor Energy, Inc. ............................ 195,515 5,931,925
Total S.A. ..................................... 150,569 8,126,810
40,314,096
PERSONAL PRODUCTS -- 0.3%
Shiseido Company Ltd. .......................... 375,303 6,153,592
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
12
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 1.1%
Bayer AG ....................................... 107,204 $ 5,747,131
Novartis AG (Regd.) ............................ 135,993 5,506,994
Roche Holding AG ............................... 90,779 12,328,682
Teva Pharmaceutical
Industries Ltd. ADR ......................... 17,155 846,428
Yuhan Corp. .................................... 1,737 254,970
24,684,205
PROFESSIONAL SERVICES -- 0.1%
The Capita Group PLC ........................... 174,534 2,053,696
REAL ESTATE INVESTMENT TRUSTS (REIT'S) -- 0.0%*
Unibail-Rodamco (REIT) ......................... 6,532 972,650
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.5%
CapitaLand Ltd. ................................ 858,500 2,200,598
Franshion Properties China Ltd. ................ 1,593,463 544,858
Hung Poo Real Estate
Development Corp. ........................... 469,888 590,045
Mitsubishi Estate Company Ltd. ................. 376,982 6,294,429
Shenzhen Investment Ltd. ....................... 1,115,678 472,181
Sun Hung Kai Properties Ltd. ................... 119,476 1,496,909
11,599,020
ROAD & RAIL -- 0.2%
East Japan Railway Co. ......................... 60,991 3,672,672
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.5%
ASM Pacific Technology Ltd. .................... 76,803 392,932
Samsung Electronics
Company Ltd. ................................ 11,280 5,241,776
Taiwan Semiconductor Manufacturing
Company Ltd. ................................ 3,040,233 5,068,599
Taiwan Semiconductor Manufacturing
Company Ltd. ADR ............................ 48,720 458,455
11,161,762
SOFTWARE -- 0.1%
Nintendo Company Ltd. .......................... 9,898 2,731,862
SPECIALTY RETAIL -- 0.2%
Esprit Holdings Ltd. ........................... 287,056 1,609,355
Hennes & Mauritz AB (Series B) ................. 40,125 1,993,860
3,603,215
TEXTILES APPAREL & LUXURY GOODS -- 0.1%
Adidas AG ...................................... 47,593 1,809,097
TOBACCO -- 0.0%*
ITC Ltd. ....................................... 185,747 743,686
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE -- 0.0%*
Dalian Port PDA Company Ltd. ................... 522,632 $ 211,749
WATER UTILITIES -- 0.0%*
Pan Asia Environmental Protection
Group Ltd. .................................. 1,258,024 196,413
WIRELESS TELECOMMUNICATION SERVICES -- 1.0%
America Movil SAB de C.V. ADR
(Series L) .................................. 81,418 3,152,505
Bharti Airtel Ltd. ............................. 35,401 596,360 (a)
China Mobile Ltd. .............................. 257,462 2,577,925
Idea Cellular Ltd. ............................. 202,883 301,963 (a)
Mobile Telesystems OJSC ADR .................... 7,928 292,781
MTN Group Ltd. ................................. 319,018 4,887,409
Philippine Long Distance
Telephone Co. ............................... 6,840 340,401
Turkcell Iletisim Hizmet AS .................... 18,951 105,475
Turkcell Iletisim Hizmet AS ADR ................ 41,593 576,479
Vodafone Group PLC ............................. 4285165 8,270,830
21,102,128
TOTAL COMMON STOCK
(COST $573,247,776) ......................... 469,652,993
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.3%
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 0.0%*
Itau Unibanco Banco Multiplo S.A. .............. 98,464 1,562,522
ELECTRIC UTILITIES -- 0.0%*
Cia Energetica de Minas Gerais ................. 23,986 322,498
MEDIA -- 0.0%*
NET Servicos de Comunicacao S.A. ............... 40,968 397,179 (a)
METALS & MINING -- 0.1%
Cia Vale do Rio Doce ........................... 131,589 2,004,251
OIL, GAS & CONSUMABLE FUELS -- 0.1%
Petroleo Brasileiro S.A. ....................... 54,741 906,391
WIRELESS TELECOMMUNICATION SERVICES -- 0.1%
Vivo Participacoes S.A. ........................ 51,678 984,092
TOTAL PREFERRED STOCK
(COST $4,812,158) ........................... 6,176,933
TOTAL FOREIGN EQUITY
(COST $578,059,934) ......................... 475,829,926
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
13
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------
BONDS AND NOTES -- 29.1%
- ---------------------------------------------------------------------------------------
U.S. TREASURIES -- 6.7%
U.S. Treasury Bonds
3.50% 02/15/39 .......................... $ 12,197,400 $ 10,546,970
4.50% 05/15/38 .......................... 1,081,100 1,116,067
U.S. Treasury Notes
0.76% 01/31/11 .......................... 2,773,800 2,775,326 (d)
0.95% 03/31/11 .......................... 16,564,400 16,541,756 (d)
1.04% 04/30/11 .......................... 26,420,000 26,342,589 (d)
1.06% 05/31/11 .......................... 10,531,400 10,493,592 (d)
1.75% 03/31/14 .......................... 16,419,700 15,880,937
1.88% 02/28/14 - 04/30/14 ............... 9,227,800 8,979,168
2.25% 05/31/14 .......................... 4,080,500 4,025,658
2.38% 03/31/16 .......................... 847,800 807,861
2.75% 02/15/19 .......................... 10,374,600 9,716,435
2.88% 06/30/10 .......................... 14,500,000 14,836,443
3.50% 02/15/18 .......................... 238,800 239,975
3.63% 10/31/09 .......................... 7,605,000 7,688,777
3.75% 11/15/18 .......................... 858,300 873,123
4.63% 11/15/09 - 10/31/11 ............... 17,235,000 17,548,591
148,413,268
FEDERAL AGENCIES -- 2.6%
Federal Home Loan Banks
5.00% 11/17/17 .......................... 2,400,000 2,553,874 (h)
Federal Home Loan Mortgage Corp.
4.13% 12/21/12 - 09/27/13 ............... 8,836,000 9,385,499
4.88% 02/09/10 .......................... 9,610,000 9,868,778
5.13% 11/17/17 .......................... 11,500,000 12,621,572
Federal National Mortgage Assoc.
2.75% 03/13/14 .......................... 5,440,000 5,428,358
3.63% 02/12/13 .......................... 3,256,000 3,423,446
3.88% 07/12/13 .......................... 13,796,000 14,521,946
57,803,473
AGENCY MORTGAGE BACKED -- 10.2%
Federal Home Loan Mortgage Corp.
4.50% 06/01/33 - 02/01/35 ............... 232,083 231,775 (h)
5.00% 03/01/35 - 06/01/39 ............... 19,244,659 19,618,163 (h)
5.50% 05/01/20 - 04/01/39 ............... 7,501,898 7,791,261 (h)
6.00% 04/01/17 - 11/01/37 ............... 4,608,499 4,817,466 (h)
6.50% 01/01/27 - 08/01/36 ............... 764,355 815,293 (h)
7.00% 06/01/29 - 08/01/36 ............... 223,118 241,584 (h)
7.50% 11/01/09 - 09/01/33 ............... 31,042 33,702 (h)
8.00% 01/01/30 - 11/01/30 ............... 13,454 14,866 (h)
9.00% 10/01/25 .......................... 509 566 (h)
5.50% TBA ............................... 11,850,000 12,231,428 (c)
Federal National Mortgage Assoc.
4.00% 05/01/19 - 06/01/19 ............... 189,808 193,386 (h)
4.50% 05/01/18 - 02/01/35 ............... 1,269,822 1,297,004 (h)
4.50% 02/01/20 .......................... 55,591 57,326 (h,m)
5.00% 07/01/20 - 08/01/35 ............... 3,767,034 3,851,541 (h)
5.26% 04/01/37 .......................... 535,438 559,437 (i)
5.47% 04/01/37 .......................... 445,741 467,102 (i)
5.50% 04/01/14 - 12/01/38 ............... 58,488,211 60,631,258 (h)
5.50% 06/01/20 .......................... 46,758 49,403 (h,m)
- ---------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------
5.50% 04/01/37 .......................... $ 421,045 $ 441,265 (i)
5.52% 04/01/37 .......................... 197,783 207,162 (i)
5.59% 04/01/37 .......................... 542,146 569,761 (i)
5.63% 03/01/37 .......................... 42,000 43,992 (i)
5.68% 04/01/37 .......................... 394,391 414,005 (i)
5.72% 04/01/37 .......................... 212,171 222,979 (i)
6.00% 09/01/19 - 03/01/38 ............... 13,254,197 13,887,701 (h)
6.00% 10/01/34 - 03/01/35 ............... 128,918 135,519 (h,m)
6.04% 10/01/37 .......................... 807,939 849,094 (i)
6.50% 09/01/17 - 08/01/36 ............... 1,781,234 1,904,165 (h)
6.50% 10/01/34 - 12/01/34 ............... 33,310 35,674 (h,m)
7.00% 04/01/17 - 06/01/36 ............... 324,652 354,205 (h)
7.50% 12/01/09 - 03/01/34 ............... 71,388 77,294 (h)
8.00% 12/01/11 - 11/01/33 ............... 24,393 26,450 (h)
8.50% 06/01/30 .......................... 173 191 (h)
9.00% 04/01/16 - 12/01/22 ............... 5,640 6,127 (h)
4.50% TBA ............................... 7,680,000 7,663,196 (c)
5.00% TBA ............................... 713,000 725,923 (c)
5.50% TBA ............................... 32,346,000 33,522,148 (c)
6.00% TBA ............................... 33,767,000 35,299,375 (c)
6.50% TBA ............................... 15,044,000 16,021,860 (c)
7.00% TBA ............................... 975,000 1,057,875 (c)
Government National Mortgage Assoc.
4.50% 08/15/33 - 09/15/34 ............... 376,762 378,872 (h)
6.00% 04/15/27 - 09/15/36 ............... 520,542 546,807 (h)
6.50% 04/15/24 - 09/15/36 ............... 456,626 487,266 (h)
6.50% 06/15/34 .......................... 17,682 18,809 (h,m)
7.00% 03/15/12 - 10/15/36 ............... 390,227 421,358 (h)
7.00% 06/15/34 .......................... 10,152 10,955 (h,m)
8.00% 03/15/30 .......................... 3,267 3,697 (h)
9.00% 11/15/16 - 12/15/21 ............... 14,452 15,648 (h)
228,251,934
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.4%
Federal Home Loan Mortgage Corp.
0.24% 09/25/43 .......................... 325,716 1,861 (g,h,i,n)
2.88% 11/15/37 .......................... 1,207,995 1,054,435 (d,f)
4.50% 10/15/16 - 03/15/19 ............... 157,243 9,136 (g,h,n)
5.00% 07/15/17 - 06/15/28 ............... 467,508 17,331 (g,h,n)
5.00% 05/15/38 .......................... 575,740 562,980
5.50% 04/15/17 - 06/15/33 ............... 135,002 12,774 (g,h,n)
6.48% 04/15/38 .......................... 3,091,551 347,799 (g,i,n)
7.50% 01/15/16 .......................... 3,772 3,907 (h)
7.50% 07/15/27 .......................... 4,693 707 (g,h,n)
8.00% 02/01/23 - 07/01/24 ............... 3,194 642 (g,h,n)
9.53% 12/15/33 .......................... 45,000 43,036 (h,i)
14.75% 09/15/34 .......................... 791,042 598,752 (d,f)
Federal Home Loan Mortgage Corp. REMIC
5.73% 08/15/37 .......................... 5,474,980 488,916 (g,i,n)
5.75% 05/15/38 .......................... 3,192,265 310,637 (g,i,n)
Federal Home Loan Mortgage STRIPS
4.60% 08/01/27 .......................... 757 632 (d,f,h)
Federal National Mortgage Assoc.
1.19% 12/25/42 .......................... 171,262 5,762 (g,h,i,n)
4.50% 11/25/13 - 05/25/18 ............... 62,401 2,907 (g,h,n)
4.75% 11/25/14 .......................... 5,989 86 (g,h,n)
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
14
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------
5.00% 02/25/32 .......................... $ 1,511,585 $ 163,338 (g,h,n)
5.00% 10/25/35 - 08/25/38 ............... 1,493,691 1,455,308
5.50% 01/25/33 .......................... 650,005 680,190
5.99% 03/25/37 .......................... 4,049,416 389,554 (g,i,n)
6.46% 05/25/37 .......................... 6,667,802 740,793 (g,i,n)
6.67% 03/25/38 .......................... 3,019,535 337,244 (g,i,n)
6.92% 01/25/36 .......................... 1,429,541 145,985 (g,i,n)
7.29% 09/25/42 .......................... 170,651 28,982 (g,h,i,n)
7.39% 08/25/16 .......................... 34,905 1,941 (g,h,i,n)
15.92% 03/25/31 .......................... 53,868 59,747 (h,i)
Federal National Mortgage Assoc. (Class 1)
4.50% 09/01/35 - 01/01/36 ............... 4,077,904 575,381 (g,n)
5.00% 05/25/38 .......................... 1,308,341 188,311 (g,n)
Federal National Mortgage Assoc. (Class 2)
4.50% 08/01/35 .......................... 1,316,083 196,564 (g,n)
5.00% 08/01/34 - 03/25/38 ............... 1,371,240 202,203 (g,n)
5.50% 12/01/33 .......................... 309,009 47,497 (g,n)
7.50% 11/01/23 .......................... 16,442 358 (g,h,n)
8.00% 08/01/23 - 07/01/24 ............... 6,921 1,405 (g,h,n)
Federal National Mortgage Assoc. (Class H)
5.00% 10/25/22 .......................... 73,433 6,615 (g,h,n)
Federal National Mortgage Assoc. (Class K)
1008.00% 05/25/22 .......................... 4 76 (g,h,n)
Federal National Mortgage Assoc. REMIC
6.92% 08/25/37 .......................... 2,856,485 329,067 (g,i,n)
9,012,859
ASSET BACKED -- 1.1%
American Express Credit Account Master Trust
(Class A)
0.44% 12/17/12 ........................... 5,000,000 4,966,462 (d,h,i,m)
Bear Stearns Asset Backed Securities Trust
0.53% 11/25/35 ........................... 2,069,696 1,741,163 (d,i)
Bear Stearns Asset Backed Securities Trust
(Class A)
0.68% 01/25/34 ........................... 11,641 6,578 (d,i)
Capital Auto Receivables Asset Trust
0.40% 05/15/11 ........................... 2,608,490 2,595,117 (d,h,i)
Capital One Auto Finance Trust
0.34% 04/15/12 ........................... 1,631,189 1,612,458 (d,h,i)
Countrywide Asset-Backed Certificates
(Class M)
1.36% 06/26/33 ........................... 586,601 86,732 (i)
Discover Card Master Trust I (Class A)
6.02% 06/16/15 ........................... 420,000 347,931 (d,i)
Discover Card Master Trust I (Class B)
(Series 2)
10.22% 05/15/12 ........................... 690,000 590,244 (d,i)
Ford Credit Auto Owner Trust (Class A)
0.49% 02/15/12 ........................... 7,125,000 7,052,228 (d,h,i,m)
GSAMP Trust
0.28% 05/25/36 ........................... 530,870 366,300 (b,d,i)
- ---------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------
GSR Mortgage Loan Trust
0.51% 11/25/30 ........................... $ 1,546,166 $ 268,870 (d,i)
Indymac Residential Asset Backed Trust
0.43% 06/25/36 ........................... 1,757,159 1,596,984 (d,i)
Indymac Residential Asset Backed Trust
(Class M)
2.31% 04/25/47 ........................... 189,000 2,480 (h,i,m)
Indymac Seconds Asset Backed Trust (Class A)
0.47% 02/25/37 ........................... 1,856,328 1,036,030 (d,i)
Mid-State Trust
7.54% 07/01/35 ........................... 4,231 2,917 (h)
Nissan Auto Lease Trust
0.52% 02/15/13 ........................... 1,147,000 1,136,944 (d,i,m)
Residential Asset Mortgage Products Inc.
0.28% 03/25/34 ........................... 896 846 (d,h,i)
Residential Asset Securities Corp.
0.81% 07/25/32 ........................... 5,225 1,993 (d,h,i)
Residential Asset Securities Corp. (Class A)
4.16% 07/25/30 ........................... 20,408 19,188 (h,i)
SLM Student Loan Trust (Class A)
1.37% 06/15/18 ........................... 80,281 77,492 (d,h,i)
Triad Auto Receivables Owner Trust (Class A)
0.52% 02/12/14 ........................... 2,000,000 1,707,219 (d,i,m)
Wells Fargo Home Equity Trust
3.97% 05/25/34 ........................... 19,540 18,808 (h,i)
25,234,984
CORPORATE NOTES -- 6.5%
Abbott Laboratories
5.88% 05/15/16 ........................... 692,000 754,710
American Electric Power Company, Inc.
(Series C)
5.38% 03/15/10 ........................... 2,125,000 2,173,641 (h)
American Express Company
8.13% 05/20/19 ........................... 342,000 354,903
Anheuser-Busch InBev
Worldwide Inc.
7.75% 01/15/19 ........................... 500,000 546,828 (b)
ARAMARK Corp.
8.50% 02/01/15 ........................... 1,000,000 970,000
Archer-Daniels-Midland Co.
6.45% 01/15/38 ........................... 1,017,000 1,102,641
Arizona Public Service Co.
6.25% 08/01/16 ........................... 370,000 364,370 (h)
AT&T Inc.
6.40% 05/15/38 ........................... 1,208,000 1,182,526
6.70% 11/15/13 ........................... 934,000 1,025,740
Banco Nacional de Desenvolvimento Economico
e Social
6.50% 06/10/19 ........................... 1,400,000 1,402,800 (b)
Bank of America Corp.
5.75% 12/01/17 ........................... 2,750,000 2,448,677
7.38% 05/15/14 ........................... 1,005,000 1,038,181
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
15
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------
Bristol-Myers Squibb Co.
5.45% 05/01/18 ........................... $ 640,000 $ 678,077
5.88% 11/15/36 ........................... 234,000 240,939 (h)
Bunge Ltd. Finance Corp.
8.50% 06/15/19 ........................... 547,000 571,972
Carolina Power & Light Co.
5.15% 04/01/15 ........................... 810,000 852,142 (h)
5.70% 04/01/35 ........................... 155,000 153,683 (h)
6.13% 09/15/33 ........................... 123,000 129,587 (h)
CBS Corp.
8.88% 05/15/19 ........................... 344,000 335,266
CFG Investment SAC
9.25% 12/19/13 ........................... 100,000 88,000
Chesapeake Energy Corp.
7.25% 12/15/18 ........................... 1,000,000 870,000
Ciliandra Perkasa Finance Company Pvt Ltd.
10.75% 12/08/11 ........................... 100,000 93,208
Citigroup, Inc.
5.13% 05/05/14 ........................... 1,394,000 1,269,022
6.13% 11/21/17 ........................... 2,820,000 2,472,466 (h)
6.50% 08/19/13 ........................... 2,788,000 2,708,202
8.50% 05/22/19 ........................... 805,000 818,877
CME Group Inc.
5.40% 08/01/13 ........................... 1,354,000 1,422,577
Community Health Systems, Inc.
8.88% 07/15/15 ........................... 1,000,000 980,000
ConocoPhillips
6.00% 01/15/20 ........................... 1,006,000 1,077,129
Consolidated Edison Company of New York Inc.
5.85% 04/01/18 ........................... 528,000 554,791
6.65% 04/01/19 ........................... 528,000 587,095
7.13% 12/01/18 ........................... 7,400,000 8,406,467
Corp Andina de Fomento
8.13% 06/04/19 ........................... 300,000 317,843
COX Communications Inc.
7.13% 10/01/12 ........................... 240,000 257,989 (h)
7.75% 11/01/10 ........................... 375,000 390,373 (h)
Credit Suisse
5.50% 05/01/14 ........................... 1,626,000 1,689,316
6.00% 02/15/18 ........................... 1,166,000 1,164,047
Credit Suisse First Boston International
for CJSC The EXIM of Ukraine
7.65% 09/07/11 ........................... 200,000 157,000
CSX Corp.
6.25% 03/15/18 ........................... 646,000 651,525
CVS Caremark Corp.
5.75% 06/01/17 ........................... 526,000 528,718 (h)
6.60% 03/15/19 ........................... 302,000 322,688
DASA Finance Corp.
8.75% 05/29/18 ........................... 546,000 537,155
Diageo Capital PLC
5.20% 01/30/13 ........................... 454,000 472,170
7.38% 01/15/14 ........................... 588,000 665,296
Dover Corp.
6.50% 02/15/11 ........................... 375,000 399,636 (h)
Duke Energy Indiana Inc.
6.35% 08/15/38 ........................... 817,000 896,545
- ---------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------
Dynegy Holdings Inc.
7.50% 06/01/15 ........................... $ 1,000,000 $ 833,750
Eli Lilly & Co.
4.20% 03/06/14 ........................... 300,000 308,868
Emerson Electric Company
5.00% 04/15/19 ........................... 452,000 454,747
Empresa Nacional del Petroleo
6.25% 07/08/19 ........................... 100,000 99,144 (b)
EOG Resources, Inc.
5.88% 09/15/17 ........................... 725,000 771,109
6.88% 10/01/18 ........................... 928,000 1,053,818
ERP Operating LP (REIT)
5.25% 09/15/14 ........................... 343,000 325,638
European Investment Bank
4.88% 01/17/17 ........................... 1,200,000 1,262,814
GlaxoSmithKline Capital Inc.
4.85% 05/15/13 ........................... 885,000 925,748
6.38% 05/15/38 ........................... 543,000 590,477
HCA Inc.
9.25% 11/15/16 ........................... 1,000,000 985,000
Hewlett-Packard Co.
5.50% 03/01/18 ........................... 515,000 541,364
Host Hotels & Resorts LP (REIT)
9.00% 05/15/17 ........................... 1,000,000 952,500 (b)
HSBC Bank USA N.A.
3.88% 09/15/09 ........................... 1,175,000 1,180,612 (h)
4.63% 04/01/14 ........................... 585,000 574,345
7.00% 01/15/39 ........................... 750,000 792,804
HSBC Finance Corp.
6.75% 05/15/11 ........................... 405,000 416,418 (h)
HSBC Holdings PLC
6.50% 05/02/36 ........................... 100,000 97,653 (h)
6.80% 06/01/38 ........................... 750,000 753,722
Hydro Quebec
8.05% 07/07/24 ........................... 820,000 992,720 (h)
Ingles Markets, Inc.
8.88% 05/15/17 ........................... 1,000,000 985,000 (b)
Intergen N.V.
9.00% 06/30/17 ........................... 1,000,000 947,500 (b)
International Business Machines Corp.
4.75% 11/29/12 ........................... 1,300,000 1,393,934 (h)
Johnson & Johnson
5.85% 07/15/38 ........................... 914,000 979,541
JPMorgan Chase & Co.
6.40% 05/15/38 ........................... 827,000 829,085
7.00% 11/15/09 ........................... 1,130,000 1,147,688 (h)
JPMorgan Chase Bank
5.88% 06/13/16 ........................... 825,000 795,123
Kellogg Co.
5.13% 12/03/12 ........................... 508,000 543,034
Kimberly-Clark Corp.
7.50% 11/01/18 ........................... 306,000 368,233
Korea Hydro & Nuclear Power Company Ltd.
6.25% 06/17/14 ........................... 300,000 299,257 (b)
Kraft Foods Inc.
6.75% 02/19/14 ........................... 310,000 339,999
Kreditanstalt fuer Wiederaufbau
3.50% 03/10/14 ........................... 2,526,000 2,573,138
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
16
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------
4.13% 10/15/14 ........................... $ 1,022,000 $ 1,033,073
4.50% 07/16/18 ........................... 1,989,000 2,037,786
Majapahit Holding BV
7.25% 10/17/11 ........................... 100,000 98,000 (b)
7.75% 10/17/16 ........................... 425,000 374,000 (b)
McDonald's Corp.
6.30% 03/01/38 ........................... 725,000 784,917
Merrill Lynch & Company Inc.
6.05% 08/15/12 ........................... 545,000 546,440
6.88% 04/25/18 ........................... 544,000 503,502
MetLife, Inc. (Series A)
6.82% 08/15/18 ........................... 2,439,000 2,456,339
Morgan Stanley
5.05% 01/21/11 ........................... 949,000 967,712
6.00% 04/28/15 ........................... 533,000 531,608
7.30% 05/13/19 ........................... 1,356,000 1,406,104
Morgan Stanley (Series F)
6.63% 04/01/18 ........................... 500,000 498,453
Munich Re America Corp. (Series B)
7.45% 12/15/26 ........................... 315,000 290,174 (h)
Nevada Power Co. (Series I)
6.50% 04/15/12 ........................... 515,000 537,827 (h)
Northern Trust Corp.
4.63% 05/01/14 ........................... 652,000 670,000
NorthWestern Corp.
5.88% 11/01/14 ........................... 200,000 203,419 (h)
Oracle Corp.
5.00% 07/08/19 ........................... 688,000 685,434
5.75% 04/15/18 ........................... 206,000 217,298
Pacific Gas & Electric Co.
5.80% 03/01/37 ........................... 500,000 502,499
Pacificorp
6.25% 10/15/37 ........................... 403,000 439,131
Parker Hannifin Corp.
5.50% 05/15/18 ........................... 830,000 848,770
Pemex Finance Ltd.
9.03% 02/15/11 ........................... 92,750 99,243 (h)
PepsiAmericas, Inc.
5.00% 05/15/17 ........................... 260,000 247,685
PepsiCo, Inc.
5.00% 06/01/18 ........................... 1,163,000 1,195,355
7.90% 11/01/18 ........................... 1,498,000 1,822,473
Pfizer Inc.
6.20% 03/15/19 ........................... 636,000 695,545
7.20% 03/15/39 ........................... 316,000 375,222
PMorgan Chase & Co.
5.38% 10/01/12 ........................... 459,000 480,699
Potomac Electric Power Co.
7.90% 12/15/38 ........................... 233,000 287,659
Princeton University (Series A)
4.95% 03/01/19 ........................... 220,000 222,682
5.70% 03/01/39 ........................... 188,000 188,252
Principal Financial Group, Inc.
8.88% 05/15/19 ........................... 1,006,000 1,056,115
Prudential Financial, Inc.
5.70% 12/14/36 ........................... 485,000 363,871 (h)
6.10% 06/15/17 ........................... 415,000 394,810
7.38% 06/15/19 ........................... 685,000 672,554
Public Service Company of Colorado
7.88% 10/01/12 ........................... 520,000 602,434 (h)
- ---------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------
Qtel International Finance Ltd.
7.88% 06/10/19 ........................... $ 500,000 $ 508,688 (b)
RailAmerica, Inc.
9.25% 07/01/17 ........................... 1,498,000 1,445,570 (b)
Rio Tinto Finance USA Ltd.
8.95% 05/01/14 ........................... 342,000 380,046
9.00% 05/01/19 ........................... 475,000 527,964
Rogers Communications Inc.
6.80% 08/15/18 ........................... 1,710,000 1,833,164
RSHB Capital SA for OJSC Russian
Agricultural Bank
6.97% 09/21/16 ........................... 100,000 86,000 (i)
Safeway Inc.
6.25% 03/15/14 ........................... 968,000 1,038,803
Simon Property Group LP (REIT)
6.75% 05/15/14 ........................... 342,000 343,643
Southern California Edison Co.
5.50% 08/15/18 ........................... 1,351,000 1,433,246
Standard Bank London Holdings PLC for NAK
Naftogaz Ukrainy
8.13% 09/30/09 ........................... 200,000 174,000
Standard Chartered Bank Hong Kong Ltd.
4.38% 12/03/14 ........................... 380,000 364,800 (i)
Talisman Energy Inc.
7.75% 06/01/19 ........................... 250,000 276,948
Telecom Italia Capital S.A.
6.20% 07/18/11 ........................... 989,000 1,023,810
7.18% 06/18/19 ........................... 960,000 973,147
Telefonica Emisiones SAU
5.86% 02/04/13 ........................... 600,000 632,483
5.88% 07/15/19 ........................... 687,000 708,292
The Allstate Corp.
7.45% 05/16/19 ........................... 502,000 543,094
The Bear Stearns Companies LLC
5.70% 11/15/14 ........................... 2,500,000 2,547,173
6.95% 08/10/12 ........................... 1,330,000 1,445,516 (h)
The Goldman Sachs Group, Inc.
7.50% 02/15/19 ........................... 214,000 229,145
6.00% 05/01/14 ........................... 1,918,000 2,001,740
6.60% 01/15/12 ........................... 264,000 281,087 (h)
The Kroger Co.
6.15% 01/15/20 ........................... 1,096,000 1,119,819
The Procter & Gamble Co.
5.50% 02/01/34 ........................... 311,000 316,895
The Toledo Edison Company
7.25% 05/01/20 ........................... 324,000 360,747
The Travelers Companies, Inc.
5.80% 05/15/18 ........................... 2,546,000 2,616,988
Thomson Reuters Corp.
5.95% 07/15/13 ........................... 1,083,000 1,107,883
6.50% 07/15/18 ........................... 550,325 572,734
Time Warner Cable Inc.
6.20% 07/01/13 ........................... 622,000 655,367
6.75% 07/01/18 ........................... 3,066,000 3,193,451
8.25% 04/01/19 ........................... 308,000 349,462
8.75% 02/14/19 ........................... 934,000 1,088,056
TransCanada Pipelines Ltd.
6.50% 08/15/18 ........................... 217,000 236,080
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
17
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------------
Transocean Inc.
6.00% 03/15/18 ........................... $ 501,000 $ 520,848
United Technologies Corp.
6.13% 07/15/38 ........................... 618,000 670,792
Vedanta Resources PLC
9.50% 07/18/18 ........................... 100,000 83,000 (b)
Verizon Communications Inc.
5.25% 04/15/13 ........................... 2,500,000 2,623,703
6.35% 04/01/19 ........................... 430,000 447,325
6.40% 02/15/38 ........................... 210,000 205,588
6.90% 04/15/38 ........................... 536,000 559,157
8.75% 11/01/18 ........................... 1,998,000 2,366,589
Verizon Global Funding Corp.
7.25% 12/01/10 ........................... 788,000 839,017
Verizon Pennsylvania Inc.
8.75% 08/15/31 ........................... 165,000 186,824 (h)
Walgreen Co.
4.88% 08/01/13 ........................... 983,000 1,043,023
5.25% 01/15/19 ........................... 1,131,000 1,176,545
Wal-Mart Stores, Inc.
5.80% 02/15/18 ........................... 654,000 712,431
6.20% 04/15/38 ........................... 524,000 575,524
6.88% 08/10/09 ........................... 1,000,000 1,006,098 (h)
WEA Finance LLC
7.50% 06/02/14 ........................... 1,028,000 1,019,290 (b)
WellPoint, Inc.
6.00% 02/15/14 ........................... 342,000 348,295
Wells Fargo & Co.
4.38% 01/31/13 ........................... 915,000 922,878
5.63% 12/11/17 ........................... 240,000 236,240
Westar Energy, Inc.
7.13% 08/01/09 ........................... 420,000 419,836 (h)
Wyeth
5.50% 03/15/13 ........................... 1,364,000 1,458,258
XTO Energy Inc.
6.38% 06/15/38 ........................... 418,000 418,129
6.50% 12/15/18 ........................... 236,000 253,190
144,085,107
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.4%
Banc of America Commercial Mortgage Inc.
5.32% 09/10/47 ........................... 1,300,000 1,203,636 (h)
Banc of America Commercial Mortgage Inc.
(Class C)
5.88% 04/10/49 ........................... 400,000 83,376 (h,i,m)
Banc of America Funding Corp.
5.61% 03/20/36 ........................... 191,905 17,178 (h,i,m)
5.70% 02/20/36 ........................... 343,731 52,357 (h,i,m)
Banc of America Mortgage Securities Inc.
(Class B)
5.36% 01/25/36 ........................... 197,313 22,777 (h,i)
5.54% 02/25/36 ........................... 157,502 32,374 (h,i)
Bear Stearns Commercial Mortgage Securities
4.75% 02/13/46 ........................... 1,400,000 1,217,995 (i)
5.24% 12/11/38 ........................... 580,000 311,662
5.33% 02/11/44 ........................... 980,000 793,118
5.48% 10/12/41 ........................... 1,500,000 1,456,913 (h)
- -------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------------
5.57% 03/11/39 ........................... $ 1,000,000 $ 977,564 (h,i)
5.61% 06/11/50 ........................... 1,010,000 912,366
5.69% 06/11/50 ........................... 700,000 573,301 (i)
Bear Stearns Commercial Mortgage Securities
(Class A)
5.54% 10/12/41 ........................... 3,590,000 3,049,659
5.63% 04/12/38 ........................... 1,175,000 1,150,156 (h,i)
5.92% 06/11/50 ........................... 620,000 341,841 (i)
Countrywide Alternative Loan Trust
5.94% 05/25/36 ........................... 52,696 53 (h,i,m)
6.00% 03/25/36 - 08/25/36 ................ 262,427 487 (h,m)
Countrywide Alternative Loan Trust (Class B)
6.00% 05/25/36 - 08/25/36 ................ 152,004 3,867 (h,m)
Credit Suisse Mortgage Capital Certificates
5.47% 09/15/39 ........................... 682,000 477,220 (h)
Credit Suisse Mortgage Capital Certificates
(Class C)
5.64% 02/25/36 ........................... 110,516 9,742 (h,i,m)
Crusade Global Trust (Class A)
1.31% 01/17/34 ........................... 1,449,259 1,220,566 (h,i)
CS First Boston Mortgage Securities Corp.
5.34% 10/25/35 ........................... 165,186 18,170 (h,i,m)
Greenwich Capital Commercial Funding Corp.
5.60% 12/10/49 ........................... 1,110,000 1,004,476
Impac CMB Trust
0.57% 04/25/35 ........................... 260,541 123,861 (d,h,i)
Indymac INDA Mortgage Loan Trust
5.15% 01/25/36 ........................... 99,540 3,424 (h,i,m)
Indymac INDA Mortgage Loan Trust (Class B)
5.15% 01/25/36 ........................... 107,242 10,455 (h,i,m)
JP Morgan Chase Commercial Mortgage
Securities Corp.
5.34% 08/12/37 ........................... 1,820,000 1,619,988 (i)
6.07% 02/12/51 ........................... 1,720,000 1,067,569
6.26% 02/15/51 ........................... 790,000 355,913 (i)
LB Commercial Conduit Mortgage Trust
5.84% 07/15/44 ........................... 560,000 520,765 (i)
LB-UBS Commercial Mortgage Trust
0.85% 09/15/39 ........................... 19,801,245 390,306 (h,i,m)
0.92% 01/18/12 ........................... 3,948,048 49,441 (h,i,m)
4.95% 09/15/30 ........................... 630,000 539,793
5.66% 03/15/39 ........................... 1,000,000 841,308 (h,i)
LB-UBS Commercial Mortgage Trust (Class F)
6.45% 07/15/40 ........................... 475,000 30,528 (i,m)
MASTR Alternative Loans Trust
5.00% 08/25/18 ........................... 37,260 3,463 (g,h,n)
Medallion Trust (Class A)
1.29% 08/22/36 ........................... 945,419 815,931 (d,i)
MLCC Mortgage Investors Inc.
5.22% 02/25/36 ........................... 164,986 9,998 (h,i)
Morgan Stanley Capital I
5.16% 10/12/52 ........................... 2,000,000 1,695,341 (i)
5.28% 12/15/43 ........................... 1,500,000 1,430,181 (h)
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
18
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------------
5.33% 12/15/43 ........................... $ 1,500,000 $ 1,121,731 (h)
5.39% 11/12/41 ........................... 2,000,000 729,933 (h,i)
5.69% 04/15/49 ........................... 1,850,000 1,348,507 (i)
5.71% 07/12/44 ........................... 300,000 252,863 (h)
7.11% 04/15/33 ........................... 7,940 7,929 (h,i)
Morgan Stanley Capital I (Class A)
5.36% 02/12/44 ........................... 1,000,000 913,194
MortgageIT Trust (Class A)
0.61% 08/25/35 ........................... 1,866,255 1,036,773 (d,i)
Nomura Asset Securities Corp. (Class A)
6.59% 03/15/30 ........................... 6,013 6,020 (h)
Opteum Mortgage Acceptance Corp.
0.28% 02/25/35 ........................... 143,265 75,931 (d,h,i)
Residential Accredit Loans Inc.
6.00% 01/25/36 ........................... 236,333 10,543 (h,m)
6.03% 01/25/36 ........................... 19,339 1,099 (h,i,m)
Residential Funding Mortgage Securities I
5.75% 01/25/36 ........................... 96,391 25,544 (h)
5.75% 01/25/36 ........................... 127,876 33,013 (h,m)
WaMu Mortgage Pass Through Certificates
0.65% 01/25/45 ........................... 100,527 46,224 (d,i)
Wells Fargo Mortgage Backed Securities Trust
5.39% 08/25/35 ........................... 469,240 37,744 (h,i)
5.50% 01/25/36 - 03/25/36 ................ 563,954 95,590 (h)
Wells Fargo Mortgage Backed Securities Trust
(Class B)
5.50% 03/25/36 ........................... 953,239 190,448 (h)
30,372,205
SOVEREIGN BONDS -- 0.1%
Government of Brazil
5.88% 01/15/19 ........................... 400,000 403,600
8.00% 01/15/18 ........................... 530,000 593,600 (h)
Government of Dominican
9.50% 09/27/11 ........................... 162,481 160,857
Government of Korea
5.75% 04/16/14 ........................... 221,000 226,458
Government of Manitoba Canada
4.90% 12/06/16 ........................... 330,000 341,389 (h)
Government of Quebec Canada
7.50% 09/15/29 ........................... 495,000 606,931
Government of Ukraine
7.75% 09/23/09 ........................... 400,000 376,000
Government of Venezuela
5.38% 08/07/10 ........................... 248,000 232,500
10.75% 09/19/13 ........................... 223,000 183,975
3,125,310
MUNICIPAL BONDS AND NOTES -- 0.1%
Dallas Area Rapid Transit
6.00% 12/01/44 ........................... 425,000 430,559
New Jersey State Turnpike Authority
7.41% 01/01/40 ........................... 710,000 826,483
- -------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------------
New Jersey Transportation
Trust Fund Authority
6.88% 12/15/39 ........................... $ 620,000 $ 630,893
1,887,935
TOTAL BONDS AND NOTES
(COST $654,334,222) ....................... 648,187,075
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 0.4%
- -------------------------------------------------------------------------------------
Financial Select Sector SPDR Fund ............ 184,495 2,208,405 (k)
Industrial Select Sector SPDR Fund ........... 345,395 7,584,874 (k)
TOTAL EXCHANGE TRADED FUNDS
(COST $17,926,599) ........................ 9,793,279
- -------------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.2%
- -------------------------------------------------------------------------------------
GEI Investment Fund
(COST $8,689,463) ......................... 4,779,204 (j)
TOTAL INVESTMENTS IN SECURITIES
(COST $2,125,618,361) ..................... 1,870,839,139
- -------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 20.5%
- -------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 7.0%
GE Money Market Fund Institutional Class
0.28% ..................................... 155,149,561 (d,i)
PRINCIPAL
AMOUNT
- -------------------------------------------------------------
TREASURY -- 8.5%
U.S. Treasury Bill
0.20% 09/10/09 ........................... $ 15,000,000 14,995,050 (d)
0.23% 10/01/09 ........................... 66,500,000 66,467,016 (d)
0.27% 08/20/09 ........................... 32,500,000 32,493,468 (d)
0.28% 11/05/09 ........................... 28,500,000 28,478,511 (d)
0.32% 07/23/09 ........................... 20,000,000 19,998,660 (d)
0.38% 09/03/09 ........................... 28,000,000 27,981,084 (d)
190,413,789
AGENCY -- 5.0%
FHLB Disc Corp
0.20% 08/14/09 ........................... 14,000,000 13,997,900 (d)
0.22% 08/03/09 ........................... 20,000,000 19,997,740 (d)
0.30% 11/18/09 ........................... 16,000,000 15,985,584 (d)
0.33% 08/05/09 ........................... 7,000,000 6,999,160 (d)
Freddie Discount
0.40% 07/06/09 ........................... 6,000,000 5,999,898 (d)
0.50% 07/20/09 ........................... 15,000,000 14,999,160 (d)
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
19
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------
FNMA Discount
0.46% 12/07/09 ........................... $ 17,900,000 $ 17,879,308 (d)
0.54% 07/30/09 ........................... 15,000,000 14,998,755 (d)
110,857,505
TIME DEPOSIT -- 0.0%*
State Street Corp.
0.01% 07/01/09 ........................... 109,005 109,005 (e)
TOTAL SHORT-TERM INVESTMENTS
(COST $456,469,465) ....................... 456,529,860
TOTAL INVESTMENTS
(COST $2,582,087,826) ..................... 2,327,368,999
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (4.4)% ............................. (97,435,720)
--------------
NET ASSETS -- 100.0% ......................... $2,229,933,279
==============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Total Return Fund had the following long futures contracts open at June
30, 2009 (unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------
DJ Euro Stoxx 50 Index Futures September 2009 46 $ 1,547,236 $ 4,908
FTSE 100 Index Futures September 2009 10 694,641 (6,884)
S&P 500 Index Futures September 2009 11 2,517,625 25,200
S&P Midcap 400 E Mini Index Futures September 2009 40 2,306,800 28,810
Topix Index Futures September 2009 8 766,544 2,063
2 Yr. U.S. Treasury Notes Futures September 2009 27 5,837,906 38,316
5 Yr. U.S. Treasury Notes Futures September 2009 128 14,684,000 231,648
The GEI Total Return Fund had the following short futures contracts open at June
30, 2009 (unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------
10 Yr. U.S. Treasury Notes Futures September 2009 296 (34,414,625) (343,047)
-------------
$ (18,986)
=============
The GEI Total Return Fund was invested in the following Countries at June 30,
2009 (unaudited):
COUNTRY PERCENTAGE (BASED ON MARKET VALUE)
- --------------------------------------------------------------------------------
United States 78.55%
United Kingdom 2.93%
Switzerland 2.82%
Japan 2.73%
France 2.40%
Canada 1.74%
Germany 1.44%
China 0.90%
Brazil 0.89%
Spain 0.86%
South Korea 0.54%
Australia 0.49%
Taiwan 0.45%
Italy 0.41%
India 0.39%
Netherlands 0.35%
South Africa 0.30%
Mexico 0.23%
Finland 0.20%
Hong Kong 0.17%
Singapore 0.15%
Luxembourg 0.14%
Russia 0.12%
Ireland 0.11%
Chile 0.11%
Sweden 0.09%
Turkey 0.08%
Cayman Islands 0.07%
Denmark 0.06%
Israel 0.05%
Indonesia 0.05%
Philippines 0.03%
Greece 0.03%
Czech Republic 0.03%
Malaysia 0.02%
Venezuela 0.02%
Egypt 0.02%
Thailand 0.01%
Ukrainian SSR 0.01%
Dominican Republic 0.01%
Peru 0.00%
------
100.00%
======
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
20
TOTAL RETURN FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The GEI Total Return Fund was invested in the following Sectors at June 30, 2009
(unaudited):
SECTOR PERCENTAGE (BASED ON MARKET VALUE)
- --------------------------------------------------------------------------------
Short-Term 19.62%
Agency Mortgage Backed 9.81%
U.S. Treasuries 6.38%
Corporate Notes 6.19%
Oil, Gas & Consumable Fuels 3.59%
Commercial Banks 3.19%
Capital Markets 3.16%
Communications Equipment 2.72%
Federal Agencies 2.48%
Software 2.16%
Media 2.07%
Energy Equipment & Services 2.03%
Biotechnology 1.79%
Wireless Telecommunication Services 1.71%
Insurance 1.67%
Healthcare Equipment & Supplies 1.61%
Pharmaceuticals 1.61%
Chemicals 1.52%
Metals & Mining 1.46%
Semiconductors & Semiconductor Equipment 1.34%
Beverages 1.31%
Non-Agency Collateralized Mortgage Obligations 1.31%
Food Products 1.30%
IT Services 1.21%
Healthcare Providers & Services 1.18%
Diversified Financial Services 1.16%
Specialty Retail 1.15%
Asset Backed 1.08%
Commercial Services & Supplies 1.00%
Multi-Utilities 0.89%
Internet Software & Services 0.81%
Electric Utilities 0.79%
Aerospace & Defense 0.78%
Real Estate Management & Development 0.72%
Industrial Conglomerates 0.63%
Diversified Telecommunication Services 0.63%
Personal Products 0.57%
Food & Staples Retailing 0.57%
Life Sciences Tools & Services 0.56%
Household Products 0.50%
Computers & Peripherals 0.47%
Hotels Restaurants & Leisure 0.44%
Construction & Engineering 0.43%
Exchange Traded Funds 0.42%
Machinery 0.41%
Multiline Retail 0.40%
Agency Collateralized Mortgage Obligations 0.39%
Electrical Equipment 0.35%
Electronic Equipment, Instruments & Components 0.31%
Automobiles 0.27%
Professional Services 0.25%
Road & Rail 0.23%
Other Investments 0.21%
Tobacco 0.20%
Textiles Apparel & Luxury Goods 0.18%
Sovereign Bonds 0.13%
Construction Materials 0.13%
Water Utilities 0.11%
Municipal Bonds and Notes 0.08%
Thrifts & Mortgage Finance 0.06%
Gas Utilities 0.05%
Household Durables 0.05%
Paper & Forest Products 0.04%
Real Estate Investment Trusts (REIT's) 0.07%
Auto Components 0.02%
Independent Power Producers & Energy Traders 0.02%
Food & Staple Retail 0.01%
Transportation Infrastructure 0.01%
------
100.00%
======
See Notes to Schedule of Investments on page 22 and Notes to Financial
Statements.
21
Notes to Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may
be resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 2009, these securities amounted to
$9,127,877 or 0.41% of the Fund's net assets. These securities have been
determined to be liquid using procedures established by the Board of
Directors of GE Investments Funds, Inc.
(c) Settlement is on a delayed delivery or when-issued basis with final
maturity to be announced (TBA) in the future.
(d) Coupon amount represents effective yield.
(e) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(f) Principal only securities represent the right to receive the monthly
principal payments on an underlying pool of mortgages. No payments of
interest on the pool are passed through to the "principal only" holder.
(g) Interest only securities represent the right to receive the monthly
interest payments on an underlying pool of mortgages. Payments of
principal on the pool reduce the value of the "interest only" holding.
(h) At June 30, 2009, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(i) Variable or floating rate security. The stated rate represents the rate at
June 30, 2009.
(j) GEAM, the investment adviser of the Fund, also serves as the investment
adviser of the GEI Investment Fund.
(k) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street
Bank & Trust Co., the Fund's custodian and accounting agent.
(l) GEAM, the investment adviser of the Fund, also serves as investment
adviser of the GE Funds - GE Money Market Fund.
(m) Illiquid securities. At June 30, 2009, these securities amounted to
$15,887,058 or 0.71% of the Fund's net assets. These securities have been
determined to be illiquid using procedures established by the Board of
Directors of GE Investments Funds, Inc.
(n) Coupon amount represents the coupon of the underlying mortgage securities
on which monthly interest payments are based.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2009.
Abbreviations:
ADR American Depository Receipt
GDR Global Depository Receipt
NVDR Non-Voting Depository Receipt
REGD. Registered
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
SPDR Standard & Poors Depository Receipts
STRIPS Separate Trading of Registered Interest and Principal of Security
TBA To be Announced
22
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
TOTAL RETURN FUND
-----------------------------------------------------------------------------------------
CLASS 1
-----------------------------------------------------------------------------------------
6/30/09+ 12/31/08(e)** 12/31/07 12/31/06 12/31/05 12/31/04
-----------------------------------------------------------------------------------------
INCEPTION DATE .......................... -- -- -- -- -- 7/1/85
Net asset value, beginning of period .... $ 12.75 $ 18.61 $ 17.69 $ 16.04 $ 15.97 $ 15.09
INCOME/(LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income ................ 0.12 0.35 0.35 0.36 0.23 0.20
Net realized and unrealized
gains/(losses) on investments ..... 0.64 (5.80) 1.71 1.84 0.36 1.04
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT
OPERATIONS ........................... 0.76 (5.45) 2.06 2.20 0.59 1.24
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ................ -- 0.34 0.35 0.31 0.23 0.20
Net realized gains ................... -- 0.07 0.79 0.24 0.29 0.16
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ..................... -- 0.41 1.14 0.55 0.52 0.36
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD .......... $ 13.51 $ 12.75 $ 18.61 $ 17.69 $ 16.04 $ 15.97
====================================================================================================================================
TOTAL RETURN (a) ........................ 5.96% (29.28)% 11.68%(b) 13.75% 3.67% 8.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) .................... $ 1,017,879 $ 989,975 $ 1,525,002 $ 1,390,230 $ 959,531 $ 515,506
Ratios to average net assets:
Net investment income* ............ 1.87% 2.16% 2.20% 2.33% 1.89% 1.81%
Net Expenses* ..................... 0.58%(b)(d) 0.51%(b)(c) 0.52%(c) 0.48%(c) 0.45% 0.49%
Gross Expenses* ................... 0.63% 0.55% 0.56% 0.53% 0.45% 0.49%
Portfolio turnover rate .............. 100% 203% 176% 138% 146% 141%
---------------------------------------------------------
CLASS 2
---------------------------------------------------------
6/30/09+ 12/31/08(e)** 12/31/07 12/31/06
---------------------------------------------------------
INCEPTION DATE .............................. -- -- -- 5/1/06
Net asset value, beginning of period ........ $ 12.71 $ 18.56 $ 17.68 $ 17.03
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .................... 0.12 0.35 0.38 0.26
Net realized and unrealized
gains/(losses) on investments ......... 0.64 (5.80) 1.67 0.94
- ----------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS .................... 0.76 (5.45) 2.05 1.20
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .................... -- 0.33 0.38 0.31
Net realized gains ....................... -- 0.07 0.79 0.24
- ----------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ......................... -- 0.40 1.17 0.55
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD .............. $ 13.47 $ 12.71 $ 18.56 $ 17.68
==========================================================================================================
TOTAL RETURN (a) ............................ 5.98% (29.33)% 11.63%(b) 7.05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ........................ $ 14,992 $ 12,830 $ 15,281 $ 1
Ratios to average net assets:
Net investment income* ................ 1.83% 2.11% 1.75% 2.33%
Net Expenses* ......................... 0.64%(b)(d) 0.56%(b)(c) 0.56%(c) 0.57%(c)
Gross Expenses* ....................... 0.69% 0.60% 0.59% 0.64%
Portfolio turnover rate .................. 100% 203% 176% 138%
----------------------------------------------------------------------
CLASS 3
----------------------------------------------------------------------
6/30/09+ 12/31/08(e)** 12/31/07 12/31/06
----------------------------------------------------------------------
INCEPTION DATE .............................. -- -- -- 5/1/06
Net asset value, beginning of period ........ $ 12.73 $ 18.59 $ 17.69 $ 17.03
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .................... 0.11 0.34 0.35 0.12
Net realized and unrealized
gains/(losses) on investments .......... 0.64 (5.80) 1.69 1.10
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS .................... 0.75 (5.46) 2.04 1.22
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .................... -- 0.33 0.35 0.32
Net realized gains ....................... -- 0.07 0.79 0.24
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ......................... -- 0.40 1.14 0.56
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD .............. $ 13.48 $ 12.73 $ 18.59 $ 17.69
======================================================================================================================
TOTAL RETURN (a) ............................ 5.89% (29.37)% 11.56%(b) 7.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ........................ $ 1,176,902 $ 1,110,117 $ 1,173,708 $ 396,349
Ratios to average net assets:
Net investment income* ................ 1.72% 2.05% 2.04% 2.09%
Net Expenses* ......................... 0.74%(b)(d) 0.61%(b)(c) 0.61%(c) 0.62%(c)
Gross Expenses* ....................... 0.79% 0.65% 0.65% 0.69%
Portfolio turnover rate .................. 100% 203% 176% 138%
See Notes to Financial Statements.
23
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
TOTAL RETURN FUND
---------------------------------------------------------
CLASS 4
---------------------------------------------------------
6/30/09+ 12/31/08(e)** 12/31/07 12/31/06
---------------------------------------------------------
INCEPTION DATE ................................................. -- -- -- 5/1/06
Net asset value, beginning of period ........................... $ 12.74 $ 18.62 $ 17.68 $ 17.03
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ....................................... 0.13 0.33 0.33 0.26
Net realized and unrealized gains/(losses) on investments ... 0.63 (5.83) 1.73 0.92
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ................. 0.76 (5.50) 2.06 1.18
- ----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ....................................... -- 0.31 0.33 0.29
Net realized gains .......................................... -- 0.07 0.79 0.24
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................................ -- 0.38 1.12 0.53
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ................................. $ 13.50 $ 12.74 $ 18.62 $ 17.68
============================================================================================================================
TOTAL RETURN (a) ............................................... 5.80% (29.56)% 11.68% 6.89%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .................... $ 20,160 $ 8 $ 1 $ 1
Ratios to average net assets:
Net investment income* ................................... 1.70% 1.94% 2.06% 2.17%
Net Expenses* ............................................ 0.88%(b)(d) 0.76%(b)(c) 0.67%(c) 0.77%(c)
Gross Expenses* .......................................... 0.92% 0.80% 0.73% 0.84%
Portfolio turnover rate ..................................... 100% 203% 176% 138%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges.
(b) Reflects GEAM's waiver of a portion of the Fund's management fee in an
amount equal to the management fee earned by GEAM with respect to the
Fund's investment in the GE Funds - GE Money Market Fund ("GE Money Market
Fund").
(c) Reflects GEAM's contractual arrangement with GE Investments Funds, Inc. to
limit the Fund's total operating expenses of each class share (excluding
class specific expenses) to 0.32% of the average daily net assets of the
Fund attributable to such class share on an annual basis. Please see Note
4 of the Notes to Financial Statements for further details.
(d) For the period between 1/1/09 to 4/30/09, reflects GEAM's contractual
arrangement with GE Investment Funds, Inc. to limit the Fund's total
operating expenses of each class share (excluding class specific expenses)
to 0.32% of the average daily net assets of the Fund attributable to such
class share on an annual basis. This contractual arrangement was
terminated on 4/30/09. For the period beginning on 5/1/09, reflects GEAM's
contractual arrangement with GE Investment Funds, Inc. to limit the
management fee paid by the Fund on an annual basis to 0.48% of the average
daily net assets of the Fund. Please see Note 4 of the Notes to Financial
Statements for further details.
(e) Less than $0.01 per share of the distribution paid was from Return of
Capital.
* Annualized for periods less than one year.
** Per share values have been calculated using the average share method.
+ Unaudited
See Notes to Financial Statements.
24
TOTAL
Statement of Assets RETURN
and Liabilities JUNE 30, 2009 (UNAUDITED) FUND
- --------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $2,116,928,898) ........... $ 1,866,059,934
Investments in affiliated securities, at market (cost $8,689,463) .... 4,779,205
Short-term Investments at market (cost $ $301,319,904) ............... 301,380,299
Short-term affiliated investments (at amortized cost) ................ 155,149,561
Foreign cash (cost $615,465) ......................................... 612,414
Receivable for investments sold ...................................... 36,839,665
Income receivables ................................................... 6,918,499
Receivable for fund shares sold ...................................... 405,759
Variation margin receivable .......................................... 7,019
Other assets ......................................................... 703,895
- --------------------------------------------------------------------------------------------
TOTAL ASSETS ...................................................... 2,372,856,250
- --------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased .................................... 141,270,645
Payable for fund shares redeemed ..................................... 59,162
Payable to GEAM ...................................................... 1,014,026
Accrued other expenses ............................................... 442,552
Variation margin payable ............................................. 25,440
Other liabilities .................................................... 111,146
- --------------------------------------------------------------------------------------------
TOTAL LIABILITIES ................................................. 142,922,971
- --------------------------------------------------------------------------------------------
NET ASSETS .............................................................. $ 2,229,933,279
============================================================================================
NET ASSETS CONSIST OF:
Capital paid in ...................................................... 2,784,360,958
Undistributed (distribution in excess of) net investment income ...... 18,507,494
Accumulated net realized loss ........................................ (318,213,936)
Net unrealized appreciation/ (depreciation) on:
Investments ....................................................... (254,718,827)
Futures ........................................................... (18,986)
Foreign currency related transactions ............................. 16,576
- --------------------------------------------------------------------------------------------
NET ASSETS .............................................................. $ 2,229,933,279
============================================================================================
CLASS 1:
NET ASSETS .............................................................. 1,017,879,377
Shares outstanding ($0.01 par value; unlimited shares authorized) ....... 75,338,437
Net asset value per share ............................................... $ 13.51
CLASS 2:
NET ASSETS 14,992,448
Shares outstanding ($0.01 par value; unlimited shares authorized) ....... 1,113,185
Net asset value per share ............................................... $ 13.47
CLASS 3:
NET ASSETS .............................................................. 1,176,901,526
Shares outstanding ($0.01 par value; unlimited shares authorized) ....... 87,308,942
Net asset value per share ............................................... $ 13.48
CLASS 4:
NET ASSETS .............................................................. 20,159,928
Shares outstanding ($0.01 par value; unlimited shares authorized) ....... 1,493,120
Net asset value per share ............................................... $ 13.50
See Notes to Financial Statements.
25
TOTAL
Statement of Operations RETURN
FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend .............................................. $ 14,361,133
Interest .............................................. 11,690,425
Interest from affliated investments ................... 287,402
Less: Foreign taxes withheld .......................... (978,910)
- --------------------------------------------------------------------------------
TOTAL INCOME ............................................. 25,360,050
- --------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ...................... 4,011,762
Distributors Fees (Notes 4)
Class 1 ............................................ 955,176
Class 2 ............................................ 16,542
Class 3 ............................................ 1,920,767
Class 4 ............................................ 17,426
Transfer agent ........................................ 17,861
Directors's fees ...................................... 40,777
Custody and accounting expenses ....................... 226,376
Professional fees ..................................... 126,620
Registration expenses ................................. 21,998
Other expenses ........................................ 125,245
- --------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ........... 7,480,550
- --------------------------------------------------------------------------------
Less: Expenses Waived or borne by the adviser ......... (504,673)
Less: Expenses reimbursed by the adviser .............. (110,537)
- --------------------------------------------------------------------------------
NET EXPENSES .......................................... 6,865,340
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME .................................... 18,494,710
================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ........................................ (186,536,907)
Futures ............................................ (597,807)
Foreign currency related transactions .............. 90,651
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ........................................ 291,791,381
Futures ............................................ (653,777)
Foreign currency related transactions .............. 39,102
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments ....... 104,132,643
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $ 122,627,353
================================================================================
See Notes to Financial Statements.
26
TOTAL
Statements of RETURN
Changes in Net Assets FUND
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2009 DECEMBER 31,
(UNAUDITED) 2008
- -----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income ................................................................ $ 18,494,710 $ 53,915,515
Net realized loss on investments, futures and foreign currency related transactions ... (187,044,063) (129,762,612)
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures and foreign currency related transactions .................. 291,176,706 (792,228,119)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ............................................... 122,627,353 (868,075,216)
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 ............................................................................ -- (25,465,260)
Class 2 ............................................................................ -- (326,074)
Class 3 ............................................................................ -- (27,786,517)
Class 4 ............................................................................ -- (176)
Net realized gains
Class 1 ............................................................................ -- (5,318,774)
Class 2 ............................................................................ -- (69,064)
Class 3 ............................................................................ -- (5,975,204)
Class 4 ............................................................................ -- (41)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ...................................................................... -- (64,941,110)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ...................... 122,627,353 (933,016,326)
- -----------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 ............................................................................ 8,280,712 12,895,842
Class 2 ............................................................................ 2,084,698 6,814,144
Class 3 ............................................................................ 31,667,139 388,721,821
Class 4 ............................................................................ 20,569,289 9,000
Value of distributions reinvested
Class 1 ............................................................................ -- 30,784,034
Class 2 ............................................................................ -- 395,138
Class 3 ............................................................................ -- 33,761,721
Class 4 ............................................................................ -- 217
Cost of shares redeemed
Class 1 ............................................................................ (35,713,166) (119,670,911)
Class 2 ............................................................................ (789,400) (4,090,605)
Class 3 ............................................................................ (28,990,719) (18,666,216)
Class 4 ............................................................................ (1,732,070) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ....................................... (4,623,517) 330,954,185
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................................................. 118,003,836 (602,062,141)
NET ASSETS
Beginning of period ...................................................................... 2,111,929,443 2,713,991,584
- -----------------------------------------------------------------------------------------------------------------------------------
End of period ............................................................................ $ 2,229,933,279 $ 2,111,929,443
===================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD .............. $ 18,507,494 $ 12,784
- -----------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
27
TOTAL
Statements of Changes in Net Assets (continued) RETURN
Changes in Fund Shares FUND
- -----------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2009 DECEMBER 31,
(UNAUDITED) 2008
- -----------------------------------------------------------------------------------
CLASS 1
Shares sold .................................... 649,265 788,055
Issued for distributions reinvested ............ -- 2,422,033
Shares redeemed ................................ (2,890,840) (7,557,024)
- -----------------------------------------------------------------------------------
Net decrease in fund shares .................... (2,241,575) (4,346,936)
===================================================================================
CLASS 2
Shares sold .................................... 167,883 401,179
Issued for distributions reinvested ............ -- 31,187
Shares redeemed ................................ (64,057) (246,196)
- -----------------------------------------------------------------------------------
Net increase in fund shares .................... 103,826 186,170
===================================================================================
CLASS 3
Shares sold .................................... 2,477,654 22,764,099
Issued for distributions reinvested ............ -- 2,660,498
Shares redeemed ................................ (2,386,928) (1,341,496)
- -----------------------------------------------------------------------------------
Net increase in fund shares .................... 90,726 24,083,101
===================================================================================
CLASS 4
Shares sold .................................... 1,628,048 513
Issued for distributions reinvested ............ -- 17
Shares redeemed ................................ (135,522) --
- -----------------------------------------------------------------------------------
Net increase in fund shares .................... 1,492,526 530
===================================================================================
See Notes to Financial Statements.
28
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of fourteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund, Total Return Fund (the "Fund"), Income Fund, Money
Market Fund and Real Estate Securities Fund. The Fund presently offers four
classes of shares.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
The Company offers four share classes of the Fund as investment options for
variable life insurance and variable annuity contracts -- Class 1, Class 2,
Class 3 and Class 4. Classes 2, 3 and 4 shares were first offered on May 1,
2006, and Fund shares outstanding prior to May 1, 2006 were designated as Class
1 shares. Each class of shares has different fees and expenses, and as a result,
each class of shares will have different share price and performance. Not all
variable contracts offer every class of the Fund's shares.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized cost, which approximates market
value.
All assets and liabilities of the Fund that are initially expressed in foreign
currency values will be converted into U.S. dollars at the WM/Reuters exchange
rate computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
29
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that the use of these
fair value procedures will always better represent the price at which the Fund
could sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Fund adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards 157, FAIR VALUE MEASUREMENTS ("SFAS
157"). SFAS 157 establishes a new framework for measuring fair value and expands
related disclosures. Broadly, the SFAS 157 framework requires fair value to be
determined based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants. SFAS 157 establishes a three-level valuation hierarchy
based upon observable and unobservable inputs.
For financial assets and liabilities, fair value is the price that would be
received to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets and liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect our market assumptions. Preference is given to
observable inputs. These two types of inputs create the following fair value
hierarchy:
Level 1 -- Quoted prices for identical investments in active markets.
Level 2 -- Quoted prices for similar investments in active markets; quoted
prices for identical or similar investments in markets that are not
active; and model-derived valuations whose significant value drivers are
observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
The Fund maintains policies and procedures to value investments using the best
and most relevant data available. The Fund performs periodic reviews of the
methodologies used by independent pricing services including obtaining price
validation for certain securities. The following section describes the valuation
methodologies that the Fund uses to measure investments at fair value.
When available, the Fund uses quoted market prices to determine fair value of
investment securities, and they are included in Level 1. Level 1 securities
primarily include publicly-traded equity securities.
When quoted market prices are unobservable, the Fund uses quotes from
independent pricing vendors based on recent trading activity and other relevant
information including market interest rate curves, referenced credit spreads and
estimated prepayment rates where applicable. These investments are included in
level 2 and primarily include long-term US government, agency and corporate
debt, notes, bonds, and mortgage backed securities. In infrequent circumstances,
the Fund's pricing vendors may provide valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
classified in Level 3.
Other financial instruments are derivative instruments that are not reflected in
Total Investments, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------------------------------
Investments in Securities $1,373,022,418 $949,795,281 $4,551,300 $2,327,368,999
Other Financial Instruments (18,986) -- -- (18,986)
30
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Following is a reconciliation of securities activity based on Level 3 inputs for
which unobservable market inputs were used to determine fair value.
Investments Other Financial
in Securities Instruments
- --------------------------------------------------------------------------------------------
Balance at 12/31/08 $ 34,124,210 $ --
Accrued discounts/premiums (262,197) --
Realized gain (loss) 1,080,929 --
Change in unrealized appreciation (depreciation) (806,534) --
Net purchases (sales) (3,042,148) --
Net transfers in and out of Level 3 (1,905,646) --
- --------------------------------------------------------------------------------------------
Balance at 6/30/09 $ 29,188,614 $ --
- --------------------------------------------------------------------------------------------
Change in unrealized gain/(loss) for the year on level 3
securities held at 6/30/09 $ (1,255,706) $ --
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund
31
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
will not enter into a transaction involving futures for speculative purposes.
The Fund's risks in using these contracts include changes in the value of the
underlying instruments, non-performance of the counterparties under the
contracts' terms and changes in the liquidity of the secondary market for the
contracts. Futures contracts are valued at the settlement price established each
day by the board of trade or exchange on which they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. The Fund will not enter
into a transaction involving options for speculative purposes. The Fund's risks
in using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Options
are valued at the last sale price, or if no sales occurred on that day, at the
last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
SWAP CONTRACTS As part of the investment strategy, the Fund may invest in swap
agreements, which are agreements to exchange the return generated by one
instrument for the return generated by another instrument. Total return swap
agreements involve commitments to pay interest in exchange for a market linked
return based upon a notional principal amount. To the extent the total return of
the security or index underlying the agreement exceeds or falls short of the
offsetting interest rate obligation, the Fund will receive a payment from or
make a payment to the counterparty. Swaps are marked to market daily based upon
the underlying security or index. Payments received or made are recorded as
realized gain or loss in the Statement of Operations. Entering into swap
agreements involves, to varying degrees, elements of credit and market risk in
excess of the amounts recognized on the Statement of Assets and Liabilities.
Such risks involve the possibility that there will be no liquid market for these
agreements, that the counterparty to the agreements may default on its
obligation to perform and that there may be unfavorable changes in the value of
the index or securities underlying the agreement. Notional principal amounts are
used to express the extent of involvement in these transactions, but the amounts
potentially subject to credit risk are much smaller.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The Fund may purchase or sell
securities on a when-issued or forward commitment basis. These transactions are
arrangements in which the Fund purchases and sells securities with payment and
delivery scheduled a month or more after entering into the transactions. The
price of the underlying securities and the date when these securities will be
delivered and paid for are fixed at the time the transaction is negotiated.
Losses may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contracts. In connection with
such purchases, the Fund maintains cash or liquid assets in an amount equal to
purchase commitments for such underlying securities until settlement date and
for sales commitments, the Fund maintains equivalent deliverable securities as
"cover" for the transaction. Unsettled commitments are valued at the current
market value of the underlying security. Daily fluctuations in the value of such
contracts are recorded as unrealized gains or losses. The Fund will not enter
into such commitments for the purpose of investment leverage.
32
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts to facilitate transactions in foreign
denominated securities and to manage the Fund's currency exposure. Forward
foreign currency exchange contracts are valued at the mean between the bid and
the offered forward rates as last quoted by a recognized dealer. The aggregate
principal amounts of the contracts are not recorded in the Fund's financial
statements. Such amounts appear under the caption forward foreign currency
contracts in the Schedule of Investments. Fluctuations in the value of the
contracts are recorded in the Statement of Assets and Liabilities as an asset
(or liability) and in the Statement of Operations as unrealized appreciation
(depreciation) until the contracts are closed, when they are recorded as
realized gains or losses on foreign currency related transactions. The Fund's
risks in using these contracts include changes in the value of foreign currency
or the possibility that the counterparties do not perform under the contracts'
terms. When the Fund enters into a forward foreign currency exchange contract,
it is required to segregate cash or liquid securities with its custodian in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract. If the value of the segregated securities
declines, additional cash or securities is segregated so that the value of the
account will equal the amount of the Fund's commitment with respect to the
contract.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes. At June 30, 2009, information on the tax cost of
investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- ------------------------------------------------------------------------------------------------------
$2,609,404,192 $ 62,700,875 $(344,736,068) $(282,035,193)
As of December 31, 2008, the Fund has capital loss carryovers, as indicated
below.
Amount Expires
- --------------------------------------------------------------------------------
$21,723,574 12/31/16
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund elected to defer losses incurred after October 31, 2008 as follows:
Capital Currency
- --------------------------------------------------------------------------------
$80,926,197 $3,776
The tax composition of distributions paid during the years ended December 31,
2008 and December 31, 2007 were as follows:
Ordinary Long-Term Return of
Income Capital Gains Capital Total
- --------------------------------------------------------------------------------
2008 $53,455,875 $11,362,592 $122,643 $ 64,941,110
2007 63,569,771 93,007,435 -- 156,577,206
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These
33
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
differences include (but are not limited to) futures, treatment of realized
gains and losses on foreign currency transactions, and losses deferred due to
wash sale transactions. Reclassifications due to permanent book/tax differences
are made to the Fund's capital accounts to reflect income and gains available
for distribution (or available capital loss carryovers) under income tax
regulations. These reclassifications have no impact on net investment income,
realized gains or losses, or the net asset value of the Fund. The calculation of
net investment income per share in the Financial Highlights table excludes these
adjustments.
The reclassifications for the year ended December 31, 2008 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated
Income Net Realized Gain Paid In Capital
- --------------------------------------------------------------------------------
$(403,767) $526,410 $(122,643)
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Fund's 2005, 2006, 2007 and 2008 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized
respectively to call or maturity date, whichever is shorter, using the effective
yield method.
EXPENSES Fund specific expenses are allocated to the Fund that incurs such
expense and pro rata across share classes. Expenses, other than those incurred
by a specific Fund, are allocated pro rata among Funds and share classes. Such
expenses may include custodial fees, legal and accounting fees, printing costs
and registration fees. All expenses of the Fund are paid by GEAM and reimbursed
by the Fund. Certain class specific expenses (such as transfer agency fees or
distribution fees) are allocated to the class that incurs such expense.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES On March 19, 2008, the FASB issued
Statement of Financial Accounting Standards No. 161 ("FAS No. 161"), "Disclosure
about Derivative Instruments and Hedging Activities." This new accounting
statement requires enhanced disclosures about an entity's derivative and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity invests in derivatives, (b) how derivatives are accounted for
under FAS No. 133, and (c) how derivatives affect an entity's financial
position, financial performance, and cash flows. FAS No. 161 also requires
enhanced disclosures regarding credit-risk-related contingent features of
derivative instruments.
The Fund is subject to equity price risk, interest rate risk, and foreign
currency exchange rate risk in the normal course of pursuing its investment
objectives. The Fund may use futures contracts to gain exposure to, or hedge
against changes in the value of equities, interest rates or foreign currencies.
A futures contract represents a commitment for the future purchase or sale of an
asset at a specified price on a specified date. Upon entering into such
contracts, the Fund is required to deposit with the broker, either in cash or
securities, an initial margin in an amount equal to a certain percentage of the
contract amount. Subsequent payments (variation margin) are made or received by
the Fund each day, depending on the daily fluctuations in the value of the
contract, and are recorded for financial statement purposes as unrealized gains
or losses by the Fund. Upon entering into such contracts, the Fund bears the
risk of interest or exchange rates or securities prices moving unexpectedly, in
which case, the Fund may not achieve the anticipated benefits of the futures
contracts and may realize a loss. With futures contracts, there is minimal
counterparty credit risk to the Fund since futures contracts are exchange traded
and the exchange's clearinghouse, as counterparty to all traded futures,
guarantees the futures against default.
34
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Shown below are the derivative contracts entered into by the Fund, summarized by
primary risk exposure.
Asset Derivatives June 30, 2009 Liability Derivatives June 30, 2009
Derivatives not -------------------------------------------------- ----------------------------------------------------
accounted for as Location in Notional Location in Notional
hedging instruments the Statements Value/No. of the Statements Value/No. of
under FASB of Assets Contracts Fair of Assets Contracts Fair
Statement 133 and Liabilities Long/(Short) Value and Liabilities Long/(Short) Value
- -------------------------------------------------------------------------------------------------------------------------------
Equity Contracts Receivables, Net Assets - 87,310 53,874* -- -- --
Unrealized Appreciation/
(Depreciation)
- -------------------------------------------------------------------------------------------------------------------------------
Interest Rate Receivables, Net Assets - 18,200,000 269,964* Payables, Net Assets - (29,600,000) (343,047)*
Contracts Unrealized Appreciation/ Unrealized Appreciation/
(Depreciation) (Depreciation)
- -------------------------------------------------------------------------------------------------------------------------------
* INCLUDES CUMULATIVE APPRECIATION/DEPRECIATION OF FUTURES CONTRACTS AS
REPORTED IN THE SCHEDULE OF INVESTMENTS. ONLY THE CURRENT DAY'S VARIATION
MARGIN IS REPORTED WITHIN THE STATEMENT OF ASSETS AND LIABILITIES.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Derivatives not accounted Location in the Realized Gain or Change in Unrealized
for as hedging instruments Statements of (Loss) on Derivatives Appreciation/(Depreciation) on
under FASB Statement 133 Operations Recognized in Income Derivatives Recognized in Income
- ----------------------------------------------------------------------------------------------------------------------------
Equity Contracts Net realized gain/(loss) on (152,050) 809
futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on futures
- ----------------------------------------------------------------------------------------------------------------------------
Interest Rate Net realized gain/(loss) on (450,837) (655,209)
Contracts futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on futures
- ----------------------------------------------------------------------------------------------------------------------------
3. LINE OF CREDIT
The Company shares a revolving credit facility of up to $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established on November 7, 2007. Generally, borrowings under
the credit facilities would accrue interest at the Federal Funds Rate plus 50
basis points and would be borne by the borrowing Fund. The maximum amount
allowed to be borrowed by any one Fund is the lesser of (i) its prospectus
limitation or (ii) 20% of its net assets. The credit facilities were not
utilized by the Fund during the fiscal year ended June 30, 2009.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund. At a
special meeting of shareholders of the Total Return Fund held on April 9, 2009,
the Fund's shareholders approved a new annual investment advisory and
administrative fee of 0.50% of the average daily net assets of the Fund, which
became effective on May 1, 2009. Prior to May 1, 2009, the following fee
schedule had been in effect for the Fund:
35
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Annualized based on average daily net assets
- -----------------------------------------------------------------------------
Average Daily Advisory and
Net Assets of Fund Administration Fees
- -----------------------------------------------------------------------------
First $100 million 0.50%
Next $100 million 0.45%
Next $100 million 0.40%
Next $100 million 0.35%
Over $400 million 0.30%
FOR PERIODS PRIOR TO MAY 1, 2009: Pursuant to an expense limitation agreement
with the Fund, GEAM had agreed to limit total operating expenses charged to Fund
assets attributable to each class of shares (excluding class specific expenses
such as Investor Service Plan Fees (for Class 1 shares), Distribution and
Service (12b-1) Fees, and excluding interest, taxes, brokerage commissions,
other expenditures that are capitalized in accordance with generally accepted
accounting principles, and other extraordinary expenses not incurred in the
ordinary course of the Fund's business) to 0.32% of the average daily net assets
of the Fund attributable to such shares, in each case on an annual basis. This
agreement was terminated on April 30, 2009.
EFFECTIVE MAY 1, 2009: GEAM has entered into contractual arrangement with the
Company to limit the advisory and administrative fees paid by the Fund on an
annual basis to 0.48% of the average daily net assets of the Fund. The advisory
and administrative fee reduced by GEAM may however be recouped by GEAM for up to
three years from the date reduced, provided that the total operating expense
ratio for the Fund's Class 1 shares, after giving effect to the recoupment,
would not exceed 0.80% for the fiscal year in which the recoupment is made.
Unless earlier terminated or cancelled, this agreement will continue in effect
until April 30, 2010. The Company may terminate the agreement without penalty
upon 60 days written notice to GEAM. The agreement may also be terminated or
amended by the mutual consent of the Company and GEAM.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2009, $18,763 was charged to
the Fund.
INVESTOR SERVICE PLAN -- CLASS 1 AND CLASS 3 SHARES The Company adopted an
Investor Service Plan (the "Services Plan") on December 9, 2005 for Class 1
shares and on May 1, 2009 for Class 3 shares of the Total Return Fund. The
Services Plans were not adopted pursuant to Rule 12b-1 under the 1940 Act. Each
Services Plan provides that during any fiscal year, the amount of compensation
paid under the Services Plan by the Total Return Fund Class 1 or Class 3 shares
may not exceed the annual rate of 20% of the average daily net assets of the
Total Return Fund attributable to each such class shares.
DISTRIBUTION AND SHAREHOLDER SERVICE (12b-1) FEES The Company has adopted a
Distribution and Service (12b-1) Plan (12b-1 Plan) pursuant to Rule 12b-1 under
the 1940 Act with respect to each of Class 1, Class 2, Class 3 and Class 4
shares of the Total Return Fund. Under the 12b-1 Plan for Class 1 shares that
became effective May 1, 2009, payments made under the Class 1 Investor Service
Plan are covered in the event that any portion of compensation paid pursuant to
the Class 1 Investor Service Plan is determined to be an indirect use of the
assets attributable to the Class 1 shares to finance distribution of such
shares. Under each 12b-1 Plan for Class 2, Class 3 and Class 4 shares, the
Company, on behalf of the Total Return Fund, may compensate GE Investment
Distributors, Inc. (GEID), the distributor of the shares of the Total Return
Fund, for certain sales services provided by GEID or other broker dealers and
investor services provided by GEID or other service providers relating to the
Fund's Class 2, Class 3 and Class 4 shares, including services to owners or
prospective owners of variable contracts issued by insurance companies that
offer such share classes of the Total Return Fund as an investment option under
such variable contracts. Effective May 1, 2009, the amount of compensation paid
under each 12b-1 Plan may not exceed: 0.25% for Class 2 shares, 0.25% for Class
3 shares and 0.45% for Class 4 shares, of the average daily net assets of the
Fund attributable to such share class. The 12b-1 Plan continues in effect from
year to year for so long as such continuance is approved annually by the Board
of Directors, including by those directors who are not interested persons of the
Company and who have no direct or indirect financial interest in the operation
of the 12b-1 Plan or in any agreement related to it. In addition, the Class 3
12b-1 Plan covers payments made under the Class 3 Investor Service Plan in the
event that any portion of compensation paid pursuant to the Class 3 Investor
Service Plan is determined to be an indirect use of the assets attributable to
the Class 3 shares to finance distribution of such shares.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of
36
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Operations. These fees are allocated pro rata across all of the mutual fund
platforms and share classes served by the directors, including the Fund, and are
based upon the relative net assets of each fund within such platforms. (For
additional information about directors compensation please refer to the
Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2009, were as follows:
U.S. Government Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$1,375,525,543 $1,363,725,803
Other Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$379,281,341 $430,613,549
SECURITY LENDING At June 30, 2009, the Fund did not participate in securities
lending.
37
Advisory and Administrative Agreement Approvals (unaudited)
- --------------------------------------------------------------------------------
The Board of Directors of the GE Investments Funds, Inc. (the "Board"),
including the independent Board members, considered and unanimously approved, at
a special meeting held on February 25, 2009, certain changes to the Total Return
Fund, including, among other proposals, (1) the retention of Urdang Securities
Management Inc. ("Urdang") to manage assets of the Fund allocated by GE Asset
Management Incorporated ("GEAM") to be invested in real estate related
investments, and (2) an amendment to the Fund's Investment Advisory and
Administration Agreement to increase the advisory fee payable by the Fund to
GEAM, and to reflect additional oversight and other responsibilities delegated
to GEAM.
GEAM explained the specific reasons for each of its recommendations and that
each of these items would need to be approved by Fund shareholders, which would
involve a proxy solicitation and a special shareholder meeting. GEAM described
the process and the estimated costs of such a proxy solicitation and shareholder
meeting. All proposals were subsequently approved by the Fund's shareholders at
a Special Meeting of Shareholders held on April 9, 2009 and became effective on
May 1, 2009(1). Please refer to the next section of this semi-annual report for
the voting results of the Special Meeting of Shareholders.
In considering these approvals, the Board members, including the independent
Board members, considered and discussed a substantial amount of information and
analyses provided by GEAM and Urdang(2). The Board also considered detailed
information regarding performance and expenses of other investment companies,
including those with similar investment objectives and sizes, which was prepared
by an independent third party provider, Lipper Inc. ("Lipper"). The Board
members reviewed the fees charged by GEAM for other mutual funds and investment
products other than mutual funds that employ the same investment strategy as the
Fund. The Board had the opportunity to ask questions and request additional
information in connection with its considerations.
During the meetings, the Board members reviewed the information with management
of GEAM and independent legal counsel. The Board members also reviewed at the
December Board meetings a memorandum prepared by independent legal counsel
discussing the legal standards for the consideration of the continuance of the
Fund's Investment Advisory and Administration Agreement with GEAM and the GE
Investment Funds, Inc. - Real Estate Securities Fund's Investment Sub-Advisory
Agreement with Urdang. The independent Board members discussed the proposed
amendment to the Fund's Investment Advisory and Administration Agreement and new
Investment Sub-Advisory Agreement in detail during private sessions with their
independent legal counsel at which no representatives of GEAM or Urdang was
present. The independent Board members and their independent legal counsel
requested, and received and considered, additional information from GEAM
following these sessions.
The Board noted that the basis for its renewal of the Total Return Fund's
Investment Advisory and Administration Agreement with GEAM and the GE Investment
Funds, Inc. - Real Estate Securities Fund's Investment Sub-Advisory Agreement
with Urdang at the December 2008 Board meetings would remain the basis for its
approval of the proposed amendment to the Total Return Fund's Investment
Advisory and Administration Agreement with GEAM and the new Investment
Sub-Advisory Agreement with Urdang, subject to the new considerations of the
higher proposed advisory fee rate, additional services to be provided by GEAM
and Urdang's serving as sub-adviser to the Total Return Fund under the proposed
new structure.
The Board members had an opportunity to discuss this information with GEAM
managers (including senior executives and representatives from the legal,
compliance and finance departments, and investment personnel). The Board members
also had an opportunity to hear presentations by representatives of Urdang. The
Board
- ----------
(1) It is expected that Urdang will begin serving as sub-adviser to the Total
Return Fund when GEAM believes that market conditions will be favorable
for real estate related investments.
(2) In connection with the Total Return Fund proposals, this was done in part
by reference to discussions and considerations at the Board's 9/26/08,
10/23/08, 12/5/08, 12/12/08 and 2/4/09 meetings, all of which were
referenced, considered and affirmed at the 2/25/09 meeting.
38
Advisory and Administrative Agreement Approvals (unaudited)
- --------------------------------------------------------------------------------
members posed questions to these representatives and engaged in substantive
discussions with them concerning the proposed new structure.
In reaching their determinations relating to the proposed amendment to the
Fund's Investment Advisory and Administration Agreement and new Investment
Sub-Advisory Agreement, the Board, including the independent Board members,
considered all factors that it deemed relevant including the factors discussed
below. In their deliberations, the Board members did not identify any particular
information that was all-important or controlling, and each Board member may
have attributed different weights to the various factors. The Board members
evaluated this information and all other information available to them with
respect to the Fund. In particular, the Board members focused on the following:
THE NATURE, EXTENT AND QUALITY OF SERVICES EXPECTED TO BE PROVIDED
The Board reviewed the services provided by GEAM and those services expected to
be provided by GEAM and Urdang under the new structure, focusing on its
extensive past experiences with each of them. In particular, the Board
considered, and discussed with representatives of GEAM, the utility of providing
the Fund with greater investment flexibility to invest in additional asset
classes and market segments, to use additional investment techniques and
strategies, and to revise certain investment policies. They also discussed how
the proposed amendment to the Fund's Investment Advisory and Administration
Agreement to increase the advisory fee rate paid by the Fund to GEAM, and to
reflect various additional oversight and other responsibilities delegated to
GEAM could facilitate achieving these initiatives. The Board noted the
significant additional responsibilities for GEAM associated with implementing
these proposals to improve the management and competitiveness of the Fund, such
as selecting and managing the sub-adviser(s), assessing whether to retain or
terminate any such sub-adviser(s), designing and supervising the Fund's new
strategy, and allocating assets among a wider variety of asset classes and among
sub-adviser(s).
In connection with their consideration of the services expected to be provided
by Urdang, the Board considered Urdang's favorable attributes relating to: (i)
an investment philosophy oriented toward long-term performance; (ii) effective
processes used for selecting investments; and (iii) experienced professionals,
including analysts, research professionals, traders and portfolio managers with
a depth of experience involving the types of strategies they manage.
In light of the foregoing, the Board, including the independent Board members,
concluded that the services provided and expected to be provided by GEAM and
Urdang would be satisfactory, of high quality, and would have the potential to
benefit the Fund.
INVESTMENT PERFORMANCE OF THE FUND AND URDANG
The Board members considered the investment performance of the Fund and Urdang
for various periods. In considering the proposed new structure, the Board
focused on GEAM's proposed investment approach for the Fund and information
provided by GEAM about the potential for the new structure to improve
performance and competitiveness. The Board members reviewed detailed comparisons
of the performance of the Fund and Urdang with the relevant securities indices
and peer groupings with respect to various periods. The Board members also
engaged in detailed discussions with management about GEAM's and Urdang's
investment performance and reviewed the proposed changes to investment
strategies and techniques. For Urdang, the Board focused on Urdang's investment
performance with respect to the GEI Real Estate Securities Fund since the
commencement of Urdang's management of that fund.
The Board noted that it had the opportunity to speak with Urdang and engaged in
detailed discussions about its investment processes, focusing on the number and
experience of portfolio management and supporting research personnel, and its
investment style and approach employed. The Board members discussed the extent
to which Urdang's expected investment style and approach would be consistent
with GEAM's articulated long-term approach and overall investment philosophy and
considered GEAM's discussion of how the retention of Urdang would fit within its
management of the Fund's overall allocation strategy.
Taking these factors into consideration, the Board, including the independent
Board members, found the historical performance of the Fund and Urdang to be
satisfactory.
39
Advisory and Administrative Agreement Approvals (unaudited)
- --------------------------------------------------------------------------------
COST OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED FROM THE
RELATIONSHIP WITH THE FUND
The Board members reviewed the fees paid (and proposed to be paid) to GEAM by
the Fund and considered the cost of the services provided by GEAM. GEAM
explained that, pursuant to the Fund's current Investment Advisory and
Administration Agreement with GEAM, GEAM receives a management fee as follows:
50 basis points on the first $100 million of average daily net assets, 45 basis
points on the next $100 million of average daily net assets, 40 basis points on
the next $100 million of average daily net assets, 35 basis points on the next
$100 million of average daily net assets, and 30 basis points on average daily
net assets over $400 million. Under the proposed amended Investment Advisory and
Administration Agreement with GEAM, the Fund would be charged an annual
management fee rate of 0.50% of its average daily net assets.
The Board reviewed actual and pro-forma information concerning GEAM's
profitability from the fees and services provided to the Fund currently and, as
proposed, and the financial condition of GEAM for various past periods. The
Board members considered the profit margin information for GEAM's investment
company business as a whole, as well as GEAM's profitability data for the Fund.
The Board members reviewed GEAM's assumptions and the methods of cost allocation
used by GEAM in preparing Fund-specific profitability data. The Board members
also discussed with GEAM the basis for its belief that the methods of allocation
used were reasonable.
The Board members reviewed and discussed the additional services to be provided
by GEAM to the Fund, noting that GEAM, and not the Fund, would pay the
sub-advisory fees to any sub-adviser(s) retained to manage the Fund's assets,
including Urdang. The Board members determined that GEAM should be entitled to
earn a reasonable level of profits for the services it provides to the Fund and,
as described above, recognized the additional services it would provide and
costs it would incur under the new structure. The Board members also recognized
that GEAM had made significant investments in its business and had not fully
recovered the sums invested. Based on their review, the Board members, including
the independent Board members, concluded that they were satisfied that the level
of profitability achieved by GEAM from its relationship with the Fund was not
unreasonable or excessive.
The Board also considered that the proposed fees to be paid to Urdang by GEAM,
noting that they had been negotiated at arm's-length, and that GEAM used its
influence with respect to the total assets it proposes to be managed by Urdang
to obtain what it regards as the most favorable and reasonably available fee
arrangement, based on the expected relative allocation of the Fund's assets.
While the Board had examined Urdang's profitability in connection with the
services it provides to the GEI Real Estate Securities Fund, given the
arm's-length nature of the initial arrangement, the Board did not examine the
specific levels of profitability for Urdang with respect to the Fund.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS AND
WHETHER FEE LEVELS WOULD REFLECT SUCH ECONOMIES OF SCALE
The Board members considered the extent to which economies of scale would be
realized as the Fund grows, and whether fee levels reflect these economies of
scale for the benefit of Fund investors. The Board members also considered the
substantial infrastructure investments that GEAM has made with respect to its
operations and its commitment to continue investing resources to enhance
services to Fund shareholders. The Board members recognized the benefits to the
Fund of GEAM's past investment in its operations through the expenditure of
significant sums to support its substantial infrastructure and that, with
respect to all GEAM managed mutual funds, GEAM has not yet fully recouped that
investment. The Board members also recognized the benefits to the Fund of being
able to leverage a favorable cost structure achieved with respect to the Fund's
other operating expenses as a result of GEAM's large overall base of assets
under management and its vendor management practices.
The Board also considered that GEAM's proposed increase in the management fee
rate was not subject to breakpoints whereas Urdang had agreed to modest
breakpoints in its fees for larger asset levels. The Board was comfortable that
GEAM's general practice of being
40
Advisory and Administrative Agreement Approvals (unaudited)
- --------------------------------------------------------------------------------
paid lower fee levels for a smaller asset base effectively results in an advance
sharing of the economies of scale that may be enjoyed as the Fund grows, rather
than specifying a higher rate fee for lower asset levels. The Board recognized
that this consideration is less relevant with respect to the proposed
sub-advisory fees because GEAM will pay Urdang out of its advisory fees received
from the Fund.
COMPARISON OF SERVICES TO BE RENDERED AND FEES TO BE PAID
The Board discussed the services to be provided to the Fund by GEAM and the fees
charged to the Fund for those services. The Board members reviewed information
regarding the expected fee and expense ratio for the Fund and comparative
information with respect to similar products. They discussed that the Fund's
figures were very competitive and within the applicable peer group range. The
Board noted that the proposed advisory fee would still be lower than the Lipper
peer group average. The Board also considered its extensive experience with
GEAM.
The Board also discussed the services expected to be provided to the Fund by
Urdang and the proposed fees to be charged to GEAM for those services. The Board
members reviewed information regarding the proposed sub-advisory fees and noted
that they would be competitive with applicable peer group averages. The Board
also considered its favorable experience with Urdang as sub-adviser to the GEI
Real Estate Securities Fund.
The Board, including the independent Board members, concluded that, based on
this information, the proposed advisory and sub-advisory fees would be
reasonable in relation to the services expected to be provided to the Fund.
FALL-OUT BENEFITS
The Board previously considered actual and potential financial benefits that
GEAM may derive from its relationship with the Fund. The Board noted, however,
that the Fund benefits from the vast array of resources available through GEAM,
and the Fund represents only a small portion of the assets managed by GEAM. The
Board also considered that there may be financial benefits that GEAM and Urdang
derive from their relationship with the Fund, including soft dollar commission
benefits generated through Fund portfolio transactions. The Board did not view
this consideration as having a material effect on its overall view of the
reasonableness of the proposed fees and expenses for the Fund.
CONCLUSION
No single factor was determinative to the Board's decision. Based on their
discussion and such other matters as were deemed relevant, the Board members,
including the independent Board members, concluded that the proposed amendment
to the Fund's Investment Advisory and Administration Agreement with GEAM and the
new Investment Sub-Advisory Agreement with Urdang were in the best interests of
the Fund and its shareholders.
41
Special Meeting of Shareholders -- Voting Results (unaudited)
- --------------------------------------------------------------------------------
On August 9, 2009, the GE Investments Funds, Inc. held a special meeting of
shareholders of the Total Return Fund (the "Fund"). Shareholders of record on
February 4, 2009 were entitled to vote on the proposals. At the meeting, all
proposals except for Proposal 5B were approved and the following votes were
recorded:
PROPOSAL 1:
- --------------------------------------------------------------------------------
Approval of the use of a "manager of managers" arrangement whereby GEAM, as the
Fund's investment adviser, under certain circumstances, will be able to hire and
replace sub-advisers to the Fund without obtaining shareholder approval.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 140,390,612.614 84.501% 88.679%
Against 12,759,199.612 7.680% 8.059%
Abstain 5,163,566.511 3.108% 3.262%
Broker Non-votes -- -- --
Total 158,313,378.737 95.289% 100.000%
PROPOSAL 2:
- --------------------------------------------------------------------------------
Approval of a new Sub-Advisory Agreement with Urdang Securities Management, Inc.
("Urdang"), whereby Urdang will manage those assets of the Fund allocated by
GEAM to be invested in real estate related investments.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 141,072,334.427 84.912% 89.110%
Against 11,449,754.354 6.891% 7.232%
Abstain 5,791,289.956 3.486% 3.658%
Broker Non-votes -- -- --
Total 158,313,378.737 95.289% 100.000%
PROPOSAL 3:
- --------------------------------------------------------------------------------
Approval of the following changes in certain of the Fund's investment policies,
as follows:
A. Amendment of the Fund's investment policies on illiquid investments
and their reclassification from fundamental policies to a
non-fundamental policy.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 141,708,773.681 85.295% 89.512%
Against 10,035,142.658 6.040% 6.338%
Abstain 6,569,462.398 3.954% 4.150%
Broker Non-votes -- -- --
Total 158,313,378.737 95.289% 100.000%
B. Elimination of the Fund's investment policy on mortgaging, pledging
and hypothecating of investments.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 142,211,861.577 85.598% 89.829%
Against 9,778,578.510 5.885% 6.177%
Abstain 6,322,938.650 3.806% 3.994%
Broker Non-votes -- -- --
Total 158,313,378.737 95.289% 100.000%
42
Special Meeting of Shareholders -- Voting Results (unaudited)
- --------------------------------------------------------------------------------
C. Amendment of the Fund's investment policy on senior securities.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 141,515,737.112 85.179% 89.390%
Against 10,560,473.504 6.356% 6.670%
Abstain 6,237,168.121 3.754% 3.940%
Broker Non-votes -- -- --
Total 158,313,378.737 95.289% 100.000%
D. Amendment of the Fund's investment policy on real estate
investments.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 142,379,944.264 85.699% 89.936%
Against 9,874,793.988 5.944% 6.237%
Abstain 6,058,640.485 3.646% 3.827%
Broker Non-votes -- -- --
Total 158,313,378.737 95.239% 100.000%
E. Amendment of the Fund's investment policy on making loans.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 141,333,460.043 85.069% 89.274%
Against 11,165,452.773 6.721% 7.053%
Abstain 5,814,465.921 3.499% 3.673%
Broker Non-votes -- -- --
Total 158,313,378.737 95.289% 100.000%
F. Amendment of the Fund's investment policy on borrowing.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 140,944,509.769 84.835% 89.029%
Against 11,415,138.066 6.871% 7.210%
Abstain 5,953,730.902 3.583% 3.761%
Broker Non-votes -- -- --
Total 158,313,378.737 95.289% 100.000%
G. Amendment of the Fund's investment policy on diversification.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 143,389,782.004 86.307% 90.573%
Against 9,158,050.027 5.512% 5.785%
Abstain 5,765,546.706 3.470% 3.642%
Broker Non-votes -- -- --
Total 158,313,378.737 95.289% 100.000%
H. Amendment of the Fund's investment policy on concentration of
investments.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 143,330,424.019 86.271% 90.536%
Against 9,213,946.495 5.546% 5.820%
Abstain 5,769,008.223 3.472% 3.644%
Broker Non-votes -- -- --
Total 158,313,378.737 95.289% 100.000%
43
Special Meeting of Shareholders -- Voting Results (unaudited)
- --------------------------------------------------------------------------------
I. Amendment of the Fund's investment policy on investments in
commodities and its reclassification from a non-fundamental policy
to a fundamental policy.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 141,698,885.622 85.289% 89.505%
Against 10,498,293.554 6.319% 6.632%
Abstain 6,116,199.561 3.681% 3.863%
Broker Non-votes -- -- --
Total 158,313,378.737 95.289% 100.000%
PROPOSAL 4:
- --------------------------------------------------------------------------------
Approval of an amendment to the Investment Advisory and Administration Agreement
between the Company, on behalf of the Fund, and GEAM to increase the advisory
fee rate paid by the Fund to GEAM, and to reflect various additional oversight
and other responsibilities delegated to GEAM.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 135,123,710.624 81.331% 85.352%
Against 17,492,337.967 10.529% 11.049%
Abstain 5,697,330.146 3.429% 3.599%
Broker Non-votes -- -- --
Total 158,313,378.737 95.289% 100.000%
PROPOSAL 5A:
- --------------------------------------------------------------------------------
For Class 1 shares, approval of a new 12b-1 plan adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 69,502,960.723 89.832% 89.846%
Against 5,393,651.235 6.971% 6.972%
Abstain 2,461,536.175 3.181% 3.182%
Broker Non-votes -- -- --
Total 77,358,148.133 99.984% 100.000%
PROPOSAL 5B:
- --------------------------------------------------------------------------------
For Class 2 shares, approval of an amended 12b-1 plan adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 0.000 0.000% 0.000%
Against 1,015,825.040 100.000% 100.000%
Abstain 0.000 0.000% 0.000%
Broker Non-votes -- -- --
Total 1,015,825.040 100.000% 100.000%
PROPOSAL 5C:
- --------------------------------------------------------------------------------
For Class 3 shares, approval of an amended 12b-1 plan adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended.
No. of Shares % of Outstanding Shares/Dollars % of Shares Present
- ----------------------------------------------------------------------------------------------------
Affirmative 70,619,729.474 80.490% 88.359%
Against 4,182,723.552 4.768% 5.234%
Abstain 5,120,775.346 5.836% 6.407%
Broker Non-votes -- -- --
Total 79,923,228.372 91.094% 100.000%
44
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 60
POSITION(S) HELD WITH FUND Chairman of the Board and President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 11 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS President and Chief Executive
Officer - Mutual Funds and Intermediary Business since March 2007; Executive
Vice President of GEAM from February 1997 to March 2007; Director of GEAM since
1988; Vice President, GE Capital Corporation, an indirect wholly-owned
subsidiary of GE, since December 1999; Executive Vice President - Sales and
Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, from
March 1993 to March 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds since its inception; Trustee of
General Electric Savings & Security Trust, General Electric S&S Income Fund,
General Electric S&S Program Mutual Fund ("GE Savings & Security Funds"), Elfun
Funds, General Electric Insurance Plan Trust, General Relief Loan Fund, and
General Electric Pension Trust since 1988; Trustee of Fordham University since
2002; Trustee of GE Volunteers since 1993; Director, GE Asset Management
(Ireland) since February 1999; Director, GE Asset Management Funds Plc., GE
Asset Canada Company, and GE Asset Management Limited since 1998.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Director and Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds since July 2007.
45
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 43
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years (Vice President); one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
from September 2003 to July 2007; Vice President and Secretary of GE Funds and
GE Institutional Funds since July 2007; Vice President and Assistant Secretary
of Elfun Funds and GE Savings & Security Funds since October 2003.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
46
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 63
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since its inception; Trustee of Fordham University since
2002 and Marymount College from 2001 through 2002; Neuroscience Research
Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn &
Queens since 2001; Gregorian University Foundation since 1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 73
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception; Trustee, St. Francis Hospital Corp.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
47
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J. Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER -
MUTUAL FUNDS & INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Ralph R. Layman, PRESIDENT - PUBLIC EQUITIES (SINCE JULY 2009)
Maureen B. Mitchell, PRESIDENT - INSTITUTIONAL SALES AND MARKETING
(SINCE JULY 2009)
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST (SINCE JULY 2009)
Don W. Torey, PRESIDENT - ALTERNATIVE INVESTMENTS
John J. Walker, EVP, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT - INVESTMENT STRATEGIES
48
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii)
on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
- --------------------------------------------------------------------------------
[GE LOGO]
GE Investments Funds, Inc.
Income Fund Letter from the Chairman
- --------------------------------------------------------------------------------
[PHOTO OF MICHAEL J. COSGROVE]
MICHAEL J. COSGROVE
CHAIRMAN,
GE INVESTMENTS FUNDS, INC.
DEAR SHAREHOLDER:
Attached is the semi-annual report for the GE Investments Funds, Inc. -- Income
Fund (the "Fund") for the six-month period ended June 30, 2009. The report
contains information about the performance of the Fund, and other Fund specific
data, along with portfolio manager commentary. We have provided you with an
overview of the investment markets, along with our investment outlook for the
coming months.
MARKET OVERVIEW
Despite investors' hopes that the new U.S. administration and Congress would
help stabilize the nation's financial crisis, asset values continued to fall in
the first quarter of 2009. Global equities experienced sharp price declines in
January and February as troubles in the United States continued to cast a cloud
over world markets. U.S. Treasury Secretary Geithner indicated that some U.S.
banks would need large amounts of assistance to survive and talks of stress
tests and bank nationalization spooked investors. The markets also booed
government plans to take a 36% stake in Citigroup even as the financial status
of institutions already on government life-support, such as AIG, remained
uncertain. Similarly, news of troubled automakers GM and Chrysler worried
international bondholders and shareholders alike. Financial services and small
cap stocks were hardest hit in the downswing as equity indexes broke the
November 2008 lows in February. Government debt issues also had a rough February
as U.S. and U.K. debt auctions saw weak support for long and non-inflation
indexed government securities. These poor showings were soon followed by a
warmer reception for shorter-dated debt.
U.S. stocks abruptly reversed course and posted three straight weeks of gains
through the end of March after the three largest U.S. banks announced they had
turned a profit. Equity indexes around the globe followed the U.S. path,
regaining much of their losses since January. In late March, the U.S. Treasury
Secretary unveiled his Public-Private Investment Partnership (PPIP) plan to
remove toxic assets from the balance sheets of the nation's banks, and the
markets seemed convinced of a financial sector backstop. Another policy move to
support the markets came on March 18th when the Federal Reserve announced that
it would buy $300 billion of 2- and 10-year Treasuries, increase its purchase
plan of agency mortgage-backed securities from $500 billion to $1.25 trillion,
double its purchases of agency debt to $200 billion and expand the eligible
collateral in the Term Asset-Backed Securities Loan Facility (TALF) program. In
response, the yield on the U.S. Treasury 10-year note fell 47 basis points to
2.53%, recording the largest one-day drop in over four decades.
The rebound in global equities continued into the second quarter, as markets
experienced strong gains in April and May, before tailing off into a flat June
as investors started to question the strength and timing of an economic
recovery. Despite a double-digit rally since mid-March, the S&P 500 Index ended
the second quarter approximately where it started at the beginning of 2009
(priced in the low 900s). Emerging markets equities continued to outperform
their developed peers during the second quarter. The MSCI Emerging Markets Index
gained 34.7%, its best quarterly return since data collection began in 1988.
Speculation persists that developing markets are better positioned to weather
the global recession given that their financial systems are generally better
capitalized and less leveraged than the developed countries.
During the second quarter, U.S. government stress tests concluded and the banks
that needed capital swiftly and successfully raised it. The Federal Reserve also
announced that it would allow 10 large banks to repay bailout funds from the
government's controversial Troubled Asset Relief Program. In this environment,
financial stocks enjoyed a notably strong quarter, bolstered by growing
speculation that the worst of the global banking crisis was over. However,
financial risks remain as the European Central Bank said that European banks
might need to write down an additional $283 billion by the end of next year. In
late June, The European Central Bank also injected (euro)442 billion ($621
billion) into Europe's banking system in one-year funds to spur lending and help
stabilize the economy.
[GE LOGO]
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Income Fund Letter from the Chairman (Continued)
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Against this backdrop, financial markets posted improved results for the six-
and 12-month periods ended June 30.
TOTAL RETURNS AS OF
JUNE 30, 2009 6-MONTH 12-MONTH
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U.S. equities (S&P 500 Index) 3.16 -26.21
Global equities (MSCI World Index) 6.35 -29.50
International equities
(MSCI EAFE Index) 7.95 -31.35
Emerging Markets equities
(MSCI EM Index) 36.01 -28.07
Small-cap U.S. equities
(Russell 2000 Index) 2.64 -25.01
Mid-cap U.S. equities
(Russell Mid Cap Index) 9.96 -30.36
U.S. fixed income (Barclays Capital
U.S. Aggregate Bond Index) 1.90 6.05
U.S. short-term government
fixed income (Barclays Capital
U.S. Treasury Bond Index 1-3 Year) 0.47 4.94
U.S. tax-exempt income
(Barclays Capital U.S. Municipal
Bond Index 10 year) 4.38 5.58
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OUTLOOK
Uncertainty will likely continue around the strength and timing of a U.S.
economic recovery. With unemployment at a 25-year high of 9.5%, and American
consumers having suffered a collapse in wealth of at least $15 trillion since
early 2007, it is hard to have much confidence in a consumer-driven recovery in
the short term. We believe the economy will work below its potential for many
quarters to come as deleveraging continues among consumers and global financial
institutions.
While equity markets have enjoyed a bounce off of the bottom over the first half
of the year, the positive earnings surprises in April and May came mostly from
productivity gains and cost containment programs. Earnings in the second quarter
will be heavily scrutinized for evidence that a real recovery is sustainable and
that restocking is giving way to growth in final demand. We believe companies
are going to have to show evidence of a top-line recovery -- increased demand
and improving fundamentals -- in order for stocks to work their way higher.
Given the economic headwinds we're facing, consolidation of the second quarter's
gains seems a real possibility.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. We encourage
long-term investors to maintain a diversified investment approach that is
consistent with their goals, time horizon and risk tolerance. While diversified
portfolios are not immune to market downturns, history suggests they can put you
in a position to benefit from the inevitable return to better times.
Thank you for investing with GE Investments Funds.
Sincerely,
/s/ Michael J. Cosgrove
Michael J. Cosgrove
CHAIRMAN, GE INVESTMENTS FUNDS, INC.
JUNE 2009
MIKE COSGROVE IS PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS &
INTERMEDIARY BUSINESS AT GE ASSET MANAGEMENT. MR. COSGROVE ALSO SERVES AS A
TRUSTEE OF THE GE PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM. PREVIOUSLY
CHIEF FINANCIAL OFFICER OF GE ASSET MANAGEMENT AND ASSISTANT TREASURER - GE
COMPANY, MIKE JOINED GE IN 1970 AND HELD A NUMBER OF MANAGERIAL POSITIONS IN
FINANCE AND SALES AT GE'S INTERNATIONAL OPERATION AND IN GE TRADING COMPANY.
MIKE HAS A B.S. IN ECONOMICS FROM FORDHAM UNIVERSITY AND AN M.B.A. FROM ST.
JOHN'S UNIVERSITY.
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GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC.
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
[SIDE BAR]
GE Investments Funds, Inc.
Income Fund
Semi-Annual Report
JUNE 30, 2009
[GE LOGO]
GE Investments Funds, Inc.
Income Fund Contents
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NOTES TO PERFORMANCE ..................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................... 2
NOTES TO SCHEDULE OF INVESTMENTS ......................................... 12
FINANCIAL STATEMENTS
Financial Highlights .................................................. 13
Statement of Assets and Liabilities ................................... 14
Statement of Operations ............................................... 15
Statements of Changes in Net Assets ................................... 16
Notes to Financial Statements ......................................... 17
ADDITIONAL INFORMATION ................................................... 25
INVESTMENT TEAM .......................................................... 28
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
Notes to Performance June 30, 2009 (unaudited)
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Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any. Total returns shown
are net of Fund expenses but do not reflect fees and charges associated with the
variable contracts such as administrative fees, account charges and surrender
charges, which, if reflected, would reduce the Fund's total returns for all
periods shown.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in a Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. An investment in a Fund is subject to risk, including
possible loss of principal invested.
The Barclays Capital U.S. Aggregate Bond Index (formerly Lehman Brothers
Aggregate Bond Index) is an unmanaged index and do not reflect the actual cost
of investing in the instruments that comprise the index.
The Barclays Capital U.S. Aggregate Bond Index is a market value-weighted index
of taxable investment-grade debt issues, including government, corporate,
asset-backed and mortgage-backed securities, with maturities of one year or
more. This index is designed to represent the performance of the U.S.
investment-grade first rate bond market. The results shown for the foregoing
index assume the reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer group average
return calculation is based on the blend of Morningstar peer categories, as
shown. Morningstar is an independent mutual fund rating service. A Fund's
performance may be compared to or ranked within a universe of mutual funds with
investment objectives and policies similar but not necessarily identical to the
Fund's.
(C)2009 Morningstar, Inc. All Rights Reserved. The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is no warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are responsible for any
damage or losses relating from any use of this information. Past performance is
no guarantee or future results.
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GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUND.
1
Income Fund
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[PHOTO OF PAUL M. COLONNA]
PAUL M. COLONNA
THE INCOME FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES PAUL M.
COLONNA, WILLIAM M. HEALEY, MARK H. JOHNSON AND VITA MARIE PIKE. AS LEAD
PORTFOLIO MANAGER FOR THE INCOME FUND, MR. COLONNA IS VESTED WITH OVERSIGHT
AUTHORITY. EACH PORTFOLIO MANAGER IS ASSIGNED A CLASS OF ASSETS, THE SIZE OF
WHICH ARE DETERMINED BY TEAM CONSENSUS AND ADJUSTED ON A MONTHLY BASIS, IF
NECESSARY. ALTHOUGH EACH PORTFOLIO MANAGER MANAGES HIS OR HER ASSET CLASS
INDEPENDENT OF THE OTHER TEAM MEMBERS, THE TEAM IS HIGHLY COLLABORATIVE AND
COMMUNICATIVE.
PAUL M. COLONNA IS A DIRECTOR AND PRESIDENT - FIXED INCOME AT GE ASSET
MANAGEMENT. SINCE JANUARY 2005, HE HAS LED THE TEAM OF PORTFOLIO MANAGERS FOR
THE INCOME FUND. PRIOR TO JOINING GE ASSET MANAGEMENT IN FEBRUARY 2000, MR.
COLONNA WAS A SENIOR PORTFOLIO MANAGER WITH THE FEDERAL HOME LOAN MORTGAGE
CORPORATION, OVERSEEING THE MORTGAGE INVESTMENT GROUP.
WILLIAM M. HEALEY IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS
SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE INCOME FUND SINCE SEPTEMBER
1997. PRIOR TO JOINING GE ASSET MANAGEMENT, MR. HEALEY SPENT OVER 10 YEARS IN
THE FIXED INCOME GROUP AT METLIFE.
MARK H. JOHNSON IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT AND SENIOR
PORTFOLIO MANAGER OF STRUCTURED PRODUCTS. HE HAS BEEN A MEMBER OF THE PORTFOLIO
MANAGEMENT TEAM FOR THE INCOME FUND SINCE SEPTEMBER 2007. MR. JOHNSON JOINED GE
ELECTRIC COMPANY (GE) IN 1998 IN ITS EMPLOYERS REINSURANCE CORPORATION AS A
TAXABLE INCOME PORTFOLIO MANAGER. MR. JOHNSON JOINED GE ASSET MANAGEMENT AS A
VICE PRESIDENT AND PORTFOLIO MANAGER IN 2002 AND BECAME A SENIOR VICE PRESIDENT
AND SENIOR PORTFOLIO MANAGER OF STRUCTURED PRODUCTS IN 2007.
VITA MARIE PIKE IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. SHE HAS
SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE INCOME FUND SINCE JUNE 2004.
PRIOR TO JOINING GE ASSET MANAGEMENT IN JANUARY 2001, SHE WAS WITH ALLIANCE
CAPITAL FOR OVER NINE YEARS SERVING IN A NUMBER OF DIFFERENT CAPACITIES
INCLUDING PORTFOLIO MANAGER.
Q. HOW DID THE INCOME FUND PERFORM COMPARED TO ITS BENCHMARK AND MORNINGSTAR
PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009?
A. For the six-month period ended June 30, 2009, the Income Fund returned
0.68% for the Class 1 shares and 0.49% for the Class 4 shares. The
Barclays Capital U.S. Aggregate Bond Index, the Fund's benchmark, returned
1.90% and the Fund's Morningstar peer group of 206 US Insurance
Intermediate -Term Bond funds returned an average of 6.24% for the same
period.
Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE SIX-MONTH PERIOD
ENDING JUNE 30, 2009.
A. Despite the $787 billion stimulus bill signed into legislation in February
to revive the economy and create jobs, unemployment continued to rise
throughout the first half of 2009. The unemployment rate hit 9.5% in June
and total jobs lost, according to Bureau of Labor Statistics, year to date
totaled 3.38 million, resulting in up to 6.46 million jobs lost since the
recession began in December 2007. Housing prices continued to decline and
delinquencies headed higher even for those borrowers with high credit
quality. Consumers began to delever in 2009 by increasing savings, which
caused spending to plummet. Although the economic data was generally poor,
there were still talks of economic "greenshoots", which some investors
believe may be the beginning of recovery.
Interest rates steadily rose during the first half, while the Federal
Reserve kept its fed funds rate target steady at 0-0.25%. The US treasury
2 and 10-year note yields ended June at 1.1% and 3.5% respectively, up 34
and 132 basis points. The one downward spike in rates occurred in mid
March when the Federal Reserve announced quantitative easing plans to
buyback up to $300 billion of US treasuries, $200 billion of US agency
debt and $1.25 trillion of agency
2
- --------------------------------------------------------------------- [Q&A LOGO]
mortgage-backed securities. The short end of the market improved as
3-month LIBOR decreased 80 basis points to 0.60%. Credit markets, in
general, opened up with healthy new issuance from both high grade and high
yield companies
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. Positive contributors to Fund performance relative to the benchmark were
allocations to high yield and emerging market sectors. High yield and
emerging market indices returned 23% and 11.4% respectively compared to
the benchmark, which returned 1.8%. Relative performance continued to
suffer from marked to market pricing on sub-prime and alt-A backed
securities. A second negative contributor to relative performance was
portfolio duration. Our bias toward a longer relative duration
underperformed as interest rates increased during the quarter.
3
Income Fund
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Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2009.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2009 - JUNE 30, 2009
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ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
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Class 1 1,000.00 1,006.82 3.63
Class 4 1,000.00 1,004.87 5.87
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HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
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Class 1 1,000.00 1,020.95 3.66
Class 4 1,000.00 1,018.76 5.91
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* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.73% FOR
CLASS 1 SHARES AND 1.18% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1,
2009 - JUNE 30, 2009), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE
PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE ONE-HALF YEAR PERIOD).
** ACTUAL FUND RETURNS FOR SIX-MONTH PERIOD ENDED JUNE 30, 2009 WERE AS
FOLLOWS: 0.68% FOR CLASS 1 SHARES, AND 0.49% FOR CLASS 4 SHARES.
4
Income Fund (unaudited)
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CHANGE IN VALUE OF A $10,000 INVESTMENT
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CLASS 1 SHARES
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[LINE GRAPH]
Barclays Capital U.S.
Income Fund Aggregate Bond Index
06/99 $10,000 $10,000
12/99 $10,045 $10,056
12/00 $11,123 $11,225
12/01 $11,950 $12,173
12/02 $13,131 $13,421
12/03 $13,604 $13,972
12/04 $14,069 $14,578
12/05 $14,355 $14,932
12/06 $14,983 $15,579
12/07 $15,706 $16,664
12/08 $14,903 $17,538
06/09 $15,005 $17,871
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AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2009
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CLASS 1 SHARES (Inception date: 1/3/95)
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SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS YEAR YEAR YEAR $10,000 INVESTMENT
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Income Fund 0.68% -4.05% 2.01% 4.14% $15,005
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Barclays Capital U.S. Aggregate
Bond Index 1.90% 6.05% 5.02% 5.98% $17,871
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Morningstar peer group average* 6.24% 1.18% 3.39% 4.45%
===========================================================================================
CLASS 4 SHARES
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[LINE GRAPH]
Barclays Capital U.S.
Income Fund Aggregate Bond Index
05/01/08 $10,000 $10,000
06/08 $ 9,896 $ 9,919
09/08 $ 9,680 $ 9,870
12/08 $ 9,412 $10,322
06/09 $ 9,457 $10,518
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TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 2009
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CLASS 4 SHARES (Inception date: 5/1/08)
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SIX ONE SINCE ENDING VALUE OF A
MONTHS YEAR INCEPTION $10,000 INVESTMENT
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Income Fund 0.49% -4.43% -4.67% $ 9,457
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Barclays Capital U.S. Aggregate
Bond Index 1.90% 6.05% 4.43% $10,518
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Morningstar peer group average** 6.24% 1.18%
=====================================================================================
INVESTMENT PROFILE
A Fund designed for investors who seek maximum income consistent with prudent
investment management and the preservation of capital by investing at least 80%
of its net assets in debt securities under normal circumstances.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Market Value of $65,493 (in thousands)
[PIE CHART]
Other Investments 0.4%
Mortgage-Backed 36.5%
Corporate Notes 23.3%
U.S. Treasuries 17.8%
Asset-Backed and Other 12.9%
Federal Agencies 9.1%
QUALITY RATINGS AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
MOODY'S/S&P/ PERCENTAGE OF
FITCH RATING*** MARKET VALUE
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Aaa / AAA 67.78%
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Aa / AA 2.34%
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A / A 12.05%
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Baa / BBB 4.23%
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Ba / BB and lower 13.60%
================================================================================
* MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS
INDICATED IN THE INTERMEDIATE-TERM BOND PEER GROUP CONSISTING OF 206, 202,
161 AND 96 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS AND ONE YEAR PERIODS INDICATED IN THE
INTERMEDIATE-TERM BOND PEER GROUP CONSISTING OF 206 AND 202 UNDERLYING
ANNUITY FUNDS, RESPECTIVELY.
*** MOODY'S INVESTORS SERVICES INC., STANDARD & POOR'S AND FITCH ARE
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
5
INCOME FUND
Schedule of Investments June 30, 2009 (unaudited)
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INCOME FUND
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PRINCIPAL
AMOUNT VALUE
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BONDS AND NOTES -- 104.5% +
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U.S. TREASURIES -- 19.4%
U.S. Treasury Bonds
3.50% 02/15/39 .................................. $ 1,372,700 $ 1,186,960
4.50% 05/15/38 .................................. 103,800 107,157
U.S. Treasury Notes
0.76% 01/31/11 .................................. 185,000 185,102 (c)
0.95% 03/31/11 .................................. 1,486,700 1,484,668 (c)
1.04% 04/30/11 .................................. 2,464,000 2,456,780 (c)
1.06% 05/31/11 .................................. 943,900 940,511 (c)
1.25% 11/30/10 .................................. 141,700 142,746
1.75% 03/31/14 .................................. 740,700 716,396
1.88% 02/28/14 .................................. 1,314,100 1,280,117
2.25% 05/31/14 .................................. 817,500 806,513
2.38% 03/31/16 .................................. 199,800 190,388
2.75% 02/15/19 .................................. 1,359,100 1,272,879
3.50% 02/15/18 .................................. 24,700 24,822
3.63% 10/31/09 .................................. 80,000 80,881
3.75% 11/15/18 .................................. 176,200 179,243
4.50% 11/15/10 - 05/15/17 ....................... 95,000 101,973
4.63% 10/31/11 .................................. 460,000 495,291
11,652,427
FEDERAL AGENCIES -- 10.0%
Federal Home Loan Banks
5.00% 11/17/17 .................................. 400,000 425,646 (f)
Federal Home Loan Mortgage Corp.
4.13% 09/27/13 .................................. 700,000 741,634
4.88% 02/09/10 .................................. 1,805,000 1,853,605
5.13% 11/17/17 .................................. 1,200,000 1,317,034
8.25% 06/01/26 .................................. 60,000 80,009 (f,h)
Federal National Mortgage Assoc.
2.75% 03/13/14 .................................. 700,000 698,502
3.88% 07/12/13 .................................. 816,000 858,938 (f)
5,975,368
AGENCY MORTGAGE BACKED -- 32.3%
Federal Home Loan Mortgage Corp.
4.50% 06/01/33 - 02/01/35 ....................... 232,083 231,775 (f)
5.00% 07/01/35 - 10/01/35 ....................... 350,256 357,651 (f)
5.50% 05/01/20 - 03/01/38 ....................... 755,607 786,763 (f)
6.00% 04/01/17 - 11/01/37 ....................... 1,296,542 1,359,585 (f)
6.50% 01/01/27 - 08/01/36 ....................... 442,696 473,133 (f)
7.00% 10/01/16 - 08/01/36 ....................... 138,312 149,831 (f)
7.50% 11/01/09 - 09/01/33 ....................... 19,005 20,483 (f)
8.00% 11/01/30 .................................. 17,673 19,582 (f)
8.50% 04/01/30 - 05/01/30 ....................... 23,321 25,682 (f)
5.50% TBA ....................................... 180,000 185,794 (b)
Federal National Mortgage Assoc.
4.00% 05/01/19 - 06/01/19 ....................... 202,498 206,316 (f)
4.50% 05/01/18 - 12/01/34 ....................... 831,429 852,817 (f)
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PRINCIPAL
AMOUNT VALUE
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4.50% 02/01/20 .................................. $ 25,479 $ 26,274 (f,k)
5.00% 03/01/34 - 08/01/35 ....................... 467,291 477,601 (f)
5.26% 04/01/37 .................................. 142,284 148,661 (g)
5.47% 04/01/37 .................................. 118,561 124,243 (g)
5.50% 12/01/13 - 04/01/38 ....................... 1,458,869 1,517,702 (f)
5.50% 06/01/20 .................................. 28,574 30,191 (f,k)
5.50% 04/01/37 .................................. 111,887 117,261 (g)
5.52% 04/01/37 .................................. 53,169 55,690 (g)
5.59% 04/01/37 .................................. 144,069 151,407 (g)
5.63% 03/01/37 .................................. 11,292 11,828 (g)
5.68% 04/01/37 .................................. 106,022 111,295 (g)
5.72% 04/01/37 .................................. 57,038 59,943 (g)
6.00% 06/01/14 - 03/01/38 ....................... 1,565,415 1,646,225 (f)
6.00% 10/01/34 - 03/01/35 ....................... 128,918 135,518 (f,k)
6.04% 10/01/37 .................................. 121,599 127,793 (g)
6.50% 07/01/17 - 02/01/35 ....................... 1,544,073 1,653,416 (f)
6.50% 10/01/34 - 12/01/34 ....................... 33,310 35,674 (f,k)
7.00% 03/01/15 - 06/01/36 ....................... 531,408 579,677 (f)
7.50% 12/01/09 - 03/01/34 ....................... 133,655 145,620 (f)
8.00% 12/01/12 - 11/01/33 ....................... 99,051 108,098 (f)
8.50% 05/01/31 .................................. 5,003 5,453 (f)
9.00% 04/01/16 - 12/01/22 ....................... 11,933 12,964 (f)
4.50% TBA ....................................... 710,000 708,447 (b)
5.00% TBA ....................................... 2,688,000 2,745,780 (b)
5.50% TBA ....................................... 1,435,000 1,481,190 (b)
7.00% TBA ....................................... 210,000 227,850 (b)
Government National
Mortgage Assoc.
4.13% 12/20/24 .................................. 3,112 3,160 (f,g)
4.38% 02/20/23 - 02/20/26 ....................... 11,346 11,578 (f,g)
4.50% 08/15/33 - 09/15/34 ....................... 412,816 415,184 (f)
6.00% 04/15/27 - 09/15/36 ....................... 410,793 431,377 (f)
6.50% 04/15/19 - 08/15/36 ....................... 283,920 303,675 (f)
6.50% 03/15/24 - 08/15/34 ....................... 47,753 50,879 (f,k)
7.00% 03/15/12 - 10/15/36 ....................... 151,726 164,364 (f)
7.00% 01/15/28 - 06/15/34 ....................... 53,275 57,984 (f,k)
7.50% 11/15/31 - 10/15/33 ....................... 8,189 8,927 (f)
8.00% 12/15/29 .................................. 3,590 4,060 (f)
8.50% 10/15/17 .................................. 15,884 17,184 (f)
9.00% 11/15/16 - 12/15/21 ....................... 40,990 44,384 (f)
5.50% TBA ....................................... 700,000 722,750 (b)
19,350,719
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.1%
Federal Home Loan Mortgage Corp.
0.24% 09/25/43 .................................. 1,341,184 7,662 (e,f,g,l)
2.88% 11/15/37 .................................. 190,069 165,908 (c,d)
4.50% 10/15/16 - 03/15/19 ....................... 329,120 22,389 (e,f,l)
5.00% 10/15/14 - 12/01/34 ....................... 2,531,402 339,674 (e,f,l)
5.00% 05/15/38 .................................. 73,276 71,652
5.50% 04/15/17 - 06/15/33 ....................... 411,421 53,525 (e,f,l)
7.50% 01/15/16 .................................. 20,746 21,486 (f)
7.50% 07/15/27 .................................. 10,942 1,647 (e,f,l)
8.00% 02/01/23 - 07/01/24 ....................... 5,222 1,051 (e,f,l)
9.53% 12/15/33 .................................. 150,000 143,453 (f,g)
14.75% 09/15/34 .................................. 76,054 57,566 (c,d)
See Notes to Schedule of Investments on page 12 and Notes to Financial
Statements.
6
INCOME FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp. REMIC
5.75% 05/15/38 .................................. $ 287,715 $ 27,997 (e,g,l)
Federal Home Loan Mortgage STRIPS
4.60% 08/01/27 .................................. 1,335 1,114 (c,d,f)
Federal National Mortgage Assoc.
1.19% 12/25/42 .................................. 85,631 2,881 (e,f,g,l)
4.00% 02/25/28 .................................. 3,157 3,161 (f)
4.50% 05/25/18 .................................. 68,074 3,171 (e,f,l)
4.75% 11/25/14 .................................. 17,968 258 (e,f,l)
5.00% 08/25/17 - 02/25/32 ....................... 299,757 27,330 (e,f,l)
5.00% 10/25/35 - 08/25/38 ....................... 202,227 196,658
5.50% 01/25/33 .................................. 150,001 156,967 (f)
6.69% 10/25/29 .................................. 373,188 29,596 (e,f,g,l)
6.92% 01/25/36 .................................. 130,985 13,376 (e,g,l)
7.00% 09/25/20 .................................. 702 741 (f)
7.19% 05/25/18 .................................. 551,342 45,888 (e,f,g,l)
7.29% 09/25/42 .................................. 898,162 152,535 (e,f,g,l)
7.39% 08/25/16 .................................. 150,984 8,396 (e,f,g,l)
15.92% 03/25/31 .................................. 294,687 326,853 (f,g)
Federal National Mortgage
Assoc. (Class 1)
3.85% 11/01/34 .................................. 282,905 248,351 (c,d,f)
4.50% 09/01/35 - 01/01/36 ....................... 568,829 80,260 (e,l)
5.00% 05/25/38 .................................. 174,650 25,138 (e,l)
Federal National Mortgage
Assoc. (Class 2)
4.50% 08/01/35 .................................. 170,860 25,519 (e,l)
5.00% 08/01/34 - 03/25/38 ....................... 1,053,633 169,268 (e,l)
5.50% 12/01/33 .................................. 74,967 11,523 (e,f,l)
7.50% 11/01/23 .................................. 32,599 709 (e,f,l)
8.00% 08/01/23 - 07/01/24 ....................... 11,598 2,352 (e,f,l)
8.50% 07/25/22 .................................. 513 101 (e,f,l)
9.00% 05/25/22 .................................. 336 68 (e,f,l)
Federal National Mortgage
Assoc. (Class B)
5.13% 12/25/22 .................................. 332 280 (c,d,f)
Federal National Mortgage
Assoc. (Class H)
5.00% 10/25/22 .................................. 86,785 7,818 (e,f,l)
Federal National Mortgage
Assoc. (Class K)
1008.00% 05/25/22 .................................. 7 152 (e,f,l)
2,454,474
ASSET BACKED -- 8.7%
Bear Stearns Asset Backed
Securities Trust
0.53% 11/25/35 .................................. 827,878 696,465 (c,f,g)
Chase Funding Mortgage Loan
Asset-Backed Certificates
0.87% 02/25/33 .................................. 28,122 22,416 (c,f,g)
5.75% 05/25/32 .................................. 24,846 11,558 (f,g)
Countrywide Asset-Backed
Certificates
1.17% 05/25/33 .................................. 11,011 6,329 (f,g)
Discover Card Master Trust I (Class A)
6.02% 06/16/15 .................................. 40,000 33,136 (c,g)
- -----------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------
Discover Card Master Trust I
(Class B) (Series 2)
10.22% 05/15/12 .................................. $ 60,000 $ 51,326 (c,g)
Fleet Home Equity Loan
Trust (Class A)
0.57% 01/20/33 .................................. 158,628 95,855 (c,f,g)
Mid-State Trust
7.54% 07/01/35 .................................. 2,116 1,458 (f)
Nissan Auto Lease Trust
0.52% 02/15/13 .................................. 244,000 241,861 (c,g,k)
RAAC Series (Class 2)
0.61% 08/25/36 .................................. 4,353,000 2,634,218 (c,g,k)
Residential Asset Mortgage
Products Inc.
0.51% 04/25/35 .................................. 1,731,344 1,383,621 (c,g)
Residential Asset Mortgage
Products Inc. (Class A)
1.00% 06/25/32 .................................. 30,339 15,186 (c,g)
Residential Asset Securities Corp.
0.81% 07/25/32 .................................. 4,750 1,812 (c,f,g)
Wells Fargo Home Equity Trust
3.97% 05/25/34 .................................. 27,445 26,416 (f,g)
5,221,657
CORPORATE NOTES -- 25.4%
Abbott Laboratories
5.88% 05/15/16 .................................. 92,000 100,337 (f)
AMC Entertainment Inc.
8.75% 06/01/19 .................................. 166,000 156,040 (a)
American Express Company
8.13% 05/20/19 .................................. 32,000 33,207
Anheuser-Busch InBev
Worldwide Inc.
7.20% 01/15/14 .................................. 72,000 77,409 (a)
7.75% 01/15/19 .................................. 36,000 39,372 (a,f)
ARAMARK Corp.
8.50% 02/01/15 .................................. 212,000 205,640
Archer-Daniels-Midland Co.
6.45% 01/15/38 .................................. 97,000 105,168
Arizona Public Service Co.
6.25% 08/01/16 .................................. 165,000 162,489 (f)
AT&T Inc.
6.40% 05/15/38 .................................. 80,000 78,313 (f)
6.70% 11/15/13 .................................. 108,000 118,608 (f)
Banco Nacional de Desenvolvimento
Economico e Social
6.50% 06/10/19 .................................. 200,000 200,400 (a)
Bank of America Corp.
4.88% 01/15/13 .................................. 100,000 98,797
5.75% 12/01/17 .................................. 75,000 66,782
7.38% 05/15/14 .................................. 100,000 103,302
Berkshire Hathaway Finance Corp.
5.00% 08/15/13 .................................. 7,000 7,344
Bristol-Myers Squibb Co.
5.45% 05/01/18 .................................. 94,000 99,593
5.88% 11/15/36 .................................. 56,000 57,661 (f)
Bunge Ltd. Finance Corp.
8.50% 06/15/19 .................................. 53,000 55,420
See Notes to Schedule of Investments on page 12 and Notes to Financial
Statements.
7
INCOME FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------
Cargill Inc.
5.20% 01/22/13 .................................. $ 162,000 $ 163,916 (a,f)
6.00% 11/27/17 .................................. 63,000 62,709 (a)
Carolina Power & Light Co.
5.15% 04/01/15 .................................. 80,000 84,162 (f)
5.70% 04/01/35 .................................. 45,000 44,617 (f)
6.13% 09/15/33 .................................. 88,000 92,713 (f)
CBS Corp.
8.88% 05/15/19 .................................. 34,000 33,137
Chesapeake Energy Corp.
7.25% 12/15/18 .................................. 17,000 14,790
Citigroup, Inc.
5.13% 05/05/14 .................................. 102,000 92,855
6.50% 08/19/13 .................................. 205,000 199,132 (f)
8.50% 05/22/19 .................................. 78,000 79,345
Clarendon Alumina Production Ltd.
8.50% 11/16/21 .................................. 155,000 116,250 (a,f)
CME Group Inc.
5.40% 08/01/13 .................................. 185,000 194,370
Community Health Systems, Inc.
8.88% 07/15/15 .................................. 210,000 205,800
ConocoPhillips
6.00% 01/15/20 .................................. 98,000 104,929
Consolidated Edison Company of
New York Inc.
5.85% 04/01/18 .................................. 75,000 78,806
6.65% 04/01/19 .................................. 74,000 82,282
Corp Nacional del Cobre de
Chile - CODELCO
7.50% 01/15/19 .................................. 36,000 41,120 (a)
COX Communications Inc.
6.25% 06/01/18 .................................. 83,000 82,048 (a)
7.13% 10/01/12 .................................. 57,000 61,272 (f)
7.75% 11/01/10 .................................. 130,000 135,329 (f)
Credit Suisse
5.50% 05/01/14 .................................. 60,000 62,336
6.00% 02/15/18 .................................. 66,000 65,889
CSX Corp.
6.25% 03/15/18 .................................. 64,000 64,547
CVS Caremark Corp.
5.75% 06/01/17 .................................. 76,000 76,393
6.60% 03/15/19 .................................. 30,000 32,055
DASA Finance Corp.
8.75% 05/29/18 .................................. 28,000 27,546
Diageo Capital PLC
7.38% 01/15/14 .................................. 57,000 64,493
Dover Corp.
6.50% 02/15/11 .................................. 90,000 95,913 (f)
Duke Energy Indiana Inc.
6.35% 08/15/38 .................................. 111,000 121,807
Dynegy Holdings Inc.
7.50% 06/01/15 .................................. 210,000 175,087
Eli Lilly & Co.
4.20% 03/06/14 .................................. 30,000 30,887
Emerson Electric Company
5.00% 04/15/19 .................................. 45,000 45,273
EOG Resources, Inc.
5.88% 09/15/17 .................................. 17,000 18,081
6.88% 10/01/18 .................................. 88,000 99,931
- -----------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------
ERP Operating LP (REIT)
5.25% 09/15/14 .................................. $ 33,000 $ 31,330
European Investment Bank
4.88% 01/17/17 .................................. 100,000 105,234
GlaxoSmithKline Capital Inc.
4.85% 05/15/13 .................................. 66,000 69,039
6.38% 05/15/38 .................................. 74,000 80,470
HCA Inc.
9.25% 11/15/16 .................................. 194,000 191,090
Hewlett-Packard Co.
5.50% 03/01/18 .................................. 78,000 81,993
Host Hotels & Resorts LP (REIT)
9.00% 05/15/17 .................................. 185,000 176,212 (a)
HSBC Bank USA N.A.
4.63% 04/01/14 .................................. 50,000 49,089
HSBC Finance Corp.
6.75% 05/15/11 .................................. 95,000 97,678
HSBC Holdings PLC
6.50% 05/02/36 .................................. 100,000 97,653 (f)
6.80% 06/01/38 .................................. 250,000 251,241
IIRSA Norte Finance Ltd.
8.75% 05/30/24 .................................. 163,512 152,066 (a,f)
Ingles Markets, Inc.
8.88% 05/15/17 .................................. 84,000 82,740 (a)
Intergen N.V.
9.00% 06/30/17 .................................. 213,000 201,817 (a)
Johnson & Johnson
5.85% 07/15/38 .................................. 70,000 75,020
JPMorgan Chase & Co.
6.40% 05/15/38 .................................. 117,000 117,295
JPMorgan Chase Bank
5.88% 06/13/16 .................................. 25,000 24,095
Kellogg Co.
5.13% 12/03/12 .................................. 67,000 71,621
Kraft Foods Inc.
6.75% 02/19/14 .................................. 34,000 37,290
Kreditanstalt fuer Wiederaufbau
3.50% 03/10/14 .................................. 340,000 346,345
4.13% 10/15/14 .................................. 132,000 133,430
4.50% 07/16/18 .................................. 231,000 236,666
McDonald's Corp.
6.30% 03/01/38 .................................. 109,000 118,008
Merrill Lynch & Company Inc.
6.05% 08/15/12 .................................. 75,000 75,198
6.88% 04/25/18 .................................. 157,000 145,312
MetLife, Inc. (Series A)
6.82% 08/15/18 .................................. 113,000 113,803
Midamerican Energy Holdings Co.
6.13% 04/01/36 .................................. 115,000 113,675 (f)
Morgan Stanley
5.05% 01/21/11 .................................. 42,000 42,828
6.00% 04/28/15 .................................. 67,000 66,825
7.30% 05/13/19 .................................. 166,000 172,134
Morgan Stanley (Series F)
6.63% 04/01/18 .................................. 100,000 99,691
Munich Re America Corp. (Series B)
7.45% 12/15/26 .................................. 105,000 96,725 (f)
See Notes to Schedule of Investments on page 12 and Notes to Financial
Statements.
8
INCOME FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
New York Life Global Funding
5.38% 09/15/13 .......................... $ 77,000 $ 79,694 (a)
NGPL Pipeco LLC
7.12% 12/15/17 .......................... 81,000 84,905 (a)
Northern States Power Co.
6.25% 06/01/36 .......................... 65,000 71,189 (f)
Northern Trust Corp.
4.63% 05/01/14 .......................... 64,000 65,767
NorthWestern Corp.
5.88% 11/01/14 .......................... 85,000 86,453 (f)
Novartis Capital Corp.
4.13% 02/10/14 .......................... 30,000 30,881
NRG Energy, Inc.
7.38% 02/01/16 .......................... 195,000 184,519
Oncor Electric Delivery Company
5.95% 09/01/13 .......................... 46,000 47,865
OPTI Canada Inc.
8.25% 12/15/14 .......................... 132,000 87,120
Oracle Corp.
5.00% 07/08/19 .......................... 66,000 65,754
5.75% 04/15/18 .......................... 30,000 31,645
Pacific Gas & Electric Co.
5.80% 03/01/37 .......................... 105,000 105,525
Pacificorp
6.25% 10/15/37 .......................... 2,000 2,179
Parker Hannifin Corp.
5.50% 05/15/18 .......................... 114,000 116,578
Pemex Finance Ltd.
9.03% 02/15/11 .......................... 22,750 24,342 (f)
PepsiAmericas, Inc.
5.00% 05/15/17 .......................... 26,000 24,768
PepsiCo, Inc.
5.00% 06/01/18 .......................... 29,000 29,807
7.90% 11/01/18 .......................... 14,000 17,032
Petroleos Mexicanos
8.00% 05/03/19 .......................... 18,000 19,530 (a)
Pfizer Inc.
6.20% 03/15/19 .......................... 64,000 69,992
7.20% 03/15/39 .......................... 32,000 37,997
PMorgan Chase & Co.
5.38% 10/01/12 .......................... 102,000 106,822
Princeton University (Series A)
4.95% 03/01/19 .......................... 24,000 24,293
5.70% 03/01/39 .......................... 20,000 20,027
Principal Financial Group, Inc.
8.88% 05/15/19 .......................... 98,000 102,882
Prudential Financial, Inc.
7.38% 06/15/19 .......................... 66,000 64,801
RailAmerica, Inc.
9.25% 07/01/17 .......................... 142,000 137,030 (a)
Rio Tinto Finance USA Ltd.
8.95% 05/01/14 .......................... 34,000 37,782
9.00% 05/01/19 .......................... 47,000 52,241
Roche Holdings Inc.
6.00% 03/01/19 .......................... 76,000 81,037 (a)
Rogers Communications Inc.
6.80% 08/15/18 .......................... 186,000 199,397
Sabine Pass LNG LP
7.25% 11/30/13 .......................... 105,000 88,987
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Safeway Inc.
6.25% 03/15/14 .......................... $ 18,000 $ 19,317
Security Benefit Life Insurance
8.75% 05/15/16 .......................... 120,000 36,000 (a)
Simon Property Group LP (REIT)
6.75% 05/15/14 .......................... 34,000 34,163
Southern California Edison Co.
5.50% 08/15/18 .......................... 65,000 68,957
Standard Bank London Holdings
PLC for NAK Naftogaz Ukrainy
8.13% 09/30/09 .......................... 100,000 87,000
Standard Chartered Bank
Hong Kong Ltd.
4.38% 12/03/14 .......................... 210,000 201,600 (g)
Talisman Energy Inc.
7.75% 06/01/19 .......................... 6,000 6,647
Teck Resources Ltd.
10.75% 05/15/19 .......................... 16,000 17,200 (a)
Telecom Italia Capital S.A.
6.20% 07/18/11 .......................... 81,000 83,851
7.18% 06/18/19 .......................... 92,000 93,260
Telefonica Emisiones SAU
5.86% 02/04/13 .......................... 150,000 158,121
5.88% 07/15/19 .......................... 65,000 67,015
Tesco PLC
5.50% 11/15/17 .......................... 100,000 101,863 (a)
The Allstate Corp.
7.45% 05/16/19 .......................... 48,000 51,929 (f)
The Bear Stearns Companies LLC
6.95% 08/10/12 .......................... 175,000 190,199 (f)
The Goldman Sachs Group, Inc.
5.25% 10/15/13 .......................... 51,000 52,050
6.00% 05/01/14 .......................... 140,000 146,112
6.60% 01/15/12 .......................... 7,000 7,453 (f)
7.50% 02/15/19 .......................... 150,000 160,616
The Kroger Co.
6.15% 01/15/20 .......................... 98,000 100,130
The Potomac Edison Co.
5.35% 11/15/14 .......................... 95,000 90,908 (f)
The Toledo Edison Company
7.25% 05/01/20 .......................... 32,000 35,629
The Travelers Companies, Inc.
5.80% 05/15/18 .......................... 78,000 80,175
Thomson Reuters Corp.
5.95% 07/15/13 .......................... 151,000 154,469
6.50% 07/15/18 .......................... 73,445 76,436
TIAA Global Markets Inc.
4.95% 07/15/13 .......................... 168,000 172,680 (a)
Time Warner Cable Inc.
6.20% 07/01/13 .......................... 52,000 54,789
6.75% 07/01/18 .......................... 96,000 99,991
8.25% 04/01/19 .......................... 30,000 34,038
8.75% 02/14/19 .......................... 110,000 128,144
TransCanada Pipelines Ltd.
6.50% 08/15/18 .......................... 29,000 31,550
Transocean Inc.
6.00% 03/15/18 .......................... 78,000 81,090
United Technologies Corp.
6.13% 07/15/38 .......................... 87,000 94,432
See Notes to Schedule of Investments on page 12 and Notes to Financial
Statements.
9
INCOME FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------
Verizon Communications Inc.
6.35% 04/01/19 .......................... $ 30,000 $ 31,209
6.40% 02/15/38 .......................... 70,000 68,529
6.90% 04/15/38 .......................... 76,000 79,283
8.75% 11/01/18 .......................... 40,000 47,379
Verizon Global Funding Corp.
7.25% 12/01/10 .......................... 193,000 205,495
Verizon Pennsylvania Inc.
8.75% 08/15/31 .......................... 110,000 124,550 (f)
Verizon Wireless Capital LLC
5.55% 02/01/14 .......................... 106,000 112,533 (a)
7.38% 11/15/13 .......................... 193,000 215,872 (a)
Walgreen Co.
4.88% 08/01/13 .......................... 43,000 45,626
5.25% 01/15/19 .......................... 67,000 69,698
Wal-Mart Stores, Inc.
5.80% 02/15/18 .......................... 78,000 84,969
6.20% 04/15/38 .......................... 120,000 131,799
WEA Finance LLC
7.50% 06/02/14 .......................... 100,000 99,153 (a)
WellPoint, Inc.
6.00% 02/15/14 .......................... 34,000 34,626
Wells Fargo & Co.
4.38% 01/31/13 .......................... 65,000 65,560
5.63% 12/11/17 .......................... 40,000 39,373
Westar Energy, Inc.
7.13% 08/01/09 .......................... 100,000 99,961 (f)
Wyeth
5.50% 03/15/13 .......................... 108,000 115,463
XTO Energy Inc.
6.38% 06/15/38 .......................... 61,000 61,019
6.50% 12/15/18 .......................... 32,000 34,331
15,252,398
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.5%
Banc of America Commercial
Mortgage Inc. (Class A)
5.49% 02/10/51 .......................... 131,250 92,130
Banc of America Commercial
Mortgage Inc. (Class C)
5.88% 04/10/49 .......................... 100,000 20,844 (f,g,k)
Banc of America Funding Corp.
5.61% 03/20/36 .......................... 68,899 6,167 (f,g,k)
5.71% 02/20/36 .......................... 173,355 18,193 (f,g,k)
Banc of America Mortgage
Securities Inc. (Class B)
5.36% 01/25/36 .......................... 73,992 7,577 (f,g)
Bear Stearns Commercial
Mortgage Securities
4.75% 02/13/46 .......................... 280,000 243,599 (g)
5.48% 10/12/41 .......................... 245,000 237,962 (f)
5.61% 06/11/50 .......................... 90,000 81,300
5.69% 06/11/50 .......................... 60,000 49,140 (g)
Bear Stearns Commercial Mortgage
Securities (Class A)
5.54% 10/12/41 .......................... 130,000 110,433
5.63% 04/12/38 .......................... 25,000 24,471 (g)
5.92% 06/11/50 .......................... 80,000 44,109 (g)
- -----------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------
Bear Stearns Commercial Mortgage
Securities (Class D)
6.18% 09/11/42 .......................... $ 20,000 $ 3,219 (g,k)
Countrywide Alternative Loan Trust
5.94% 05/25/36 .......................... 17,565 18 (f,g,k)
6.00% 03/25/36 - 08/25/36 ............... 87,050 148 (f,k)
Countrywide Alternative Loan
Trust (Class B)
6.00% 05/25/36 - 08/25/36 ............... 39,297 779 (f,k)
Credit Suisse Mortgage Capital
Certificates
5.47% 09/15/39 .......................... 217,000 151,843 (f)
Credit Suisse Mortgage Capital
Certificates (Class C)
5.64% 02/25/36 .......................... 38,440 3,389 (f,g,k)
CS First Boston Mortgage
Securities Corp.
0.83% 07/15/37 .......................... 1,732,683 28,890 (f,g,k)
1.59% 03/15/35 .......................... 2,687,264 25,651 (f,g,k)
5.34% 10/25/35 .......................... 72,876 8,016 (f,g,k)
Greenwich Capital Commercial
Funding Corp.
5.60% 12/10/49 .......................... 50,000 45,247
Indymac INDA Mortgage Loan Trust
5.12% 01/25/36 .......................... 99,540 3,424 (f,g,k)
Indymac INDA Mortgage Loan
Trust (Class B)
5.12% 01/25/36 .......................... 99,299 9,681 (f,g,k)
JP Morgan Chase Commercial
Mortgage Securities Corp.
6.07% 02/12/51 .......................... 210,000 130,343
6.40% 02/12/51 .......................... 40,000 2,666 (g,k)
LB Commercial Conduit
Mortgage Trust
5.84% 07/15/44 .......................... 50,000 46,497 (g)
LB-UBS Commercial Mortgage Trust
0.85% 09/15/39 .......................... 6,300,899 124,198 (f,g,k)
0.92% 01/18/12 .......................... 2,784,953 34,876 (f,g,k)
LB-UBS Commercial Mortgage
Trust (Class B)
6.65% 07/14/16 .......................... 34,000 32,177 (a,f)
LB-UBS Commercial Mortgage
Trust (Class F)
6.45% 07/15/40 .......................... 70,000 4,499 (g,k)
MASTR Alternative Loans Trust
5.00% 08/25/18 .......................... 119,232 11,081 (e,f,l)
MLCC Mortgage Investors Inc.
5.24% 02/25/36 .......................... 59,995 3,636 (f,g)
Morgan Stanley Capital I
5.28% 12/15/43 .......................... 102,000 97,252 (f)
5.33% 12/15/43 .......................... 102,000 76,278 (f)
5.39% 11/12/41 .......................... 280,000 102,191 (f,g)
5.71% 07/12/44 .......................... 100,000 84,288 (f)
Nomura Asset Securities
Corp. (Class A)
6.59% 03/15/30 .......................... 6,013 6,020 (f)
Puma Finance Ltd. (Class A)
1.33% 10/11/34 .......................... 72,478 62,320 (g)
See Notes to Schedule of Investments on page 12 and Notes to Financial
Statements.
10
INCOME FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------
Residential Funding Mortgage
Securities I
5.75% 01/25/36 .......................... $ 96,147 $ 24,822 (f,k)
5.75% 01/25/36 .......................... 96,391 25,544 (f)
Wells Fargo Mortgage Backed
Securities Trust
5.39% 08/25/35 .......................... 105,481 9,114 (f,g)
5.50% 01/25/36 .......................... 149,990 27,275 (f)
2,121,307
SOVEREIGN BONDS -- 0.8%
Government of Brazil
8.00% 01/15/18 .......................... 76,000 85,120
Government of Dominican
9.50% 09/27/11 .......................... 71,909 71,190
Government of Indonesia
11.63% 03/04/19 .......................... 100,000 126,625 (a)
Government of Korea
5.75% 04/16/14 .......................... 22,000 22,543
Government of Panama
6.70% 01/26/36 .......................... 105,000 101,850
Government of Venezuela
5.38% 08/07/10 .......................... 59,000 55,312
10.75% 09/19/13 .......................... 7,000 5,775
468,415
MUNICIPAL BONDS AND NOTES -- 0.3%
Dallas Area Rapid Transit
6.00% 12/01/44 .......................... 40,000 40,523
New Jersey State Turnpike Authority
7.41% 01/01/40 .......................... 110,000 128,047
New Jersey Transportation Trust
Fund Authority
6.88% 12/15/39 .......................... 15,000 15,264
183,834
TOTAL BONDS AND NOTES
(COST $66,403,054) ......................... 62,680,599
- ---------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.4%
- ---------------------------------------------------------------------------------
GEI Investment Fund
(COST $405,469) ........................... 223,008 (i)
TOTAL INVESTMENT IN SECURITIES
(COST $66,808,523) ......................... 62,903,607
- ---------------------------------------------------------------------------------
VALUE
- ---------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 4.3%
- ---------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class 0.28%
(COST $2,589,586) .......................... $ 2,589,586 (c,j)
TOTAL INVESTMENTS
(COST $69,398,109) ......................... 65,493,193
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (9.2)% .............................. (5,522,336)
-----------
NET ASSETS -- 100.0% .......................... $59,970,857
===========
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Income Fund had the following long futures contracts open at June
30,2009 (unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------------------
5 Yr. U.S. Treasury Notes Futures September 2009 16 $ 1,835,500 $(14,946)
The GEI Income Fund had the following short futures contracts open
at June 30,2009 (unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------------------
2 Yr. U.S. Treasury Notes Futures September 2009 3 $ (648,656) $ (430)
10 Yr. U.S. Treasury Notes Futures September 2009 44 (5,115,688) (61,681)
--------
$(77,057)
========
See Notes to Schedule of Investments on page 12 and Notes to Financial
Statements.
11
Notes to Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Pursuant to Rule 144A of the Securities Act of 1933, these securities may
be resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 2009, these securities amounted to
$2,868,398, or 4.78% of net assets. These securities have been determined
to be liquid using procedures established by the Board of Directors of GE
Investments Funds, Inc.
(b) Settlement is on a delayed delivery or when-issued basis with final
maturity to be announced (TBA) in the future.
(c) Coupon amount represents effective yield.
(d) Principal only securities represent the right to receive the monthly
principal payments on an underlying pool of mortgages. No payments of
interest on the pool are passed through to the "principal only" holder.
(e) Interest only securities represent the right to receive the monthly
interest payments on an underlying pool of mortgages. Payments of
principal on the pool reduce the value of the "interest only" holding.
(f) At June 30, 2009, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(g) Variable or floating rate security. The stated rate represents the rate at
June 30, 2009.
(h) Step coupon bond. Security becomes interest bearing at a future date.
(i) GEAM, the investment adviser of the Fund, also serves as the investment
adviser of the GEI Investment Fund.
(j) GEAM, the investment adviser of the Fund, also serves as investment
adviser of the GE Money Market Fund.
(k) Illiquid securities. At June 30, 2009, these securities amounted to
$3,532,079, or 5.89% of net assets. These securities have been determined
to be illiquid using procedures established by the Board of Directors of
GE Investments Funds, Inc.
(l) Coupon amount represents the coupon of the underlying mortgage securities
on which monthly interest payments are based.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2009.
Abbreviations:
REIT Real Estate Investment Trust
ADR American Depository Receipt
SPDR Standard & Poors Depository Receipts
TBA To be Announced
STRIPS Separate Trading of Registered Interest and Principal of Security
TBA To be Announced
REMIC Real Estate Mortgage Investment Conduit
12
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
INCOME FUND
-------------------------------------------------------------------- -------------------------
CLASS 1 CLASS 4
-------------------------------------------------------------------- -------------------------
6/30/09+ 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 6/30/09+ 12/31/08**
-------------------------------------------------------------------- -------------------------
INCEPTION DATE ................... -- -- -- -- -- 1/3/95 -- 5/1/08
Net asset value, beginning
of period ..................... $ 10.26 $ 11.50 $ 11.80 $ 11.84 $ 12.25 $ 12.61 $ 10.24 $ 11.56
INCOME/(LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) ...................... 0.10 0.56 0.81 0.56 0.61 0.55 (0.05) 0.37
Net realized and unrealized
gains/(losses) on
investments ................... (0.02) (1.16) (0.25) (0.04) (0.36) (0.12) 0.13 (1.08)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM
INVESTMENT OPERATIONS ......... 0.08 (0.60) 0.56 0.52 0.25 0.43 0.08 (0.71)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ......... -- 0.64 0.82 0.56 0.61 0.57 -- 0.61
Net realized gains ............ -- -- -- -- 0.05 0.22 -- --
Return of capital ............. -- 0.00(b) 0.04 -- 0.00(b) -- -- 0.00(b)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............. -- 0.64 0.86 0.56 0.66 0.79 -- 0.61
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD ..................... $ 10.34 $ 10.26 $ 11.50 $ 11.80 $ 11.84 $ 12.25 $ 10.32 $ 10.24
====================================================================================================================================
TOTAL RETURN (a) ................. 0.68% (5.21)% 4.83% 4.37% 2.04% 3.42% 0.49% (6.16)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ............. $ 59,961 $ 68,731 $ 93,480 $126,732 $ 116,558 $135,172 $ 9 $ 9
Ratios to average net assets:
Net investment income* ..... 3.90% 4.63% 5.07% 5.07% 4.49% 3.82% 3.44% 4.33%*
Gross Expense* ............. 0.73% 0.65% 0.61% 0.61% 0.60% 0.59% 1.18% 1.10%*
Net Expenses* .............. 0.73%(c) 0.63%(c) 0.61% 0.61% 0.60% 0.59% 1.18%(c) 1.08%(c)*
Portfolio turnover rate ....... 124% 385% 448% 270% 311% 343% 124% 385%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges.
(b) Less than $0.01 per share.
(c) Reflects GEAM's waiver of a portion of the Fund's management fee in an
amount equal to the management fee earned by GEAM with respect to the
Fund's investment in the GE Funds - GE Money Market Fund.
* Annualized for periods less than one year.
** Per share values have been calculated using the average share method.
+ Unaudited
See Notes to Financial Statements.
13
Statement of Assets INCOME
and Liabilities JUNE 30, 2009 (UNAUDITED) FUND
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $66,403,054) .... $ 62,680,599
Investments in affiliated securities, at market
(cost $405,469) ......................................... 223,008
Short-term affiliated investments (at amortized cost) ...... 2,589,586
Receivable for investments sold ............................ 1,262,771
Income receivables ......................................... 516,627
Receivable for fund shares sold ............................ 32,144
Variation margin receivable ................................ 2,237
- --------------------------------------------------------------------------------
TOTAL ASSETS ............................................ 67,306,972
- --------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased .......................... 7,353,273
Payable for fund shares redeemed ........................... 800
Payable to GEAM ............................................ 6,508
Accrued other expenses ..................................... (30,753)
Variation margin payable ................................... 103
Other liabilities .......................................... 6,184
- --------------------------------------------------------------------------------
TOTAL LIABILITIES ....................................... 7,336,115
- --------------------------------------------------------------------------------
NET ASSETS .................................................... $ 59,970,857
================================================================================
NET ASSETS CONSIST OF:
Capital paid in ............................................ 74,056,588
Undistributed (distribution in excess of)
net investment income ................................... 1,221,046
Accumulated net realized loss .............................. (11,324,804)
Net unrealized depreciation on:
Investments ............................................. (3,904,916)
Futures ................................................. (77,057)
- --------------------------------------------------------------------------------
NET ASSETS .................................................... $ 59,970,857
================================================================================
CLASS 1:
NET ASSETS .................................................... 59,961,400
Shares outstanding ($0.01 par value; unlimited shares
authorized) ................................................ 5,797,019
Net asset value per share ..................................... $ 10.34
CLASS 4:
NET ASSETS .................................................... 9,457
Shares outstanding ($0.01 par value; unlimited shares
authorized) ................................................ 916
Net asset value per share ..................................... $ 10.32
See Notes to Financial Statements.
14
Statement of Operations INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Interest ................................................ $ 1,446,112
Interest from affliated investments ..................... 5,010
- --------------------------------------------------------------------------------
TOTAL INCOME ............................................... 1,451,122
- --------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ........................ 157,456
Distributors Fees (Notes 4)
Service Class ........................................ 21
Transfer agent .......................................... 9,786
Directors's fees ........................................ 1,325
Custody and accounting expenses ......................... 40,063
Professional fees ....................................... 11,855
Registration expenses ................................... 1,677
Other expenses .......................................... 9,134
- --------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ............. 231,317
- --------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser ................ (1,241)
- --------------------------------------------------------------------------------
Net expenses ............................................ 230,076
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME ...................................... 1,221,046
================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments .......................................... (4,435,226)
Futures .............................................. 149,301
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments .......................................... 3,737,367
Futures .............................................. (211,755)
- --------------------------------------------------------------------------------
Net realized and unrealized loss on investments ......... (760,313)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $ 460,733
================================================================================
See Notes to Financial Statements.
15
Statements of INCOME
Changes in Net Assets FUND
- -----------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2009 DECEMBER 31,
(UNAUDITED) 2008
- -----------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income .............................. $ 1,221,046 $ 3,994,585
Net realized loss on investments and futures ........ (4,285,925) (2,556,185)
Net increase (decrease) in unrealized appreciation/
(depreciation) on investments and futures ........ 3,525,612 (5,834,231)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) from operations ............. 460,733 (4,395,831)
- -----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 .......................................... -- (4,063,117)
Class 4 .......................................... -- (528)
- -----------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .................................... -- (4,063,645)
- -----------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and
distributions ....................................... 460,733 (8,459,476)
- -----------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 .......................................... 455,205 6,597,220
Class 4 .......................................... -- 10,000
Value of distributions reinvested
Class 1 .......................................... -- 4,063,117
Class 4 .......................................... -- 528
Cost of shares redeemed
Class 1 .......................................... (9,685,336) (26,951,232)
Class 4 .......................................... -- --
- -----------------------------------------------------------------------------------------------
Net decrease from share transactions ................ (9,230,131) (16,280,367)
- -----------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS ........................... (8,769,398) (24,739,843)
NET ASSETS
Beginning of period .................................... 68,740,255 93,480,098
- -----------------------------------------------------------------------------------------------
End of period .......................................... $ 59,970,857 $ 68,740,255
===============================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT
INCOME, END OF PERIOD .................................. $ 1,221,046 $ --
- -----------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold ............................................... 44,405 572,624
Issued for distributions reinvested ....................... -- 395,244
Shares redeemed ........................................... (948,712) (2,398,663)
- -----------------------------------------------------------------------------------------------
Net decrease in fund shares ............................... (904,307) (1,430,795)
===============================================================================================
CLASS 4
Shares sold ............................................... -- 865
Issued for distributions reinvested ....................... -- 51
- -----------------------------------------------------------------------------------------------
Net increase in fund shares ............................... -- 916
===============================================================================================
See Notes to Financial Statements.
16
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of fourteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund, Total Return Fund, Income Fund (the "Fund"), Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
The Company offers two share classes (Class 1 and Class 4) of the Fund as
investment options for variable life insurance and variable annuity contracts.
Class 4 shares were first offered on May 1, 2008, and Fund shares outstanding
prior to May 1, 2008 were designated as Class 1 shares. Each share class has
different fees and expenses, and as a result, each share class will have
different share price and performance. Not all variable contracts offer both
share classes of the Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Any short-term
securities held by the Fund with remaining maturities of sixty days or less at
the time of purchase are valued on the basis of amortized cost, which
approximates market value.
All assets and liabilities of the Fund that are initially expressed in foreign
currency values will be converted into U.S. dollars at the WM/Reuters exchange
rate computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
17
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Fund adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards 157, FAIR VALUE MEASUREMENTS ("SFAS
157"). SFAS 157 establishes a new framework for measuring fair value and expands
related disclosures. Broadly, the SFAS 157 framework requires fair value to be
determined based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants. SFAS 157 establishes a three-level valuation hierarchy
based upon observable and unobservable inputs.
For financial assets and liabilities, fair value is the price that would be
received to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets and liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect our market assumptions. Preference is given to
observable inputs. These two types of inputs create the following fair value
hierarchy:
Level 1 -- Quoted prices for identical investments in active markets.
Level 2 -- Quoted prices for similar investments in active markets; quoted
prices for identical or similar investments in markets that are not
active; and model-derived valuations whose significant value drivers are
observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
The Fund maintains policies and procedures to value investments using the best
and most relevant data available. The Fund performs periodic reviews of the
methodologies used by independent pricing services including obtaining price
validation for certain securities. The following section describes the valuation
methodologies that the Fund uses to measure investments at fair value.
When available, the Fund uses quoted market prices to determine fair value of
investment securities, and they are included in Level 1. Level 1 securities
primarily include publicly-traded equity securities.
When quoted market prices are unobservable, the Fund uses quotes from
independent pricing vendors based on recent trading activity and other relevant
information including market interest rate curves, referenced credit spreads and
estimated prepayment rates where applicable. These investments are included in
level 2 and primarily include long-term US government, agency and corporate
debt, notes, bonds, and mortgage backed securities. In infrequent circumstances,
the Fund's pricing vendors may provide valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
classified in Level 3.
Other financial instruments are derivative instruments that are not reflected in
Total Investments, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------------
Investments in Securities $2,589,587 $62,190,578 $713,028 $65,493,193
Other Financial Instruments (77,057) -- -- (77,057)
18
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Following is a reconciliation of securities activity based on Level 3 inputs for
which unobservable market inputs were used to determine fair value.
Investments Other Financial
in Securities Instruments
- -----------------------------------------------------------------------------------------------------
Balance at 12/31/08 $ 4,118,448 $ --
Accrued discounts/premiums 66,540 --
Realized gain (loss) (1,126,884) --
Change in unrealized appreciation (depreciation) (684,328) --
Net purchases (sales) (1,385,124) --
Net transfers in and out of Level 3 (275,623) --
- -----------------------------------------------------------------------------------------------------
Balance at 6/30/09 $ 713,029 $ --
- -----------------------------------------------------------------------------------------------------
Change in Unrealized Gain/(Loss) for the year on level 3 securities
held at June 30, 2009 $ (756,132) $ --
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instuments that are consistent with the Fund's investment
objectives or policies. The Fund's custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/ depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund
19
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
will not enter into a transaction involving futures for speculative purposes.
The Fund's risks in using these contracts include changes in the value of the
underlying instruments, non-performance of the counterparties under the
contracts' terms and changes in the liquidity of the secondary market for the
contracts. Futures contracts are valued at the settlement price established each
day by the board of trade or exchange on which they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. The Fund will not enter
into a transaction involving options for speculative purposes. The Fund's risks
in using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Options
are valued at the last sale price, or if no sales occurred on that day, at the
last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
SWAP CONTRACTS As part of the investment strategy, the Fund may invest in swap
agreements, which are agreements to exchange the return generated by one
instrument for the return generated by another instrument. Total return swap
agreements involve commitments to pay interest in exchange for a market linked
return based upon a notional principal amount. To the extent the total return of
the security or index underlying the agreement exceeds or falls short of the
offsetting interest rate obligation, the Fund will receive a payment from or
make a payment to the counterparty. Swaps are marked to market daily based upon
the underlying security or index. Payments received or made are recorded as
realized gain or loss in the Statement of Operations. Entering into swap
agreements involves, to varying degrees, elements of credit and market risk in
excess of the amounts recognized on the Statement of Assets and Liabilities.
Such risks involve the possibility that there will be no liquid market for these
agreements, that the counterparty to the agreements may default on its
obligation to perform and that there may be unfavorable changes in the value of
the index or securities underlying the agreement. Notional principal amounts are
used to express the extent of involvement in these transactions, but the amounts
potentially subject to credit risk are much smaller.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The Fund may purchase or sell
securities on a when-issued or forward commitment basis. These transactions are
arrangements in which the Fund purchases and sells securities with payment and
delivery scheduled a month or more after entering into the transactions. The
price of the underlying securities and the date when these securities will be
delivered and paid for are fixed at the time the transaction is negotiated.
Losses may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contracts. In connection with
such purchases, the Fund maintains cash or liquid assets in an amount equal to
purchase commitments for such underlying securities until settlement date and
for sales commitments, the Fund maintains equivalent deliverable securities as
"cover" for the transaction. Unsettled commitments are valued at the current
market value of the underlying security. Daily fluctuations in the value of such
contracts are recorded as unrealized gains or losses. The Fund will not enter
into such commitments for the purpose of investment leverage.
20
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts to facilitate transactions in foreign
denominated securities and to manage the Fund's currency exposure. Forward
foreign currency exchange contracts are valued at the mean between the bid and
the offered forward rates as last quoted by a recognized dealer. The aggregate
principal amounts of the contracts are not recorded in the Fund's financial
statements. Such amounts appear under the caption forward foreign currency
contracts in the Schedule of Investments. Fluctuations in the value of the
contracts are recorded in the Statement of Assets and Liabilities as an asset
(or liability) and in the Statement of Operations as unrealized appreciation
(depreciation) until the contracts are closed, when they are recorded as
realized gains or losses on foreign currency related transactions. The Fund's
risks in using these contracts include changes in the value of foreign currency
or the possibility that the counterparties do not perform under the contracts'
terms. When the Fund enters into a forward foreign currency exchange contract,
it is required to segregate cash or liquid securities with its custodian in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract. If the value of the segregated securities
declines, additional cash or securities is segregated so that the value of the
account will equal the amount of the Fund's commitment with respect to the
contract.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2009, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- --------------------------------------------------------------------------------
$69,561,143 $1,737,386 $(5,805,336) $(4,067,950)
As of December 31, 2008, the Fund has capital loss carryovers as indicated
below. Capital loss carryovers are available to offset future realized capital
gains to the extent provided in the Internal Revenue Code and regulations
thereunder. To the extent that these carryover losses are used to offset future
capital gains, it is probable that the gains so offset will not be distributed
to shareholders because they would be taxable as ordinary income.
Amount Expires
- --------------------------------------------------------------------------------
$1,055,894 12/31/13
1,322,182 12/31/14
1,315,125 12/31/15
972,866 12/31/16
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
21
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The Fund elected to defer losses incurred after October 31, 2008 as follows:
Capital Currency
- --------------------------------------------------------------------------------
$1,991,958 $ --
The tax composition of distributions paid during the years ended December 31,
2008 and December 31, 2007 were as follows:
Long-Term Return
Ordinary Capital of
Income Gains Capital Total
- -----------------------------------------------------
2008 $4,014,342 $ -- $ 49,303 $4,063,645
2007 6,169,021 -- 305,059 6,474,080
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures,
treatment of realized gains and losses on foreign currency contracts and losses
deferred due to wash sale transactions. Reclassifications due to permanent
book/tax differences are made to the Fund's capital accounts to reflect income
and gains available for distribution (or available capital loss carryovers)
under income tax regulations. These reclassifications have no impact on net
investment income, realized gains or losses, or the net asset value of the Fund.
The calculation of net investment income per share in the Financial Highlights
table excludes these adjustments.
The reclassifications for the year ended December 31, 2008 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated Paid in
Income Net Realized Gain Capital
- --------------------------------------------------------------------------------
$69,392 $(20,089) $(49,303)
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2005, 2006, 2007 and 2008 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Fund specific expenses are allocated to the Fund that incurs such
expense and pro rata across share classes. Expenses, other than those incurred
by a specific Fund, are allocated pro rata among Funds and share classes. Such
expenses may include custodial fees, legal and accounting fees, printing costs
and registration fees. All expenses of the Fund are paid by GEAM and reimbursed
by the Fund. Certain class specific expenses (such as transfer agency fees or
distribution fees) are allocated to the class that incurs such expense.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES On March 19, 2008, the FASB issued
Statement of Financial Accounting Standards No. 161 ("FAS No. 161"), "Disclosure
about Derivative Instruments and Hedging Activities." This new accounting
statement requires enhanced disclosures about an entity's derivative and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity invests in derivatives, (b) how derivatives are accounted for
under FAS No. 133, and (c) how derivatives affect an entity's financial
position, financial performance, and cash flows. FAS No. 161 also requires
enhanced disclosures regarding credit-risk-related contingent features of
derivative instruments.
The Fund is subject to interest rate risk in the normal course of pursuing its
investment objectives. The Fund may use futures contracts to gain exposure to,
or hedge against changes in the value of interest rates. A futures contract
represents a commitment for the future purchase or sale of an asset at a
specified price on a specified date. Upon entering into such contracts, the Fund
is required to deposit with the broker, either in cash or securities, an
22
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
initial margin in an amount equal to a certain percentage of the contract
amount. Subsequent payments (variation margin) are made or received by the Fund
each day, depending on the daily fluctuations in the value of the contract, and
are recorded for financial statement purposes as unrealized gains or losses by
the Fund. Upon entering into such contracts, the Fund bears the risk of interest
rates moving unexpectedly, in which case, the Fund may not achieve the
anticipated benefits of the futures contracts and may realize a loss. With
futures contracts, there is minimal counterparty credit risk to the Fund since
futures contracts are exchange traded and the exchange's clearinghouse, as
counterparty to all traded futures, guarantees the futures against default.
Shown below are the derivative contracts entered into by the Fund, summarized by
primary risk exposure.
Asset Derivatives June 30, 2009 Liability Derivatives June 30, 2009
---------------------------------------- ----------------------------------------------------------------
Derivatives not --
accounted for as Location in Notional Location in Notional
hedging instruments the Statements Value/No. of the Statements Value/No. of
under FASB of Assets Contracts Fair of Assets Contracts Fair
Statement 133 and Liabilities Long/(Short) Value and Liabilities Long/(Short) Value
- ---------------------------------------------------------------------------------------------------------------------------------
Interest Rate Receivables, Net Assets - 1,600,000 (15,044)* Payables, Net Assets - (5,000,000) (62,141)*
Contracts Unrealized Appreciation/ Unrealized Appreciation/
(Depreciation) (Depreciation)
- ---------------------------------------------------------------------------------------------------------------------------------
* INCLUDES CUMULATIVE APPRECIATION/DEPRECIATION OF FUTURES CONTRACTS AS
REPORTED IN THE SCHEDULE OF INVESTMENTS. ONLY THE CURRENT DAY'S VARIATION
MARGIN IS REPORTED WITHIN THE STATEMENT OF ASSETS AND LIABILITIES.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Change in Unrealized
Derivatives not accounted Location in the Realized Gain or Appreciation/(Depreciation)
for as hedging instruments Statements of (Loss) on Derivatives on Derivatives
under FASB Statement 133 Operations Recognized in Income Recognized in Income
- ---------------------------------------------------------------------------------------------------------------
Interest Rate Net realized gain/(loss) on 149,301 (211,755)
Contracts futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on futures
- ---------------------------------------------------------------------------------------------------------------
3. LINE OF CREDIT
The Company shares a revolving credit facility of up to $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established on November 7, 2007. Generally, borrowings under
the credit facilities would accrue interest at the Federal Funds Rate plus 50
basis points and would be borne by the borrowing Fund. The maximum amount
allowed to be borrowed by any one Fund is the lesser of (i) its prospectus
limitation or (ii) 20% of its net assets. The credit facilities were not
utilized by the Fund during the fiscal year ended June 30, 2009.
4. AMOUNTS PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was
retained by the Company's Board of Directors effective November 15, 1997 to act
as investment adviser and administrator of the Fund. Compensation of GEAM for
investment advisory and administrative services is paid monthly based on the
average daily net assets of the Fund at an annualized rate of 0.50%.
23
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ended June 30, 2009, $626 was charged to the
Fund.
DISTRIBUTION AND SERVICE (12b-1) FEES The Company has adopted a Distribution and
Service (12b-1) Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with
respect to Class 4 shares of the Fund. Under the Plan, the Fund may compensate
GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and
the Fund's principal distributor, for certain sales services provided by GEID or
other broker dealers and investor services provided by GEID or other service
providers relating to the Fund's Class 4 shares, including services to owners or
prospective owners of variable contracts issued by insurance companies that
offer such share class as an investment option. The amount of compensation paid
under the Plan by the Fund's Class 4 shares may not exceed 0.45% of the average
daily net assets of the Fund attributable to such share class. The Plan
continues in effect from year to year for so long as such continuance is
approved annually by the Board of Directors, including by those directors who
are not interested persons of the Company and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related to
it.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2009 were as follows:
U.S. Government Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$69,915,759 $71,617,701
Other Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$13,772,827 $21,339,806
SECURITY LENDING At June 30, 2009, the Fund did not participate in securities
lending.
24
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 60
POSITION(S) HELD WITH FUND Chairman of the Board and President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 11 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS President and Chief Executive
Officer - Mutual Funds and Intermediary Business since March 2007; Executive
Vice President of GEAM from February 1997 to March 2007; Director of GEAM since
1988; Vice President, GE Capital Corporation, an indirect wholly-owned
subsidiary of GE, since December 1999; Executive Vice President - Sales and
Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, from
March 1993 to March 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds since its inception; Trustee of
General Electric Savings & Security Trust, General Electric S&S Income Fund,
General Electric S&S Program Mutual Fund ("GE Savings & Security Funds"), Elfun
Funds, General Electric Insurance Plan Trust, General Relief Loan Fund, and
General Electric Pension Trust since 1988; Trustee of Fordham University since
2002; Trustee of GE Volunteers since 1993; Director, GE Asset Management
(Ireland) since February 1999; Director, GE Asset Management Funds Plc., GE
Asset Canada Company, and GE Asset Management Limited since 1998.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Director and Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds since July 2007.
25
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 43
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years (Vice President); one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
from September 2003 to July 2007; Vice President and Secretary of GE Funds and
GE Institutional Funds since July 2007; Vice President and Assistant Secretary
of Elfun Funds and GE Savings & Security Funds since October 2003.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
26
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 63
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since its inception; Trustee of Fordham University since
2002 and Marymount College from 2001 through 2002; Neuroscience Research
Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn &
Queens since 2001; Gregorian University Foundation since 1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 73
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception; Trustee, St. Francis Hospital Corp.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
27
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J. Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS &
INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Ralph R. Layman, PRESIDENT - PUBLIC EQUITIES (SINCE JULY 2009)
Maureen B. Mitchell, PRESIDENT - INSTITUTIONAL SALES AND MARKETING (SINCE JULY
2009)
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST (SINCE JULY 2009)
Don W. Torey, PRESIDENT - ALTERNATIVE INVESTMENTS
John J. Walker, EVP, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT - INVESTMENT STRATEGIES
28
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii)
on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
- --------------------------------------------------------------------------------
[GE LOGO]
GE Investments Funds, Inc.
Money Market Fund Letter from the Chairman
- --------------------------------------------------------------------------------
[PHOTO OF MICHAEL J. COSGROVE]
MICHAEL J. COSGROVE
CHAIRMAN,
GE INVESTMENTS FUNDS, INC.
DEAR SHAREHOLDER:
Attached is the semi-annual report for the GE Investments Funds, Inc. -- Money
Market Fund (the "Fund") for the six-month period ended June 30, 2009. The
report contains information about the performance of the Fund, and other Fund
specific data, along with portfolio manager commentary. We have provided you
with an overview of the investment markets, along with our investment outlook
for the coming months.
MARKET OVERVIEW
Despite investors' hopes that the new U.S. administration and Congress would
help stabilize the nation's financial crisis, asset values continued to fall in
the first quarter of 2009. Global equities experienced sharp price declines in
January and February as troubles in the United States continued to cast a cloud
over world markets. U.S. Treasury Secretary Geithner indicated that some U.S.
banks would need large amounts of assistance to survive and talks of stress
tests and bank nationalization spooked investors. The markets also booed
government plans to take a 36% stake in Citigroup even as the financial status
of institutions already on government life-support, such as AIG, remained
uncertain. Similarly, news of troubled automakers GM and Chrysler worried
international bondholders and shareholders alike. Financial services and small
cap stocks were hardest hit in the downswing as equity indexes broke the
November 2008 lows in February. Government debt issues also had a rough February
as U.S. and U.K. debt auctions saw weak support for long and non-inflation
indexed government securities. These poor showings were soon followed by a
warmer reception for shorter-dated debt.
U.S. stocks abruptly reversed course and posted three straight weeks of gains
through the end of March after the three largest U.S. banks announced they had
turned a profit. Equity indexes around the globe followed the U.S. path,
regaining much of their losses since January. In late March, the U.S. Treasury
Secretary unveiled his Public- Private Investment Partnership (PPIP) plan to
remove toxic assets from the balance sheets of the nation's banks, and the
markets seemed convinced of a financial sector backstop. Another policy move to
support the markets came on March 18th when the Federal Reserve announced that
it would buy $300 billion of 2- and 10-year Treasuries, increase its purchase
plan of agency mortgage-backed securities from $500 billion to $1.25 trillion,
double its purchases of agency debt to $200 billion and expand the eligible
collateral in the Term Asset-Backed Securities Loan Facility (TALF) program. In
response, the yield on the U.S. Treasury 10-year note fell 47 basis points to
2.53%, recording the largest one-day drop in over four decades.
The rebound in global equities continued into the second quarter, as markets
experienced strong gains in April and May, before tailing off into a flat June
as investors started to question the strength and timing of an economic
recovery. Despite a double-digit rally since mid-March, the S&P 500 Index ended
the second quarter approximately where it started at the beginning of 2009
(priced in the low 900s). Emerging markets equities continued to outperform
their developed peers during the second quarter. The MSCI Emerging Markets Index
gained 34.7%, its best quarterly return since data collection began in 1988.
Speculation persists that developing markets are better positioned to weather
the global recession given that their financial systems are generally better
capitalized and less leveraged than the developed countries.
During the second quarter, U.S. government stress tests concluded and the banks
that needed capital swiftly and successfully raised it. The Federal Reserve also
announced that it would allow 10 large banks to repay bailout funds from the
government's controversial Troubled Asset Relief Program. In this environment,
financial stocks enjoyed a notably strong quarter, bolstered by growing
speculation that the worst of the global banking crisis was over. However,
financial risks remain as the European Central Bank said that European banks
might need to write down an additional $283 billion by the end of next year. In
late June, The European Central Bank also injected (euro)442 billion ($621
billion) into Europe's banking system in one-year funds to spur lending and help
stabilize the economy.
[GE LOGO]
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Money Market Fund Letter from the Chairman (Continued)
- --------------------------------------------------------------------------------
Against this backdrop, financial markets posted improved results for the six-
and 12-month periods ended June 30.
TOTAL RETURNS AS OF
JUNE 30, 2009 6-MONTH 12-MONTH
- --------------------------------------------------------------------------------
U.S. equities (S&P 500 Index) 3.16 -26.21
Global equities (MSCI World Index) 6.35 -29.50
International equities
(MSCI EAFE Index) 7.95 -31.35
Emerging Markets equities
(MSCI EM Index) 36.01 -28.07
Small-cap U.S. equities
(Russell 2000 Index) 2.64 -25.01
Mid-cap U.S. equities
(Russell Mid Cap Index) 9.96 -30.36
U.S. fixed income (Barclays Capital
U.S. Aggregate Bond Index) 1.90 6.05
U.S. short-term government
fixed income (Barclays Capital
U.S. Treasury Bond Index 1-3 Year) 0.47 4.94
U.S. tax-exempt income
(Barclays Capital U.S. Municipal
Bond Index 10 year) 4.38 5.58
- --------------------------------------------------------------------------------
OUTLOOK
Uncertainty will likely continue around the strength and timing of a U.S.
economic recovery. With unemployment at a 25-year high of 9.5%, and American
consumers having suffered a collapse in wealth of at least $15 trillion since
early 2007, it is hard to have much confidence in a consumer-driven recovery in
the short term. We believe the economy will work below its potential for many
quarters to come as deleveraging continues among consumers and global financial
institutions.
While equity markets have enjoyed a bounce off of the bottom over the first half
of the year, the positive earnings surprises in April and May came mostly from
productivity gains and cost containment programs. Earnings in the second quarter
will be heavily scrutinized for evidence that a real recovery is sustainable and
that restocking is giving way to growth in final demand. We believe companies
are going to have to show evidence of a top-line recovery -- increased demand
and improving fundamentals -- in order for stocks to work their way higher.
Given the economic headwinds we're facing, consolidation of the second quarter's
gains seems a real possibility.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. We encourage
long-term investors to maintain a diversified investment approach that is
consistent with their goals, time horizon and risk tolerance. While diversified
portfolios are not immune to market downturns, history suggests they can put you
in a position to benefit from the inevitable return to better times.
Thank you for investing with GE Investments Funds.
Sincerely,
/s/ Michael J. Cosgrove
Michael J. Cosgrove
CHAIRMAN, GE INVESTMENTS FUNDS, INC.
JUNE 2009
MIKE COSGROVE IS PRESIDENT AND CHIEF EXECUTIVE OFFICER -MUTUAL FUNDS &
INTERMEDIARY BUSINESS AT GE ASSET MANAGEMENT. MR. COSGROVE ALSO SERVES AS A
TRUSTEE OF THE GE PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM. PREVIOUSLY
CHIEF FINANCIAL OFFICER OF GE ASSET MANAGEMENT AND ASSISTANT TREASURER - GE
COMPANY, MIKE JOINED GE IN 1970 AND HELD A NUMBER OF MANAGERIAL POSITIONS IN
FINANCE AND SALES AT GE'S INTERNATIONAL OPERATION AND IN GE TRADING COMPANY.
MIKE HAS A B.S. IN ECONOMICS FROM FORDHAM UNIVERSITY AND AN M.B.A. FROM ST.
JOHN'S UNIVERSITY.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC.
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
[SIDE BAR]
GE Investments Funds, Inc.
Money Market Fund
Semi-Annual Report
JUNE 30, 2009
[GE LOGO]
GE Investments Funds, Inc.
Money Market Fund Contents
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE ..................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................... 2
NOTES TO SCHEDULE OF INVESTMENTS ......................................... 8
FINANCIAL STATEMENTS
Financial Highlights .................................................. 9
Statement of Assets and Liabilities ................................... 10
Statement of Operations ............................................... 11
Statements of Changes in Net Assets ................................... 12
Notes to Financial Statements ......................................... 13
ADDITIONAL INFORMATION ................................................... 18
INVESTMENT TEAM .......................................................... 21
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
Notes to Performance June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any. Total returns shown
are net of Fund expenses but do not reflect fees and charges associated with the
variable contracts such as administrative fees, account charges and surrender
charges, which, if reflected, would reduce the Fund's total returns for all
periods shown.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in a Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. An investment in a Fund is subject to risk, including
possible loss of principal invested.
The 90 Day T-Bill is an unmanaged measure/index of the performance of U.S.
Treasury bills currently available in the marketplace having a remaining
maturity of 90 days.
The peer universe of the underlying annuity funds used in our peer group average
return calculation is based on the blend of Morningstar peer categories, as
shown. Morningstar is an independent mutual fund rating service. A Fund's
performance may be compared to or ranked within a universe of mutual funds with
investment objectives and policies similar but not necessarily identical to the
Fund's.
(C)2009 Morningstar, Inc. All Rights Reserved. The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is no warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are responsible for any
damage or losses relating from any use of this information. Past performance is
no guarantee or future results.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUND.
1
Money Market Fund
- --------------------------------------------------------------------------------
THE MONEY MARKET FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT
INCLUDES ADAM W. ACKERMANN, JAMES C. GANNON AND MICHAEL E. MARTINI. AS LEAD
PORTFOLIO MANAGER FOR THE MONEY MARKET FUND, MR. MARTINI HAS OVERSIGHT
RESPONSIBILITIES OVER THE FUND.
[PHOTO OF MICHAEL E. MARTINI]
MICHAEL E. MARTINI
MICHAEL E. MARTINI IS A VICE PRESIDENT AND A PORTFOLIO MANAGER AT GE ASSET
MANAGEMENT. HE HAS SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE MONEY MARKET
FUND SINCE JOINING GE ASSET MANAGEMENT IN MARCH OF 2008. PRIOR TO JOINING GE
ASSET MANAGEMENT, MR. MARTINI WAS A VICE PRESIDENT AT CERES CAPITAL PARTNERS
LLC, WHERE HE WORKED AT THE FIRM'S TREASURY DESK FROM MARCH 2006 TO JANUARY
2008, AND A SENIOR VICE PRESIDENT AT PACIFIC INVESTMENT MANAGEMENT COMPANY
(PIMCO) FROM 1996 TO 2004, WHERE HE WAS A PORTFOLIO MANAGER AT THE FIRM'S MONEY
MARKET/SHORT-TERM DESK.
ADAM W. ACKERMANN IS AN ASSISTANT PORTFOLIO MANAGER AT GE ASSET MANAGEMENT. HE
HAS SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE MONEY MARKET FUND SINCE JUNE
2009. HIS RESPONSIBILITIES INCLUDE CASH MANAGEMENT, INCLUDING DAILY MONEY MARKET
TRADE EXECUTION, AND TECHNICAL PROJECTS. MR. ACKERMANN JOINED GE ASSET
MANAGEMENT IN 2005 THROUGH THE SUMMER INTERNSHIP PROGRAM WORKING WITH THE U.S.
EQUITY MID-CAP PORTFOLIO MANAGEMENT TEAM. ADAM THEN JOINED THE FIXED INCOME TEAM
AS AN ANALYST, AND IN 2007 BECAME MANAGER OF THE GLOBAL FIXED INCOME TRADING
OPERATIONS UNTIL JUNE 2009.
JAMES C. GANNON IS AN ASSISTANT PORTFOLIO MANAGER OF GE ASSET MANAGEMENT. HE HAS
SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE MONEY MARKET FUND SINCE DECEMBER
2000. SINCE JOINING GE ASSET MANAGEMENT IN 1995, MR. GANNON SERVED IN VARIOUS
POSITIONS AT GE ASSET MANAGEMENT INCLUDING TRADE OPERATIONS SPECIALIST IN FIXED
INCOME, AND BECAME AN ASSISTANT PORTFOLIO MANAGER IN FEBRUARY 2003.
Q. HOW DID THE MONEY MARKET FUND PERFORM COMPARED TO ITS BENCHMARK AND
MORNINGSTAR PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009?
A. For the six-month period ended June 30, 2009, the Class 1 shares of the
Money Market Fund returned 0.26%. The 90-day Treasury Bill, the Fund's
benchmark, returned 0.09% and the Fund's Morningstar peer group of 99 US
Insurance Money Market Taxable funds returned an average of 0.12% for the
same period.
Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE SIX-MONTH PERIOD
ENDING JUNE 30, 2009.
A. Despite the $787 billion stimulus bill signed into legislation in February
to revive the economy and create jobs, unemployment continued to rise
throughout the first half of 2009. The unemployment rate hit 9.5% in June
and total jobs lost, according to Bureau of Labor Statistics, year to date
totaled 3.38 million, resulting in up to 6.46 million jobs lost since the
recession began in December 2007. Housing prices continued to decline and
delinquencies headed higher even for those borrowers with high credit
quality. Consumers began to delever in 2009 by increasing savings, which
caused spending to plummet. Although the economic data was generally poor,
there were still talks of economic "greenshoots", which some investors
believe may be the beginning of recovery.
Interest rates steadily rose during the first half, while the Federal
Reserve kept its fed funds rate target steady at 0-0.25%. The US treasury
2 and 10-year note yields ended June at 1.1% and 3.5% respectively, up 34
and 132 basis points. The one downward spike in rates occurred in mid
March when the Federal Reserve announced quantitative
2
- --------------------------------------------------------------------- [Q&A LOGO]
easing plans to buyback up to $300 billion of US treasuries, $200 billion
of US agency debt and $1.25 trillion of agency mortgage-backed securities.
The short end of the market improved as 3-month LIBOR decreased 80 basis
points to 0.60%. Credit markets, in general, opened up with healthy new
issuance from both high grade and high yield companies.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. Maturity management was a primary driver of Fund performance. With a view
toward a fed funds rate being maintained at 0 to 0.25% for a long period,
the Fund's average days to maturity was extended to maintain yield. The
slight reduction in government securities from last year in favor of
higher yielding non-government securities also benefited Fund performance.
Lastly, securities purchased early in the year benchmarked off higher
LIBOR rates contributed positively.
3
Money Market Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2009.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2009 - JUNE 30, 2009
- --------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ----------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,002.57 2.28
- ----------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,022.26 2.31
- ----------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.46% FOR
CLASS 1 SHARES (FOR THE PERIOD JANUARY 1, 2009 - JUNE 30, 2009),
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
181/365 (TO REFLECT THE SIX MONTH PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2009 WAS: 0.26%.
4
Money Market Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT (CLASS 1 SHARES)
================================================================================
[LINE GRAPH]
- --------------------------------------------------------------------------------
Money Market Fund 90-Day T-Bill
(ending value $13,542) (ending value $13,424)
06/99 $10,000 $10,000
12/99 $10,262 $10,249
12/00 $10,902 $10,864
12/01 $11,337 $11,240
12/02 $11,505 $11,424
12/03 $11,595 $11,541
12/04 $11,705 $11,702
12/05 $12,032 $12,079
12/06 $12,591 $12,662
12/07 $13,211 $13,228
12/08 $13,507 $13,411
06/09 $13,542 $13,424
TOTAL RETURNS FOR THE PERIODS
ENDED JUNE 30, 2009 (CLASS 1 SHARES)
================================================================================
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Money Market Fund 0.26% 1.11% 3.09% 3.08%
- --------------------------------------------------------------------------------
90 Day T-Bill 0.09% 0.54% 2.96% 2.99%
- --------------------------------------------------------------------------------
Morningstar peer group average* 0.12% 0.95% 2.92% 2.89%
- --------------------------------------------------------------------------------
Inception date 7/1/85
================================================================================
INVESTMENT PROFILE
A fund designed for investors who seek a high level of current income consistent
with the preservation of capital and maintenance of liquidity by investing
primarily in short-term U.S. dollar-denominated money market instruments.
FUND YIELD AT JUNE 30, 2009
================================================================================
FUND IBC'S MONEY FUND**
- --------------------------------------------------------------------------------
7-DAY CURRENT 0.18%+ 0.11%
- --------------------------------------------------------------------------------
7-DAY EFFECTIVE 0.18% 0.11%
================================================================================
CURRENT YIELD REPRESENTS INCOME EARNED ON AN INVESTMENT IN THE MONEY MARKET FUND
FOR A SEVEN DAY PERIOD AND THEN ANNUALIZED.
EFFECTIVE YIELD IS CALCULATED SIMILARLY BUT COULD BE SLIGHTLY HIGHER BECAUSE IT
REFLECTS THE COMPOUNDING EFFECT OF EARNINGS ON REINVESTED DIVIDENDS.
+ THE SEVEN DAY CURRENT YIELD, RATHER THAN THE TOTAL RETURN, MORE CLOSELY
REFLECTS THE CURRENT EARNINGS OF THE MONEY MARKET FUND AT JUNE 30, 2009.
** IBC'S MONEY FUND REPORT PROVIDES AVERAGE YIELD FOR ALL MAJOR MONEY MARKET
FUNDS.
AN INVESTMENT IN THE MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH
THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. NOTWITHSTANDING THE
PRECEDING STATEMENTS, FUND SHAREHOLDERS WILL BE GUARANTEED TO RECEIVE $1.00 NET
ASSET VALUE PER SHARE FOR AMOUNTS THAT THEY HELD AS OF SEPTEMBER 19, 2008,
SUBJECT TO THE TERMS OF THE U.S. TREASURY'S TEMPORARY GUARANTEE PROGRAM FOR
MONEY MARKET FUNDS (U.S. TREASURY MONEY MARKET GUARANTEE PROGRAM) AND ONLY AS
LONG AS THE FUND CONTINUES TO PARTICIPATE IN THE PROGRAM. FOR MORE INFORMATION
ABOUT THE U.S. TREASURY MONEY MARKET GUARANTEE PROGRAM AND THE FUND'S
PARTICIPATION IN THE PROGRAM, PLEASE SEE NOTE 5 OF THE NOTES TO FINANCIAL
STATEMENTS ON PAGE 16 OF THIS SEMI-ANNUAL REPORT, AND THE FUND'S MOST CURRENT
PROSPECTUS.
* MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS
INDICATED IN THE MONEY MARKET TAXABLE PEER GROUP CONSISTING OF 99, 99, 93
AND 66 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
5
MONEY MARKET FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------
Portfolio Composition based on a Market Value of $436,558 (in thousands) as of
June 30, 2009
[PIE CHART]
Certificates of Deposit 25.9%
Corporate Notes 23.3%
Commercial Paper 20.1%
Agency 18.9%
Repurchase Agreements 7.8%
Time Deposit 4.0%
- --------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 101.8% +
- --------------------------------------------------------------------------------
AGENCY -- 17.0%
Fannie Mae
0.88% 02/12/10 ........................ $ 5,630,000 $ 5,642,555 (b)
FHLB Disc Corp
0.20% 08/19/09 ........................ 8,040,000 8,037,811 (b)
0.27% 10/30/09 ........................ 7,030,000 7,023,620 (b)
FNMA Discount
0.20% 08/20/09 ........................ 3,390,000 3,389,058 (b)
0.42% 07/20/09 - 07/22/09 ............. 13,700,000 13,696,771 (b)
Freddie Discount
0.29% 11/09/09 ........................ 9,530,000 9,519,839 (b)
0.60% 08/24/09 ........................ 4,950,000 4,945,545 (b)
Freddie Mac
0.88% 02/04/10 ........................ 18,390,000 18,390,000 (b)
4.88% 02/09/10 ........................ 2,170,000 2,238,455
72,883,654
TREASURY -- 2.3%
U.S. Treasury Notes
4.88% 08/15/09 ........................ 9,550,000 9,605,448
COMMERCIAL PAPER -- 20.4%
Canada Gov
0.18% 08/20/09 ........................ 3,850,000 3,848,984 (b)
CBA (Delaware) Finance
0.54% 07/21/09 ........................ 12,950,000 12,946,115 (b)
Conocophillips
0.25% 07/01/09 ........................ 7,000,000 7,000,000 (b)
Danske Corp.
0.37% 08/19/09 ........................ 9,790,000 9,785,070 (b)
1.14% 07/15/09 ........................ 9,350,000 9,345,855 (a)
- --------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
Eksportfinans Asa
0.25% 08/03/09 ........................ $ 7,880,000 $ 7,878,194 (b)
National Australia Funding (DE)
0.44% 08/05/09 ........................ 5,320,000 5,317,724 (b)
Nordea North America Inc.
1.00% 07/13/09 ........................ 13,000,000 12,995,667 (b)
Societe Generale N Amer
0.16% 07/01/09 ........................ 3,950,000 3,950,000 (b)
0.52% 11/18/09 ........................ 4,660,000 4,650,576 (b)
Wells Fargo & Co.
0.06% 07/01/09 ........................ 9,890,000 9,890,000 (b)
87,608,185
REPURCHASE AGREEMENTS -- 7.9%
Barclays Bank Gov Agcy Repo
0.08% dated 06/30/09, to be
repurchased at $15,600,035 on
01/07/09 collateralized by
$15,915,762 U.S. Government
Agency Bonds, 07/01/09 ................... 15,600,000 15,600,000 (b)
Deutsche Bank Gov Agcy Repo
0.08% dated 06/30/09, to be
repurchased at $12,500,028 on
01/07/09 collateralized by
$12,750,726 U.S. Government
Agency Bonds, 5.50%,
maturing 08/23/27. 07/01/09 .............. 12,500,000 12,500,000 (b)
HSBC Gov Agcy Repo
0.05% dated 06/30/09, to be
repurchased at $2,793,559 on
01/07/09 collateralized by
$2,849,430 U.S. Government
Agency Bonds, 0.00%, maturing
08/18/09. 07/01/09 ....................... 2,790,000 2,790,000 (b)
JPM Chase Gov Agcy Repo
0.05% dated 06/30/09, to be
repurchased at $3,101,591 on
01/07/09 collateralized by
$3,163,622 U.S. Government
Agency Bonds, 6.63%, maturing
11/15/30. 07/01/09 ....................... 3,100,000 3,100,000 (b)
33,990,000
CORPORATE NOTES -- 21.3%
Abbey Natl Treasury Services
1.02% 08/28/09 ........................ 8,700,000 8,700,413 (b)
1.06% 02/25/10 ........................ 12,540,000 12,540,000 (b)
Bank of Nova Scotia Houston
1.28% 01/15/10 ........................ 10,360,000 10,360,000 (b)
IBM Intl Group Capital
1.39% 07/29/09 ........................ 3,060,000 3,062,670 (b)
KFW
1.15% 01/21/10 ........................ 5,020,000 5,031,035 (b)
4.50% 09/21/09 ........................ 7,030,000 7,091,812
Procter & Gamble International Fn
1.00% 05/07/10 ........................ 2,680,000 2,680,000 (b)
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
MONEY MARKET FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
Rabobank Nederland NY
1.20% 04/26/10 ........................ $ 8,770,000 $ 8,770,000 (b)
Royal Bank of Canada NY
1.17% 01/26/10 ........................ 19,230,000 19,230,000 (b)
Toyota Motor Credit Corp.
0.34% 09/15/09 ........................ 12,900,000 12,900,000 (b)
Wal Mart Stores Inc.
6.88% 08/10/09 ........................ 1,080,000 1,087,156
91,453,086
TIME DEPOSIT -- 4.1%
Bank Of Ireland
0.25% 07/01/09 ........................ 17,300,000 17,300,000 (b)
State Street Corp.
0.01% 07/01/09 ........................ 150,956 150,956 (c)
17,450,956
CERTIFICATES OF DEPOSIT -- 28.8%
Australia & NZ Banking Group
0.52% 07/09/09 ........................ 18,000,000 18,001,287 (b)
Bank of Montreal Chicago
0.30% 07/09/09 ........................ 8,590,000 8,589,571 (b)
Bank of Nova Scotia Houston
0.53% 12/09/09 ........................ 4,390,000 4,390,000 (b)
Barclays Bank PLC NY
0.83% 09/14/09 ........................ 11,630,000 11,630,000 (b)
1.00% 10/30/09 ........................ 6,020,000 6,020,000 (b)
BNP Paribas NY
0.50% 11/25/09 ........................ 3,880,000 3,880,000 (b)
1.08% 09/01/09 ........................ 6,470,000 6,470,000 (b)
Calyon New York
1.15% 07/01/09 ........................ 12,000,000 12,000,000 (b)
National Australia Bank
0.36% 09/01/09 ........................ 3,060,000 3,060,033 (b)
Nordea Bank Finland NY
0.85% 10/13/09 ........................ 4,230,000 4,239,364 (b)
Societe Generale NY
0.29% 07/27/09 ........................ 9,500,000 9,500,000 (b)
Svenska Handelsbanken NY
0.30% 07/17/09 ........................ 13,750,000 13,756,391 (b)
Rabobank Ned NV NY
0.82% 08/03/09 ........................ 10,510,000 10,510,000 (b)
Toronto Dominion Bank NY
1.62% 08/10/09 ........................ 11,520,000 11,520,000 (b)
123,566,646
TOTAL SHORT-TERM INVESTMENTS
(COST $43,6557,975) ...................... 436,557,975
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (1.8)% ............................ (7,661,109)
------------
NET ASSETS -- 100.0% ........................ $428,896,866
============
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
Notes to Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Pursuant to Section 4(2) of the Securities Act of 1933, these securities
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At June 30, 2009, these securities
amounted to $9,345,855 or 2.18% of net assets. These securities have been
determined to be liquid using procedures established by the Board of
Trustees.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2009.
8
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
MONEY MARKET FUND
6/30/09+ 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
- ------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 7/1/85
Net asset value, beginning of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................ -- 0.02 0.05 0.05 0.03 0.01
Net realized and unrealized
gains on investments ........................... -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS ............. -- 0.02 0.05 0.05 0.03 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................ -- 0.02 0.05 0.05 0.03 0.01
Return of capital ................................ -- -- -- -- 0.00(b) --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................. -- 0.02 0.05 0.05 0.03 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====================================================================================================================================
TOTAL RETURN (a) .................................... 0.26% 2.24% 4.92% 4.65% 2.79% 0.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ......... $ 428,897 $ 547,554 $ 340,690 $ 279,622 $ 250,149 $ 278,703
Ratios to average net assets:
Net investment income* ......................... 0.54% 2.15% 4.81% 4.58% 2.74% 0.92%
Net expenses* .................................. 0.46% 0.45% 0.48% 0.49% 0.49% 0.47%
Gross expenses* ................................ 0.46% 0.45% 0.48% 0.49% 0.49% 0.47%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges. Had the adviser not absorbed a portion of
the expense, total returns would have been lower.
(b) Less than $0.01 per share.
* Annualized for periods less than one year.
+ Unaudited
See Notes to Financial Statements.
9
MONEY
Statement of Assets MARKET
and Liabilities JUNE 30, 2009 (UNAUDITED) FUND
- -------------------------------------------------------------------------------------------
ASSETS
Short-term Investments at market (at amortized cost) .................. $ 436,557,975
Income receivables .................................................... 765,419
- -------------------------------------------------------------------------------------------
TOTAL ASSETS ........................................................ 437,323,394
- -------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ..................................... 7,878,194
Payable for fund shares redeemed ...................................... 421,505
Payable to GEAM ....................................................... 79,789
Accrued other expenses ................................................ 47,040
- -------------------------------------------------------------------------------------------
TOTAL LIABILITIES ................................................... 8,426,528
- -------------------------------------------------------------------------------------------
NET ASSETS ............................................................... $ 428,896,866
===========================================================================================
NET ASSETS CONSIST OF:
Capital paid in ....................................................... 429,097,137
Undistributed (distribution in excess of)
net investment income .............................................. 148
Accumulated net realized loss ......................................... (200,419)
- -------------------------------------------------------------------------------------------
NET ASSETS ............................................................... $ 428,896,866
===========================================================================================
CLASS 1:
NET ASSETS ............................................................... 428,896,866
Shares outstanding ($0.01 par value; unlimited shares authorized) ........ 429,086,972
Net asset value per share ................................................ $ 1.00
See Notes to Financial Statements.
10
MONEY
Statement of Operations MARKET
FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) FUND
- ------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Interest ............................................................ $ 2,415,691
- ------------------------------------------------------------------------------------------
TOTAL INCOME .......................................................... 2,415,691
- ------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees .................................... 980,723
Transfer agent ...................................................... 35
Directors's fees .................................................... 13,018
Custody and accounting expenses ..................................... 26,747
Professional fees ................................................... 27,509
Registration expenses ............................................... 3,979
Other expenses ...................................................... 66,912
- ------------------------------------------------------------------------------------------
TOTAL EXPENSES ........................................................ 1,118,923
- ------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ................................................. 1,296,768
==========================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN ON:
Investments ......................................................... 11,512
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments ..................... 11,512
==========================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. $ 1,308,280
==========================================================================================
See Notes to Financial Statements.
11
MONEY
Statements of MARKET
Changes in Net Assets FUND
- -------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2009 DECEMBER 31,
(UNAUDITED) 2008
- -------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income .................................................. $ 1,296,768 $ 9,576,393
Net realized gain (loss) on investments ................................. 11,512 (148,062)
- -------------------------------------------------------------------------------------------------------------------
Net increase from operations ............................................ 1,308,280 9,428,331
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................................... (1,296,768) (9,576,393)
- -------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ....................................................... (1,296,768) (9,576,393)
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ....... 11,512 (148,062)
- -------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ............................................ 65,175,516 397,487,969
Value of distributions reinvested ....................................... 1,296,768 9,576,393
Cost of shares redeemed ................................................. (185,140,576) (200,053,070)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ......................... (118,668,292) 207,011,292
- -------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ................................... (118,656,780) 206,863,230
NET ASSETS
Beginning of period ....................................................... 547,553,646 340,690,416
- -------------------------------------------------------------------------------------------------------------------
End of period ............................................................. $ 428,896,866 $ 547,553,646
===================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF)
NET INVESTMENT INCOME, END OF PERIOD ...................................... $ 148 $ 148
CHANGES IN FUND SHARES
CLASS 1
Shares sold ............................................................. 65,175,516 397,487,969
Issued for distributions reinvested ..................................... 1,296,769 9,576,393
Shares redeemed ......................................................... (185,140,576) (200,053,070)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ....................................... (118,668,291) 207,011,292
===================================================================================================================
See Notes to Financial Statements.
12
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of fourteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund, Total Return Fund, Income Fund, Money Market Fund
(the "Fund") and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
All portfolio securities of the Money Market Fund are valued on the basis of
amortized costs, which approximates market value.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Fund adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards 157, FAIR VALUE MEASUREMENTS ("SFAS
157"). SFAS 157 establishes a new framework for measuring fair value and expands
related disclosures. Broadly, the SFAS 157 framework requires fair value to be
determined based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants. SFAS 157 establishes a three-level valuation hierarchy
based upon observable and unobservable inputs.
For financial assets and liabilities, fair value is the price that would be
received to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets and liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect our market assumptions. Preference is given to
observable inputs. These two types of inputs create the following fair value
hierarchy:
Level 1 -- Quoted prices for identical investments in active markets.
Level 2 -- Quoted prices for similar investments in active markets; quoted
prices for identical or similar investments in markets that are not
active; and model-derived valuations whose significant value drivers are
observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
The Fund maintains policies and procedures to value investments using the best
and most relevant data available. The Fund performs periodic reviews of the
methodologies used by independent pricing services including obtaining price
validation for certain securities.
13
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The following section describes the valuation methodologies that the Fund uses
to measure investments at fair value.
When available, the Fund uses quoted market prices to determine fair value of
investment securities, and they are included in Level 1. Level 1 securities
primarily include publicly-traded equity securities.
When quoted market prices are unobservable, the Fund uses quotes from
independent pricing vendors based on recent trading activity and other relevant
information including market interest rate curves, referenced credit spreads and
estimated prepayment rates where applicable. These investments are included in
level 2 and primarily include long-term US government, agency and corporate
debt, notes, bonds, and mortgage backed securities. In infrequent circumstances,
the Fund's pricing vendors may provide valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
classified in Level 3.
Other financial instruments are derivative instruments that are not reflected in
Total Investments, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------------
Investments in Securities $-- $436,557,975 $-- $436,557,975
Other Financial Instruments -- -- -- --
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's Custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
14
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2009, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- --------------------------------------------------------------------------------
$436,557,975 $-- $-- $--
As of December 31, 2008, the Fund has capital loss carryovers as indicated
below. Capital loss carryovers are available to offset future realized capital
gains to the extent provided in the Internal Revenue Code and regulations
thereunder. To the extent that these carryover losses are used to offset future
capital gains, it is probable that the gains so offset will not be distributed
to shareholders because they would be taxable as ordinary income.
Amount Expires
- --------------------------------------------------------------------------------
$ 63,869 12/31/10
148,062 12/31/16
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund incurred no such losses after October 31, 2008.
The tax composition of distributions paid during the years ended December 31,
2008 and December 31, 2007 were as follows:
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
2008 $ 9,576,393 $ -- $ 9,576,393
2007 15,052,427 -- 15,052,427
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares net investment income dividends
daily and pays them monthly. The character of income and gains to be distributed
is determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Reclassifications due to permanent
book/tax differences are made to the Fund's capital accounts to reflect income
and gains available for distribution (or available capital loss carryovers)
under income tax regulations. These reclassifications have no impact on net
investment income, realized gains or losses, or the net asset value of the Fund.
The calculation of net investment income per share in the Financial Highlights
table excludes these adjustments.
There were no reclassifications for the year ended December 31, 2008.
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Fund's 2005, 2006, 2007 and 2008 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
15
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
EXPENSES Fund specific expenses are allocated to the Fund that incurs such
expense and pro rata across share classes. Expenses, other than those incurred
by a specific Fund, are allocated pro rata among Funds and share classes. Such
expenses may include custodial fees, legal and accounting fees, printing costs
and registration fees. All expenses of the Fund are paid by GEAM and reimbursed
by the Fund.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES On March 19, 2008, the FASB issued
Statement of Financial Accounting Standards No. 161 ("FAS No. 161"), "Disclosure
about Derivative Instruments and Hedging Activities." This new accounting
statement requires enhanced disclosures about an entity's derivative and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity invests in derivatives, (b) how derivatives are accounted for
under FAS No. 133, and (c) how derivatives affect an entity's financial
position, financial performance, and cash flows. FAS No. 161 also requires
enhanced disclosures regarding credit-risk-related contingent features of
derivative instruments.
For the period ended June 30, 2009, the Fund did not transact in any derivative
instruments.
3. LINE OF CREDIT
The Trust shares a revolving credit facility of up to $150 million with a number
of its affiliates. The credit facility is with its custodian bank, State Street
Bank and Trust Company. The revolving credit facility requires the payment of a
commitment fee equal to 0.09% per annum on the daily unused portion of the
credit facility, payable quarterly. The portion borne by the Funds generally is
borne proportionally based upon net assets. In addition, the Trust has a $100
million uncommitted, unsecured line of credit with State Street, which was
established on November 7, 2007. Generally, borrowings under the credit
facilities would accrue interest at the Federal Funds Rate plus 50 basis points
and would be borne by the borrowing Fund. The maximum amount allowed to be
borrowed by any one Fund is the lesser of (i) its prospectus limitation or (ii)
20% of its net assets. The credit facilities were not utilized by the Fund
during the fiscal year ended June 30, 2009.
4. AMOUNTS PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was
retained by the Company's Board of Directors effective May 1, 1997 to act as
investment adviser and administrator of the Fund. Compensation of GEAM for
investment advisory and administrative services is paid monthly based on the
average daily net assets of the Fund. The advisory and administrative fee is
stated in the following schedule:
Annualized based on
average daily net assets
- --------------------------------------------------------------------------------
Average Daily Advisory and
Net Assets Administration
of Fund Fees
- --------------------------------------------------------------------------------
Money Market Fund First $100 million .50%
Next $100 million .45%
Next $100 million .40%
Next $100 million .35%
Over $400 million .30%
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2009, $5,107 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. U.S. TREASURY MONEY MARKET GUARANTEE PROGRAM
The U.S. Treasury Department (U.S. Treasury) has established the U.S. Treasury
Money Market Guarantee Program (Program). This voluntary program was designed to
provide stability to the market and is open to most money market funds. It
provides that, in exchange for the payment of a premium, the U.S. Treasury will
guarantee to money market fund shareholders that they will receive $1.00 for
each money market fund share held as of the close of business on September 19,
2008, subject to certain conditions and limitations. The guarantee is available
under the Program if the participating money market fund is no longer able to
maintain a stable $1.00 share price, commonly referred to as "breaking the
buck." While the Money Market Fund has maintained and
16
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
expects to continue to maintain its $1.00 share price, there can be no assurance
that the Money Market Fund will be able to do so. As a result, the Money Market
Fund has determined to participate in the Program. The Program extends through
September 18, 2009 and will not be extended beyond that date. Under the Program,
the guarantee applies to the number of shares of a participating fund held by an
investor as of the close of business on September 19, 2008, such that if the
investor increases or decreases the number of shares held between September 19,
2008 and the date of a qualifying liquidation of the Fund, then the guarantee
applies to the shares held by the investor as of the liquidation date up to the
number of shares the investor held on September 19, 2008. For owners of variable
annuity contracts and variable life insurance contracts the contract values of
which are indirectly invested in the Money Market Fund, the Fund's participation
in the Program likely would result, in the event of the Fund's liquidation under
the Program, in such owners being guaranteed that for each dollar of such
contract value as of the close of business on September 19, 2008, the owner
would have one dollar of contract value immediately following the liquidation.
For more information about the impact of the Money Market Fund's participation
in the Program on contract values, owners of variable annuity contracts and
variable life insurance contracts should consult the prospectus for their
contract.
17
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 60
POSITION(S) HELD WITH FUND Chairman of the Board and President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 11 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS President and Chief Executive
Officer - Mutual Funds and Intermediary Business since March 2007; Executive
Vice President of GEAM from February 1997 to March 2007; Director of GEAM since
1988; Vice President, GE Capital Corporation, an indirect wholly-owned
subsidiary of GE, since December 1999; Executive Vice President - Sales and
Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, from
March 1993 to March 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds since its inception; Trustee of
General Electric Savings & Security Trust, General Electric S&S Income Fund,
General Electric S&S Program Mutual Fund ("GE Savings & Security Funds"), Elfun
Funds, General Electric Insurance Plan Trust, General Relief Loan Fund, and
General Electric Pension Trust since 1988; Trustee of Fordham University since
2002; Trustee of GE Volunteers since 1993; Director, GE Asset Management
(Ireland) since February 1999; Director, GE Asset Management Funds Plc., GE
Asset Canada Company, and GE Asset Management Limited since 1998.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Director and Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds since July 2007.
18
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager
since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds
and GE Investments Funds since November 2005 and Elfun Funds and GE Savings &
Security Funds since September 2005; from August 2004 to September 2005 Vice
President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds,
Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January
2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from
December 1996 to November 2003, Controller - Mutual Funds, American Skandia
Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and
American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 43
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years (Vice President); one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
from September 2003 to July 2007; Vice President and Secretary of GE Funds and
GE Institutional Funds since July 2007; Vice President and Assistant Secretary
of Elfun Funds and GE Savings & Security Funds since October 2003.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
19
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 63
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since its inception; Trustee of Fordham University since
2002 and Marymount College from 2001 through 2002; Neuroscience Research
Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn &
Queens since 2001; Gregorian University Foundation since 1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 73
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception; Trustee, St. Francis Hospital Corp.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
20
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J. Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS &
INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Ralph R. Layman, PRESIDENT - PUBLIC EQUITIES (SINCE JULY 2009)
Maureen B. Mitchell, PRESIDENT - INSTITUTIONAL SALES AND MARKETING (SINCE JULY
2009)
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET
STRATEGIST (SINCE JULY 2009)
Don W. Torey, PRESIDENT - ALTERNATIVE INVESTMENTS John J. Walker, EVP, CHIEF
OPERATING OFFICER
David Wiederecht, PRESIDENT - INVESTMENT STRATEGIES
21
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii)
on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
- --------------------------------------------------------------------------------
[GE LOGO]
GE Investments Funds, Inc.
Real Estate Securities Fund Letter from the Chairman
- --------------------------------------------------------------------------------
[PHOTO OF MICHAEL J. COSGROVE]
MICHAEL J. COSGROVE
CHAIRMAN,
GE INVESTMENTS FUNDS, INC.
DEAR SHAREHOLDER:
Attached is the semi-annual report for the GE Investments Funds, Inc. -- Real
Estate Securities Fund (the "Fund") for the six-month period ended June 30,
2009. The report contains information about the performance of the Fund, and
other Fund specific data, along with portfolio manager commentary. We have
provided you with an overview of the investment markets, along with our
investment outlook for the coming months.
MARKET OVERVIEW
Despite investors' hopes that the new U.S. administration and Congress would
help stabilize the nation's financial crisis, asset values continued to fall in
the first quarter of 2009. Global equities experienced sharp price declines in
January and February as troubles in the United States continued to cast a cloud
over world markets. U.S. Treasury Secretary Geithner indicated that some U.S.
banks would need large amounts of assistance to survive and talks of stress
tests and bank nationalization spooked investors. The markets also booed
government plans to take a 36% stake in Citigroup even as the financial status
of institutions already on government life-support, such as AIG, remained
uncertain. Similarly, news of troubled automakers GM and Chrysler worried
international bondholders and shareholders alike. Financial services and small
cap stocks were hardest hit in the downswing as equity indexes broke the
November 2008 lows in February. Government debt issues also had a rough February
as U.S. and U.K. debt auctions saw weak support for long and non-inflation
indexed government securities. These poor showings were soon followed by a
warmer reception for shorter-dated debt.
U.S. stocks abruptly reversed course and posted three straight weeks of gains
through the end of March after the three largest U.S. banks announced they had
turned a profit. Equity indexes around the globe followed the U.S. path,
regaining much of their losses since January. In late March, the U.S. Treasury
Secretary unveiled his Public-Private Investment Partnership (PPIP) plan to
remove toxic assets from the balance sheets of the nation's banks, and the
markets seemed convinced of a financial sector backstop. Another policy move to
support the markets came on March 18th when the Federal Reserve announced that
it would buy $300 billion of 2- and 10-year Treasuries, increase its purchase
plan of agency mortgage-backed securities from $500 billion to $1.25 trillion,
double its purchases of agency debt to $200 billion and expand the eligible
collateral in the Term Asset-Backed Securities Loan Facility (TALF) program. In
response, the yield on the U.S. Treasury 10-year note fell 47 basis points to
2.53%, recording the largest one-day drop in over four decades.
The rebound in global equities continued into the second quarter, as markets
experienced strong gains in April and May, before tailing off into a flat June
as investors started to question the strength and timing of an economic
recovery. Despite a double-digit rally since mid-March, the S&P 500 Index ended
the second quarter approximately where it started at the beginning of 2009
(priced in the low 900s). Emerging markets equities continued to outperform
their developed peers during the second quarter. The MSCI Emerging Markets Index
gained 34.7%, its best quarterly return since data collection began in 1988.
Speculation persists that developing markets are better positioned to weather
the global recession given that their financial systems are generally better
capitalized and less leveraged than the developed countries.
During the second quarter, U.S. government stress tests concluded and the banks
that needed capital swiftly and successfully raised it. The Federal Reserve also
announced that it would allow 10 large banks to repay bailout funds from the
government's controversial Troubled Asset Relief Program. In this environment,
financial stocks enjoyed a notably strong quarter, bolstered by growing
speculation that the worst of the global banking crisis was over. However,
financial risks remain as the European Central Bank said that European banks
might need to write down an additional $283 billion by the end of next year. In
late June, The European Central Bank also injected (euro)442 billion ($621
billion) into Europe's banking system in one-year funds to spur lending and help
stabilize the economy.
[GE LOGO]
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Real Estate Securities Fund Letter from the Chairman (Continued)
- --------------------------------------------------------------------------------
Against this backdrop, financial markets posted improved results for the six-
and 12-month periods ended June 30.
TOTAL RETURNS AS OF
JUNE 30, 2009 6-MONTH 12-MONTH
- --------------------------------------------------------------------------------
U.S. equities (S&P 500 Index) 3.16 -26.21
Global equities (MSCI World Index) 6.35 -29.50
International equities
(MSCI EAFE Index) 7.95 -31.35
Emerging Markets equities
(MSCI EM Index) 36.01 -28.07
Small-cap U.S. equities
(Russell 2000 Index) 2.64 -25.01
Mid-cap U.S. equities
(Russell Mid Cap Index) 9.96 -30.36
U.S. fixed income (Barclays Capital
U.S. Aggregate Bond Index) 1.90 6.05
U.S. short-term government
fixed income (Barclays Capital
U.S. Treasury Bond Index 1-3 Year) 0.47 4.94
U.S. tax-exempt income
(Barclays Capital U.S. Municipal
Bond Index 10 year) 4.38 5.58
- --------------------------------------------------------------------------------
OUTLOOK
Uncertainty will likely continue around the strength and timing of a U.S.
economic recovery. With unemployment at a 25-year high of 9.5%, and American
consumers having suffered a collapse in wealth of at least $15 trillion since
early 2007, it is hard to have much confidence in a consumer-driven recovery in
the short term. We believe the economy will work below its potential for many
quarters to come as deleveraging continues among consumers and global financial
institutions.
While equity markets have enjoyed a bounce off of the bottom over the first half
of the year, the positive earnings surprises in April and May came mostly from
productivity gains and cost containment programs. Earnings in the second quarter
will be heavily scrutinized for evidence that a real recovery is sustainable and
that restocking is giving way to growth in final demand. We believe companies
are going to have to show evidence of a top-line recovery -- increased demand
and improving fundamentals -- in order for stocks to work their way higher.
Given the economic headwinds we're facing, consolidation of the second quarter's
gains seems a real possibility.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. We encourage
long-term investors to maintain a diversified investment approach that is
consistent with their goals, time horizon and risk tolerance. While diversified
portfolios are not immune to market downturns, history suggests they can put you
in a position to benefit from the inevitable return to better times.
Thank you for investing with GE Investments Funds.
Sincerely,
/s/ Michael J. Cosgrove
Michael J. Cosgrove
CHAIRMAN, GE INVESTMENTS FUNDS, INC.
JUNE 2009
MIKE COSGROVE IS PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS &
INTERMEDIARY BUSINESS AT GE ASSET MANAGEMENT. MR. COSGROVE ALSO SERVES AS A
TRUSTEE OF THE GE PENSION TRUST AND GE'S EMPLOYEE SAVINGS PROGRAM. PREVIOUSLY
CHIEF FINANCIAL OFFICER OF GE ASSET MANAGEMENT AND ASSISTANT TREASURER - GE
COMPANY, MIKE JOINED GE IN 1970 AND HELD A NUMBER OF MANAGERIAL POSITIONS IN
FINANCE AND SALES AT GE'S INTERNATIONAL OPERATION AND IN GE TRADING COMPANY.
MIKE HAS A B.S. IN ECONOMICS FROM FORDHAM UNIVERSITY AND AN M.B.A. FROM ST.
JOHN'S UNIVERSITY.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC.
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
[SIDE BAR]
GE Investments Funds, Inc.
Real Estate Securities Fund
Semi-Annual Report
JUNE 30, 2009
[GE LOGO]
GE Investments Funds, Inc.
Real Estate Securities Fund Contents
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE .................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS .............................. 2
NOTES TO SCHEDULE OF INVESTMENTS ........................................ 7
FINANCIAL STATEMENTS
Financial Highlights ................................................. 8
Statement of Assets and Liabilities .................................. 9
Statement of Operations .............................................. 10
Statements of Changes in Net Assets .................................. 11
Notes to Financial Statements ........................................ 12
ADDITIONAL INFORMATION .................................................. 18
INVESTMENT TEAM ......................................................... 21
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
Notes to Performance June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any. Total returns shown
are net of Fund expenses but do not reflect fees and charges associated with the
variable contracts such as administrative fees, account charges and surrender
charges, which, if reflected, would reduce the Fund's total returns for all
periods shown.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in a Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. An investment in a Fund is subject to risk, including
possible loss of principal invested.
FTSE NAREIT U.S. Real Estate Index is an unmanaged index of all tax-qualified
real estate investment trusts (REITs) listed on the New York Stock Exchange,
American Stock Exchange and NASDAQ which have 75% or more of their gross
invested book assets invested directly or indirectly in the equity ownership of
real estate. The results shown for the foregoing indices assume the reinvestment
of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer group average
return calculation is based on the blend of Morningstar peer categories, as
shown. Morningstar is an independent mutual fund rating service. A Fund's
performance may be compared to or ranked within a universe of mutual funds with
investment objectives and policies similar but not necessarily identical to the
Fund's.
(C)2009 Morningstar, Inc. All Rights Reserved. The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is no warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are responsible for any
damage or losses relating from any use of this information. Past performance is
no guarantee or future results.
- ----------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUND.
1
Real Estate Securities Fund
- --------------------------------------------------------------------------------
[Q&A LOGO]
URDANG SECURITIES MANAGEMENT, INC. (URDANG) IS THE SUB-ADVISER FOR THE REAL
ESTATE SECURITIES FUND. URDANG IS A WHOLLY OWNED SUBSIDIARY OF URDANG CAPITAL
MANAGEMENT, INC. (URDANG CAPITAL). URDANG CAPITAL IS WHOLLY OWNED BY THE BANK OF
NEW YORK MELLON CORPORATION (BANK OF NEW YORK) AND OPERATES AS PART OF BANK OF
NEW YORK'S ASSET MANAGEMENT DIVISION. AS A WHOLLY OWNED SUBSIDIARY OF URDANG
CAPITAL, URDANG IS A SECOND TIER SUBSIDIARY OF BANK OF NEW YORK. URDANG IS A
REGISTERED INVESTMENT ADVISER THAT WAS FORMED IN 1995 TO FOCUS EXCLUSIVELY ON
OPPORTUNITIES IN THE REAL ESTATE SECURITIES MARKET, INCLUDING PUBLICLY TRADED
REAL ESTATE INVESTMENT TRUSTS (REITS).
THE REAL ESTATE SECURITIES FUND IS CO-MANAGED BY DEAN FRANKEL, CFA AND ERIC
ROTHMAN, CFA.
DEAN FRANKEL IS A SENIOR PORTFOLIO MANAGER, NORTH AMERICA REAL ESTATE SECURITIES
STRATEGY, AT URDANG AND SERVES AS THE SENIOR PORTFOLIO MANAGER TO THE FUND. HE
JOINED URDANG IN 1997 AND HAS OVER 11 YEARS OF REAL ESTATE SECURITIES INVESTMENT
EXPERIENCE. MR. FRANKEL IS RESPONSIBLE FOR MANAGEMENT OF URDANG'S PROPRIETARY
RESEARCH PROCESS INCLUDING THE FIRM'S RELATIVE VALUE MODEL. IN ADDITION, MR.
FRANKEL ANALYZES AND INTERPRETS IMPLICATIONS OF MAJOR EVENTS AND ECONOMIC TRENDS
WHILE MANAGING THE DAILY OPERATIONS OF THE NORTH AMERICAN REAL ESTATE SECURITIES
INVESTMENT TEAM.
ERIC ROTHMAN SERVES AS A PORTFOLIO MANAGER TO THE FUND, WHERE HE WILL HELP
DIRECT URDANG'S U.S. REAL ESTATE SECURITIES STRATEGY. AS PORTFOLIO MANAGER, MR.
ROTHMAN WILL SUPPORT MR. FRANKEL WITH MARKET RESEARCH, SECTOR ALLOCATIONS, AND
REAL ESTATE SECURITIES ANALYSIS. ADDITIONALLY HE HAS PRIMARY COVERAGE
RESPONSIBILITY FOR THE LODGING, SELF STORAGE AND RETAIL SECTORS. MR. ROTHMAN
JOINED URDANG IN 2006 AND HAS OVER 14 YEARS OF REAL ESTATE SECURITIES AND REAL
ESTATE INVESTMENT EXPERIENCE, INCLUDING BEING A SELL-SIDE REIT ANALYST AT
WACHOVIA SECURITIES FROM 2001 TO 2006 AND AN ANALYST AT AEW CAPITAL MANAGEMENT,
LP FROM 1999 TO 2000.
Q. HOW DID THE REAL ESTATE SECURITIES FUND PERFORM COMPARED TO ITS BENCHMARK
AND MORNINGSTAR PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009?
A. For the six-month period ended June 30, 2009, the Real Estate Securities
Fund returned -8.36% for the Class 1 shares and -8.66% for the Class 4
shares. The FTSE NAREIT U.S. Real Estate Index, the Fund's benchmark,
returned -12.21% and the Fund's Morningstar peer group of 54 US Insurance
Real Estate funds returned an average of -8.00% for the same period.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund outperformed the benchmark by 385 basis points (bps) for the
six-month period. Stock selection generated the majority of the relative
outperformance (contributing 354 bps), while sector selection generated a
34 bps drag on performance. The Fund's cash position contributed
positively to the relative outperformance (+98 bps), while fees and other
items such as the effects of intraday trading and cash flows reduced the
Fund's relative outperformance by 33 bps.
Stock selection was very strong and broad-based with strong performance
across all sectors. Stock selection within all property sectors
contributed positively to the Fund's relative outperformance, except for
stock selections in the small timber sector. The most defensive stock
picks (those in the apartment, healthcare and triple net lease sectors)
produced 257 bps of relative outperformance.
Sector selection however reduced the Fund's relative outperformance. An
underweight to the shopping center and industrial sectors and overweight
to the apartment sector contributed positively to the Fund's relative
outperformance, but this was more than offset by an underweight to hotel
and timber sectors which were the best performing sectors of the market
during the period.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. Following significant outperformance from the apartment and regional mall
sectors, we decided the sectors were now overvalued in light of diminished
consumer spending and mounting job losses. As such we shifted both sectors
from overweight to underweight. Apartments had been a relative safe haven
for the financing advantage afforded by Fannie Mae and Freddie Mac
lending, but this advantage became less relevant as capital concerns for
all REITs eased starting in mid-March with a wave of equity
recapitalizations. Reflecting our view that the industrial REITs had
become oversold following an extended period of significant
underperformance, and as the better capital environment made for greatly
reduced risk for the two largest industrial REITs in particular, we
shifted the industrial group to neutral from a large underweight. We
increased the Fund's overweight to office and healthcare as we believe
fundamentals should hold up better given the longer lease terms.
2
Real Estate Securities Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2009.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2009 - JUNE 30, 2009
- --------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ---------------------------------------------------------------------------------------------------
Class 1 1,000.00 916.41 4.99
Class 4 1,000.00 913.45 6.97
- ---------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ---------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,019.40 5.26
Class 4 1,000.00 1,017.35 7.35
- ---------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.05% FOR
CLASS 1 SHARES AND 1.47% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1,
2009 - JUNE 30, 2009), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE
PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTHS PERIOD)
** ACTUAL FUND RETURNS FOR SIX-MONTH PERIOD ENDED JUNE 30, 2009 WERE AS
FOLLOWS: (-8.36)% FOR CLASS 1 SHARES, AND (-8.66)% FOR CLASS 4 SHARES.
3
Real Estate Securities Fund (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
FTSE NAREIT U.S.
Real Estate Securities Fund Real Estate Index
06/99 $10,000 $10,000
12/99 $ 9,171 $ 9,103
12/00 $12,156 $11,503
12/01 $13,594 $13,106
12/02 $13,411 $13,607
12/03 $18,435 $18,660
12/04 $24,388 $24,552
12/05 $27,261 $27,538
12/06 $36,264 $37,193
12/07 $30,876 $31,357
12/08 $19,750 $19,527
06/09 $18,100 $17,142
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2009
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 5/1/95)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS YEAR YEAR YEAR $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------
Real Estate Securities Fund -8.36% -40.28% -1.36% 6.11% $18,100
- ------------------------------------------------------------------------------------------
FTSE NAREIT U.S. Real Estate Index -12.21% -43.29% -2.73% 5.54% $17,142
- ------------------------------------------------------------------------------------------
Morningstar peer group average* -8.00% -41.30% -1.90% 5.66%
==========================================================================================
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[LINE GRAPH]
FTSE NAREIT U.S.
Real Estate Securities Fund Real Estate Index
05/01/08 $10,000 $10,000
06/08 $ 8,765 $ 8,981
09/08 $ 9,177 $ 9,480
12/08 $ 5,701 $ 5,801
06/09 $ 5,208 $ 5,093
- --------------------------------------------------------------------------------
TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 2009
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
SIX ONE SINCE ENDING VALUE OF A
MONTHS YEAR INCEPTION $10,000 INVESTMENT
- ---------------------------------------------------------------------------------------
Real Estate Securities Fund -8.66% -40.59% -42.82% $5,208
- ---------------------------------------------------------------------------------------
FTSE NAREIT U.S. Real Estate Index -12.21% -43.29% -43.92% $5,093
- ---------------------------------------------------------------------------------------
Morningstar peer group average** -8.00% -41.30%
=======================================================================================
INVESTMENT PROFILE
A Fund designed for investors who seek maximum total return through current
income and capital appreciation by investing at least 80% of its net assets in
equity securities and debt securities of U.S. issuers that are principally
engaged in or related to the real estate industry, including those that own
significant real estate assets, under normal circumstances.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Market Value of $52,364 (in thousands)
[PIE CHART]
Office 19.2%
Health care 17.7%
Multifamily 13.3%
Regional Malls 9.8%
Shopping Centers 7.6%
Specialty 5.9%
Self Storage 5.9%
Industrial 5.5%
Diversified 5.0%
Freestanding 3.5%
Hotel 3.4%
Office/Industrial 1.7%
Short-Term 1.5%
Other Investments 0.0%***
TOP TEN LARGEST EQUITY HOLDINGS
AS OF JUNE 30, 2009
as a % of Market Value
================================================================================
Simon Property Group, Inc. 7.42%
- --------------------------------------------------------------------------------
Boston Properties, Inc. 5.34%
- --------------------------------------------------------------------------------
Public Storage 5.24%
- --------------------------------------------------------------------------------
Vornado Realty Trust 4.98%
- --------------------------------------------------------------------------------
Equity Residential 4.24%
- --------------------------------------------------------------------------------
Nationwide Health Properties, Inc. 3.98%
- --------------------------------------------------------------------------------
Senior Housing Properties Trust 3.81%
- --------------------------------------------------------------------------------
Ventas, Inc. 3.67%
- --------------------------------------------------------------------------------
Essex Property Trust, Inc. 3.63%
- --------------------------------------------------------------------------------
Kilroy Realty Corp. 3.48%
================================================================================
* MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS
INDICATED IN THE REAL ESTATE PEER GROUP CONSISTING OF 54, 54, 41 AND 20
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** MORNINGSTAR PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL
RETURNS FOR THE SIX MONTHS AND ONE YEAR PERIODS INDICATED IN THE REAL
ESTATE PEER GROUP CONSISTING OF 54 AND 54 UNDERLYING ANNUITY FUNDS,
RESPECTIVELY.
*** LESS THAN 0.01%.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
4
REAL ESTATE SECURITIES FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK (REIT'S) -- 96.7% +
- --------------------------------------------------------------------------------
DIVERSIFIED -- 5.0%
Vornado Realty Trust ........................ 57,895 $ 2,607,012
FREESTANDING -- 3.5%
National Retail Properties, Inc. ............ 78,720 1,365,792
Realty Income Corp. ......................... 22,120 484,870
1,850,662
HEALTHCARE -- 17.6%
Cogdell Spencer Inc. ........................ 63,520 272,501
HCP, Inc. ................................... 70,690 1,497,921
Health Care REIT, Inc. ...................... 19,880 677,908
Healthcare Realty Trust Inc. ................ 49,050 825,512
Nationwide Health Properties, Inc. .......... 80,880 2,081,851
Senior Housing Properties Trust ............. 122,150 1,993,488
Ventas, Inc. ................................ 64,280 1,919,401
9,268,582
HOTEL -- 3.5%
Host Hotels & Resorts, Inc. ................. 130,800 1,097,412
LaSalle Hotel Properties .................... 41,430 511,246
Sunstone Hotel Investors, Inc. .............. 32,350 173,073
1,781,731
INDUSTRIAL -- 5.5%
AMB Property Corp. .......................... 70,340 1,323,095
DCT Industrial Trust, Inc. .................. 46,110 188,129
ProLogis .................................... 169,100 1,362,946
2,874,170
MULTIFAMILY -- 13.2%
Apartment Investment &
Management Co. (Class A) ................. 27,080 239,658
AvalonBay Communities, Inc. ................. 6,760 378,154
BRE Properties Inc. ......................... 24,120 573,091
Camden Property Trust ....................... 24,500 676,200
Equity Residential .......................... 99,860 2,219,888
Essex Property Trust, Inc. .................. 30,580 1,902,993
Post Properties, Inc. ....................... 37,180 499,699
UDR, Inc. ................................... 45,760 472,701
6,962,384
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
OFFICE -- 19.1%
Alexandria Real Estate
Equities, Inc. ........................... 19,920 $ 712,937
BioMed Realty Trust, Inc. ................... 26,930 275,494
Boston Properties, Inc. ..................... 58,610 2,795,697
Brandywine Realty Trust ..................... 177,930 1,325,578
Highwoods Properties, Inc. .................. 12,250 274,033
HRPT Properties Trust ....................... 74,980 304,419
Kilroy Realty Corp. ......................... 88,650 1,820,871
Mack-Cali Realty Corp. ...................... 51,810 1,181,268
Parkway Properties, Inc. .................... 44,060 572,780
SL Green Realty Corp. ....................... 34,170 783,860
10,046,937
OFFICE/INDUSTRIAL -- 1.7%
Duke Realty Corp. ........................... 102,990 903,222
REGIONAL MALLS -- 9.7%
Simon Property Group, Inc. .................. 75,550 3,885,536
Taubman Centers, Inc. ....................... 34,580 928,819
The Macerich Co. ............................ 16,578 291,939
5,106,294
SELF STORAGE -- 5.9%
Extra Space Storage, Inc. ................... 38,970 325,399
Public Storage .............................. 41,940 2,746,231
3,071,630
SHOPPING CENTERS -- 7.6%
Federal Realty Investment Trust ............. 19,690 1,014,429
Kimco Realty Corp. .......................... 133,810 1,344,791
Regency Centers Corp. ....................... 10,530 367,602
Weingarten Realty Investors ................. 87,310 1,266,868
3,993,690
SPECIALTY -- 4.4%
Digital Realty Trust, Inc. .................. 30,220 1,083,387
Plum Creek Timber
Company, Inc. ............................ 27,170 809,123
Rayonier, Inc. .............................. 11,970 435,109
2,327,619
TOTAL COMMON STOCK (REIT'S)
(COST $59,077,048) ....................... 50,793,933
See Notes to Schedule of Investments on page 7 and Notes to Financial
Statements.
5
REAL ESTATE SECURITIES FUND
Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 1.5%
- --------------------------------------------------------------------------------
SPECIALTY -- 1.5%
American Tower Corp. (Class A)
(COST $768,322) .......................... $ 779,106 (a)
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $4,619) ............................ 2,541 (c)
TOTAL INVESTMENTS IN SECURITIES
(COST $59,849,989) ....................... 51,575,580
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.5%
- --------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class
0.28% .................................... 788,883 (b,d)
(COST $788,883)
TOTAL INVESTMENTS
(COST $60,638,872) ....................... 52,364,463
OTHER ASSETS AND LIABILITIES,
NET -- 0.3% .............................. 182,212
------------
NET ASSETS -- 100.0% ........................ $ 52,546,675
============
See Notes to Schedule of Investments on page 7 and Notes to Financial
Statements.
6
Notes to Schedule of Investments June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) GEAM, the investment adviser of the Fund, also serves as the investment
adviser of the GEI Investment Fund.
(d) GEAM, the investment adviser of the Fund, also serves as investment
adviser of the GE Money Market Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2009.
Abbreviations:
REIT Real Estate Investment Trust
7
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
--------------------------------------------------------------------- ---------------------------
CLASS 1 CLASS 4
--------------------------------------------------------------------- ---------------------------
6/30/09+ 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 6/30/09+ 12/31/08**
--------------------------------------------------------------------- ---------------------------
INCEPTION DATE -- -- -- -- -- 5/1/95 -- 5/1/08
Net asset value, beginning
of period .................. $ 6.46 $ 10.87 $ 21.49 $ 19.20 $ 19.54 $ 16.78 $ 6.47 $ 12.15
INCOME/(LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income ...... 0.74 1.11 0.72 0.65 0.70 0.65 0.11 0.39
Net realized and
unrealized gains/
(losses) on investments .. (1.28) (5.05) (3.87) 5.68 1.62 4.76 (0.66) (5.63)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS ...... (0.54) (3.94) (3.15) 6.33 2.32 5.41 (0.55) (5.24)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ...... 0.00 0.28 0.73 0.48 0.75 0.52 0.00 0.25
Return of Capital .......... 0.00 0.19 0.02 0.00 0.00 0.00 0.00 0.19
Net realized gains ......... 0.00 0.00 6.72 3.56 1.91 2.13 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ........... 0.00 0.47 7.47 4.04 2.66 2.65 0.00 0.44
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD .................. $ 5.92 $ 6.46 $ 10.87 $ 21.49 $ 19.20 $ 19.54 $ 5.92 $ 6.47
====================================================================================================================================
TOTAL RETURN (a) .............. (8.36)% (36.03)% (14.86)% 33.03% 11.78% 32.29% (8.66)% (42.99)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ........... $ 52,541 $59,969 $ 96,650 $178,317 $143,801 $146,221 $ 5 $ 6
Ratios to average net
assets:
Net investment income* ... 6.25% 4.67% 2.59% 3.08% 3.21% 4.15% 5.80% 4.67%*
Expenses* ................ 1.05%(b) 0.95%(b) 0.90% 0.88% 0.89% 0.90% 1.47%(b) 1.40%(b)*
Portfolio turnover rate .... 57% 121% 106% 92% 52% 78% 57% 121%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges.
(b) Reflects GEAM's waiver of a portion of the Fund's management fee in an
amount equal to the management fee earned by GEAM with respect to the
Fund's investment in the GE Funds - GE Money Market Fund. Excluding
waiver, the expense ratios would be unchanged.
* Annualized for periods less than one year.
** Per share values have been calculated using the average share method.
+ Unaudited
See Notes to Financial Statements.
8
REAL ESATE
Statement of Assets SECURITIES
and Liabilities JUNE 30, 2009 (UNAUDITED) FUND
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $59,845,370) .... $ 51,573,039
Investments in affiliated securities, at market
(cost $4,619) ............................................ 2,541
Short-term affiliated investments (at amortized cost) ...... 788,883
Receivable for investments sold ............................ 104,289
Income receivables ......................................... 225,475
Receivable for fund shares sold ............................ 2,933
- --------------------------------------------------------------------------------
TOTAL ASSETS ............................................. 52,697,160
- --------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed ........................... 45,733
Payable to GEAM ............................................ 18,921
Accrued other expenses ..................................... 88,406
Other liabilities .......................................... 5,425
- --------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................ 150,485
- --------------------------------------------------------------------------------
NET ASSETS .................................................... $ 52,546,675
================================================================================
NET ASSETS CONSIST OF:
Capital paid in ............................................ 101,412,376
Undistributed (distribution in excess of)
net investment income .................................... 1,786,811
Accumulated net realized loss .............................. (42,378,103)
Net unrealized depreciation on:
Investments .............................................. (8,274,409)
- --------------------------------------------------------------------------------
NET ASSETS .................................................... $ 52,546,675
================================================================================
CLASS 1:
NET ASSETS .................................................... 52,541,463
Shares outstanding ($0.01 par value; unlimited shares
authorized) ................................................ 8,875,344
Net asset value per share ..................................... $ 5.92
CLASS 4:
NET ASSETS .................................................... 5,212
Shares outstanding ($0.01 par value; unlimited shares
authorized) ................................................ 881
Net asset value per share ..................................... $ 5.92
See Notes to Financial Statements.
9
REAL ESATE
Statement of Operations SECURITIES
FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ................................................. $ 1,793,013
Interest ................................................. 7
Interest from affliated investments ...................... 1,797
- --------------------------------------------------------------------------------
TOTAL INCOME ............................................... 1,794,817
- --------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ......................... 208,967
Distributors Fees (Notes 4)
Service Class .......................................... 11
Transfer agent ........................................... 9,776
Directors's fees ......................................... 855
Custody and accounting expenses .......................... 18,334
Professional fees ........................................ 11,417
Registration expenses .................................... 1,688
Other expenses ........................................... 8,645
- --------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ............. 259,693
- --------------------------------------------------------------------------------
Add: Expenses reimbursed by the adviser .................. (688)
- --------------------------------------------------------------------------------
Net expenses ............................................. 259,005
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME ...................................... 1,535,812
================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED LOSS ON:
Investments ............................................ (19,060,981)
INCREASE IN UNREALIZED APPRECIATION ON:
Investments ............................................ 12,709,615
- --------------------------------------------------------------------------------
Net realized and unrealized loss on investments .......... (6,351,366)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $ (4,815,554)
================================================================================
See Notes to Financial Statements.
10
REAL ESTATE
Statements of SECURITIES
Changes in Net Assets FUND
- -------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2009 DECEMBER 31,
(UNAUDITED) 2008
- -------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income ............................................. $ 1,535,812 $ 3,752,092
Net realized loss on investments ................................... (19,060,981) (22,488,124)
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments ................................................... 12,709,615 (10,147,607)
- -------------------------------------------------------------------------------------------------------------
Net decrease from operations ....................................... (4,815,554) (28,883,639)
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 .......................................................... -- (4,033,242)
Class 4 .......................................................... -- (360)
- -------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .................................................. -- (4,033,602)
- -------------------------------------------------------------------------------------------------------------
Decrease in net assets from operations and distributions ............. (4,815,554) (32,917,241)
- -------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 .......................................................... 3,161,894 18,038,966
Class 4 .......................................................... -- 10,000
Value of distributions reinvested
Class 1 .......................................................... -- 4,033,590
Class 4 .......................................................... -- 360
Cost of shares redeemed
Class 1 .......................................................... (5,774,262) (26,117,546)
Class 4 .......................................................... -- --
- -------------------------------------------------------------------------------------------------------------
Net decrease from share transactions ............................... (2,612,368) (4,034,990)
- -------------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS ......................................... (7,427,922) (36,952,231)
NET ASSETS
Beginning of period .................................................. 59,974,597 96,650,212
- -------------------------------------------------------------------------------------------------------------
End of period ........................................................ $ 52,546,675 $ 59,974,597
=============================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME,
END OF PERIOD ........................................................ $ 1,786,811 $ 5,343
- -------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold ............................................................. 648,853 2,414,396
Issued for distributions reinvested ..................................... -- 652,627
Shares redeemed ......................................................... (1,055,850) (2,680,005)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .................................. (406,997) 387,018
=============================================================================================================
CLASS 4
Shares sold ............................................................. -- 823
Issued for distributions reinvested ..................................... -- 58
Shares redeemed ......................................................... -- --
- -------------------------------------------------------------------------------------------------------------
Net increase in fund shares ............................................. -- 881
=============================================================================================================
See Notes to Financial Statements.
11
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of fourteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and
Real Estate Securities Fund (the "Fund").
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
The Company offers two share classes (Class 1 and Class 4) of the Fund as
investment options for variable life insurance and variable annuity contracts.
Class 4 shares were first offered on May 1, 2008, and Fund shares outstanding
prior to May 1, 2008 were designated as Class 1 shares. Each share class has
different fees and expenses, and as a result, each share class will have
different share price and performance. Not all variable contracts offer both
share classes of the Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on recent trading activity and other
relevant information which may include market interest rate curves, referenced
credit spreads and estimated prepayment rates where applicable. In the absence
of a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations. The Fund's written or
purchased options are valued at the last sales price, or if no sales occurred
that day, at the last reported bid price. Short-term investments with remaining
maturities of sixty days or less at the time of purchase are valued on the basis
of amortized cost, which approximates market value.
All assets and liabilities of the Fund that are initially expressed in foreign
currency values will be converted into U.S. dollars at the WM/Reuters exchange
rate computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
12
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Fund adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards 157, FAIR VALUE MEASUREMENTS ("SFAS
157"). SFAS 157 establishes a new framework for measuring fair value and expands
related disclosures. Broadly, the SFAS 157 framework requires fair value to be
determined based on the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants. SFAS 157 establishes a three-level valuation hierarchy
based upon observable and unobservable inputs.
For financial assets and liabilities, fair value is the price that would be
received to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets and liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect our market assumptions. Preference is given to
observable inputs. These two types of inputs create the following fair value
hierarchy:
Level 1 -- Quoted prices for identical investments in active markets.
Level 2 -- Quoted prices for similar investments in active markets; quoted
prices for identical or similar investments in markets that are not
active; and model-derived valuations whose significant value drivers are
observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
The Fund maintains policies and procedures to value investments using the best
and most relevant data available. The Fund performs periodic reviews of the
methodologies used by independent pricing services including obtaining price
validation for certain securities. The following section describes the valuation
methodologies that the Fund uses to measure investments at fair value.
When available, the Fund uses quoted market prices to determine fair value of
investment securities, and they are included in Level 1. Level 1 securities
primarily include publicly-traded equity securities.
When quoted market prices are unobservable, the Fund uses quotes from
independent pricing vendors based on recent trading activity and other relevant
information including market interest rate curves, referenced credit spreads and
estimated prepayment rates where applicable. These investments are included in
level 2 and primarily include long-term US government, agency and corporate
debt, notes, bonds, and mortgage backed securities. In infrequent circumstances,
the Fund's pricing vendors may provide valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
classified in Level 3.
Other financial instruments are derivative instruments that are not reflected in
Total Investments, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------------
Investments in Securities $52,361,923 $2,540 $ -- $52,364,463
Other Financial Instruments -- -- -- --
13
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net unrealized gain or loss from investments. Net realized
gains or losses on foreign currency transactions represent net gains or losses
on sales and maturities of foreign currency contracts, disposition of foreign
currencies, the difference between the amount of net investment income and
withholding taxes accrued and the U.S. dollar amount actually received or paid,
and gains or losses between the trade and settlement date on purchases and sales
of securities. Net unrealized foreign exchange gains and losses arising from
changes in the value of other assets and liabilities as a result of changes in
foreign exchange rates are included as increases or decreases in unrealized
appreciation/ depreciation on foreign currency related transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund
14
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
investments. The Fund will not enter into a transaction involving options for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Options are valued at the last sale price,
or if no sales occurred on that day, at the last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
REAL ESTATE INVESTMENT TRUSTS Dividend income, attributable to real estate
investment trusts ("REITs"), is recorded based on management's estimate of the
income included in the distributions received. Distributions received in excess
of this amount are recorded as a reduction of the cost of the investments. The
actual amounts of income and return of capital are determined by each REIT only
after its fiscal year-end, and may differ from the estimated amounts.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2009, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- --------------------------------------------------------------------------------
$65,802,562 $1,590,614 $(15,028,713) $(13,438,099)
As of December 31, 2008, the Fund has capital loss carryovers, as indicated
below.
Amount Expires
- --------------------------------------------------------------------------------
$7,213,699 12/31/16
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund elected to defer losses incurred after October 31, 2008 as follows:
Capital Currency
- --------------------------------------------------------------------------------
$10,939,733 $ --
The tax composition of distributions paid during the years ended December 31,
2008 and December 31, 2007 were as follows:
Ordinary Long-Term Return of
Income Capital Gains Capital Total
- ----------------------------------------------------------------
2008 $2,536,901 $ -- $1,496,701 $ 4,033,602
2007 5,956,613 33,613,314 148,524 39,718,451
15
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) distributions
from Real Estate Investment Trusts (REITS), and losses deferred due to wash sale
transactions. Reclassifications due to permanent book/tax differences are made
to the Fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryovers) under income tax
regulations. These reclassifications have no impact on net investment income,
realized gains or losses, or the net asset value of the Fund. The calculation of
net investment income per share in the Financial Highlights table excludes these
adjustments.
The reclassifications for the year ended December 31, 2008 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated Paid in
Income Net Realized Gain Capital
- --------------------------------------------------------------------------------
$697,686 $799,105 $(1,496,701)
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2005, 2006, 2007 and 2008 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Fund specific expenses are allocated to the Fund that incurs such
expense and pro rata across share classes. Expenses, other than those incurred
by a specific Fund, are allocated pro rata among Funds and share classes. Such
expenses may include custodial fees, legal and accounting fees, printing costs
and registration fees. All expenses of the Fund are paid by GEAM and reimbursed
by the Fund. Certain class specific expenses (such as transfer agency fees or
distribution fees) are allocated to the class that incurs such expense.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES On March 19, 2008, the FASB issued
Statement of Financial Accounting Standards No. 161 ("FAS No. 161"), "Disclosure
about Derivative Instruments and Hedging Activities." This new accounting
statement requires enhanced disclosures about an entity's derivative and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity invests in derivatives, (b) how derivatives are accounted for
under FAS No. 133, and (c) how derivatives affect an entity's financial
position, financial performance, and cash flows. FAS No. 161 also requires
enhanced disclosures regarding credit-risk-related contingent features of
derivative instruments.
For the period ended June 30, 2009, the Fund did not transact in any derivative
instruments.
3. LINE OF CREDIT
The Company shares a revolving credit facility of up to $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established on November 7, 2007. Generally, borrowings under
the credit facilities would accrue interest at the Federal Funds Rate plus 50
basis points and would be borne by the borrowing Fund. The maximum amount
allowed to be borrowed by any one Fund is the lesser of (i) its
16
Notes to Financial Statements June 30, 2009 (unaudited)
- --------------------------------------------------------------------------------
prospectus limitation or (ii) 20% of its net assets. The credit facilities were
not utilized by the Fund during the fiscal year ended June 30, 2009.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund. The
advisory and administrative fee is stated in the following schedule:
Annualized based on average daily net assets
- --------------------------------------------------------------------------------
Average Daily Advisory and
Net Assets Administration
of Fund Fees
- --------------------------------------------------------------------------------
First $100 million 0.85%
Next $100 million 0.80%
Over $200 million 0.75%
DISTRIBUTION AND SERVICE (12b-1) FEES The Company has adopted a Distribution and
Service (12b-1) Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with
respect to Class 4 shares of the Fund. Under the Plan, the Fund may compensate
GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and
the Fund's principal distributor, for certain sales services provided by GEID or
other broker dealers and investor services provided by GEID or other service
providers relating to the Fund's Class 4 shares, including services to owners or
prospective owners of variable contracts issued by insurance companies that
offer such share class as an investment option. The amount of compensation paid
under the Plan by the Fund's Class 4 shares may not exceed 0.45% of the average
daily net assets of the Fund attributable to such share class. The Plan
continues in effect from year to year for so long as such continuance is
approved annually by the Board of Directors, including by those directors who
are not interested persons of the Company and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related to
it.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2009, $457 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. SUB-ADVISORY FEES
Pursuant to an investment sub-advisory agreement with GEAM, Urdang Securities
Management, Inc. ("Urdang") is the Sub-Adviser to the Fund. Urdang is
responsible for the day-to-day portfolio management of the assets of the Fund,
including the responsibility for making decisions to buy, sell or hold a
particular security, under the general supervision of GEAM and the Board.
For their services, GEAM pays Urdang monthly sub-advisory fees which are
calculated as a percentage of the average daily net assets of the Fund.
6. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and short-term options,
for the period ended June 30, 2009 were as follows:
U.S. Government Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$ -- $ --
Other Securities
- --------------------------------------------------------------------------------
Purchases Sales
- --------------------------------------------------------------------------------
$28,496,106 $29,367,178
17
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 60
POSITION(S) HELD WITH FUND Chairman of the Board and President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 11 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS President and Chief Executive
Officer - Mutual Funds and Intermediary Business since March 2007; Executive
Vice President of GEAM from February 1997 to March 2007; Director of GEAM since
1988; Vice President, GE Capital Corporation, an indirect wholly-owned
subsidiary of GE, since December 1999; Executive Vice President - Sales and
Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, from
March 1993 to March 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds since its inception; Trustee of
General Electric Savings & Security Trust, General Electric S&S Income Fund,
General Electric S&S Program Mutual Fund ("GE Savings & Security Funds"), Elfun
Funds, General Electric Insurance Plan Trust, General Relief Loan Fund, and
General Electric Pension Trust since 1988; Trustee of Fordham University since
2002; Trustee of GE Volunteers since 1993; Director, GE Asset Management
(Ireland) since February 1999; Director, GE Asset Management Funds Plc., GE
Asset Canada Company, and GE Asset Management Limited since 1998.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Director and Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 51
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds since July 2007.
18
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager
since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds
and GE Investments Funds since November 2005 and Elfun Funds and GE Savings &
Security Funds since September 2005; from August 2004 to September 2005 Vice
President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds,
Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January
2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from
December 1996 to November 2003, Controller - Mutual Funds, American Skandia
Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and
American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 43
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 3 years (Vice President); one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
from September 2003 to July 2007; Vice President and Secretary of GE Funds and
GE Institutional Funds since July 2007; Vice President and Assistant Secretary
of Elfun Funds and GE Savings & Security Funds since October 2003.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
19
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 63
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since its inception; Trustee of Fordham University since
2002 and Marymount College from 2001 through 2002; Neuroscience Research
Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn &
Queens since 2001; Gregorian University Foundation since 1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 73
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 43
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since its inception; Trustee, St. Francis Hospital Corp.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
20
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J. Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE
OFFICER - MUTUAL FUNDS & INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Ralph R. Layman, PRESIDENT - PUBLIC EQUITIES
(SINCE JULY 2009)
Maureen B. Mitchell, PRESIDENT - INSTITUTIONAL SALES AND
MARKETING (SINCE JULY 2009)
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST (SINCE JULY 2009)
Don W. Torey, PRESIDENT - ALTERNATIVE INVESTMENTS
John J. Walker, EVP, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT - INVESTMENT STRATEGIES
21
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://WWW.GEFUNDS.COM; and (iii)
on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
- --------------------------------------------------------------------------------
[GE LOGO]
ITEM 2. CODE OF ETHICS.
Applicable only to an annual filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Applicable only to an annual filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Applicable only to an annual filing.
ITEM 5. Audit Committee of Listed Registrants
Applicable only to Closed-End Management Investment Companies.
ITEM 6. Schedule of Investments.
Attached as part of ITEM 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Applicable only to Closed-End Management Investment Companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Applicable only to Closed-End Management Investment Companies.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Applicable only to Closed-End Management Investment Companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No material changes.
ITEM 11. CONTROLS AND PROCEDURES.
The officers providing the certifications in this report in accordance
with Rule 30a-3 under the Investment Company Act of 1940 have concluded,
based on their evaluation of the registrant's disclosure controls and
procedures (as such term is defined in such rule), that such controls and
procedures are adequate and reasonably designed to achieve the purpose
described in paragraph (c) of such rule.
There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent
to the date of their last evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
ITEM 12. EXHIBITS.
(a) Not applicable.
(b) Attached hereto as Exhibit 1 and Exhibit 2 are the Certifications of
Michael J. Cosgrove and Scott Rhodes as principal executive officer and
principal financial officer, respectively, as required by Rule 30a-2 under
the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GE INVESTMENTS FUNDS, INC
By: /S/MICHAEL J. COSGROVE
Michael J. Cosgrove
Chairman, GE INVESTMENTS FUNDS, INC.
Date: September 04, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
By: /S/MICHAEL J. COSGROVE
Michael J. Cosgrove
Chairman, GE INVESTMENTS FUNDS, INC.
Date: September 04, 2009
By: /S/SCOTT RHODES
Scott Rhodes
TREASURER, GE INVESTMENTS FUNDS, INC.
Date: September 04, 2009
EXHIBIT INDEX
(b)(1) Certifications of principal executive officer and
principal financial officer as required by Rule 30a-2 under the
Investment Company Act of 1940.
(b)(2) Certification of principal executive officer and
principal financial officer as required by Section 906 of the
Sarbanes-Oxley Act of 2002.