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.
(Exact name of registrant as specified in charter)
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3001 SUMMER STREET, STAMFORD, CONNECTICUT 06905
(Address of principal executive offices) (Zip code)
GE ASSET MANAGEMENT, INC.
3001 SUMMER STREET, STAMFORD, CONNECTICUT 06905
(Name and address of agent for service)
Registrant's telephone number, including area code: 800-242-0134
Date of fiscal year end: 12/31
Date of reporting period: 06/30/10
ITEM 1. REPORTS TO STOCKHOLDERS.
GE Investments Funds, Inc.
Income Fund Letter from the Chairman
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[PHOTO] 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, 2010. 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
The six-months ended June 30, 2010 presented investors with an extremely
challenging market environment after global equity markets tumbled in the
second half of the period due primarily to concerns about sovereign default
risk and slowing global growth. U.S. equities (S&P 500 Index) declined 6.7%
over the six-month period, while international stocks (MSCI EAFE Index) fell
13.2%.
At the start of 2010, equity markets experienced a selloff in January and early
February as investors reacted negatively to signs that there was a lower
probability of a V-shaped recovery. Concerns about new global financial
regulation, policy tightening in China, and high levels of U.S. and European
debt, especially Greek sovereign debt, further fueled the volatility. Stocks
reversed these losses in the second half of the first quarter, rising steadily
as optimism about corporate earnings changed the tone in the market. The S&P
500 Index advanced 5.4%, for the first quarter of 2010 and indexes tracking
smaller capitalization stocks enjoyed even greater advances. Gains were more
subdued in non-U.S. equity markets, with the MSCI EAFE Index advancing 0.9%
during the same quarter as fears of sovereign credit risk in Europe
overshadowed stronger earnings reports. Regionally, Japan took top honors in
the first quarter, rising 8.2% based on relatively attractive stock valuations.
Canada rose 6.0%, followed by the Pacific Rim (+3.1%), and Emerging Markets
(+2.4%). The U.K. fell 0.6% while Continental Europe dropped 2.4% as Greece's
budget deficit crisis raised concerns about other highly indebted Eurozone
countries, including Portugal, Italy, Ireland, Spain, and even the United
Kingdom. The U.S. bond market returned 1.8% (Barclays Capital U.S. Aggregate
Bond Index) in the first quarter helped by another solid performance by the
credit related sectors. Fixed income securities outside the U.S. performed
similarly, however the Barclays Global Aggregate Un-hedged Bond Index lost 0.3%
(in U.S. dollar terms) due primarily to the strengthening dollar versus other
major currencies.
Although the second quarter of 2010 started quietly, stocks plunged in May as
concerns about Europe's sovereign debt problems pressured equity markets and
many investors sought defensive investments such as gold and treasury bonds.
Adding to Greece's sovereign debt woes, anxieties around contagion grew as
Spain stepped further into the European debt crisis amid credit downgrades
driven by its deteriorating economy and public finances. In June, the 2010 G20
Toronto Summit confirmed that the industrialized world leaders were committed
to reducing budget deficits through austerity measures. Some investors,
however, worried that these measures could reduce global growth and slow the
economic recovery. Several other concerns fuelled greater risk aversion during
the second quarter including increased evidence of slower growth in China, a
new resource tax in Australia, an alarming May 6th "flash crash" which sent
U.S. stocks plummeting within minutes, impending U.S. financial reform
legislation, and the spreading impact of BP's massive oil spill in the Gulf of
Mexico. At quarter end, the S&P 500 Index and the MSCI EAFE Index had tumbled
11.4% and 14.0%, respectively, in the three months ended June 30. Regionally,
Emerging Markets fared best during the second quarter, down 8.4%, followed by
Japan (-10.1%), Canada (-10.5%) and the U.K. (-13.9%). The worst performing
regions were Europe (-15.8%) and the Pacific Rim (-14.3%). In this environment,
U.S. Treasuries were the "safe" investment of choice for many investors seeking
to avoid riskier asset classes. The "flight to quality" pulled treasury yields
down across all maturity periods. The Barclays Capital U.S.
[LOGO] GE
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Income Fund
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Aggregate Bond Index returned 3.49% in the second quarter, while the Barclays
Capital Global Aggregate Un-hedged Bond Index lost 0.04% over the same
three-month period owing mainly to widening spreads in European peripheral
countries and the declining euro.
Against a backdrop of weakening investor sentiment, financial markets posted
disparate results for the six- and twelve-month periods ended June 30, 2010.
TOTAL RETURNS AS OF JUNE 30, 2010 6-MONTH 12-MONTH
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U.S. equities (S&P 500 Index) -6.7 14.4
Global equities (MSCI World Index) -9.8 10.2
International equities (MSCI EAFE Index) -13.2 5.9
Emerging Markets equities (MSCI EM Index) -6.2 23.2
Small-cap U.S. equities (Russell 2000 Index) -2.0 21.5
Mid-cap U.S. equities (Russell Mid Cap Index) -2.1 25.1
U.S. fixed income (Barclays Capital U.S. Aggregate Bond
Index) 5.3 9.5
U.S. short-term government fixed income (Barclays Capital
1-3 Year U.S. Government Bond Index) 1.9 2.9
U.S. tax-exempt income (Barclays Capital 10-Year U.S.
Municipal Bond Index) 4.1 9.6
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OUTLOOK
In the face of the fiscal concerns throughout much of Europe and signs of
slowing economic activity around the globe, the wall of worry has become
exceedingly high for investors who want to see credible government budgets that
balance fiscal austerity and economic growth. At the core of the uncertainty,
in our view, is the issue of excessive borrowing, now afflicting sovereign
markets and reminding us that the financial crisis is not yet over. Our
economic view for the second half of 2010 still favors positive, albeit slow
growth which we believe should keep interest rates at record lows for months to
come. We also believe that the policy measures implemented in Europe will
improve sentiment towards sovereign and bank debt over the balance of the year.
But many challenges remain on the horizon, including the risk of fiscal policy,
taxation and regulation missteps that could hamper the recovery. As a result,
continued market volatility appears to be the one sure thing we can predict
with certainty.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. Today's
uncertain environment is why we believe it is important for long-term investors
to maintain a disciplined, diversified investment strategy consistent with
their goals, time horizon and risk tolerance. While diversified portfolios are
not immune to market downturns, history suggests they can put investors in a
position to benefit from a 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.
AUGUST 2010
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
GE Investments Funds, Inc.
Income Fund
Semi-Annual Report
JUNE 30, 2010
[LOGO] GE
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............................ 15
FINANCIAL STATEMENTS
Financial Highlights..................................... 16
Statement of Assets and Liabilities...................... 17
Statement of Operations.................................. 18
Statements of Changes in Net Assets...................... 19
Notes to Financial Statements............................ 20
ADDITIONAL INFORMATION...................................... 30
INVESTMENT TEAM............................................. 33
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, 2010 (unaudited)
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Information on the following performance pages relating to the GE Investments
Income Fund (the "Fund") total returns and Schedule of Investments is
unaudited. All other information, including the portfolio manager Q&A pages, is
also 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 fees and 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 800-493-3042 or visit the
Fund's website at http://www.geam.com for the most recent month-end performance
data.
An investment in the 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 the Fund is subject to risk, including
possible loss of principal invested.
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. They do not reflect
the actual cost of investing in the instruments that comprise each Index.
The peer universe of the underlying annuity funds used for the peer group
average annual total return calculation is based on a blend of Morningstar peer
categories, as shown. Morningstar is an independent mutual fund rating service.
The 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 that of the Fund.
(C)2010 Morningstar, Inc. All Rights Reserved. The Morningstar information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not 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 of 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] 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 THE PRESIDENT AND CHIEF INVESTMENT OFFICER -- FIXED INCOME
AND A DIRECTOR 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, 2010?
A. For the six-month period ended June 30, 2010, the Income Fund returned 3.95%
for Class 1 shares and 3.77% for Class 4 shares. The Barclays Capital U.S.
Aggregate Bond Index, the Fund's benchmark, returned 5.33% and the Fund's
Morningstar peer group of 214 US Insurance Intermediate-Term Bond funds
returned an average of 5.48% for the same period.
Q. DESCRIBE WHAT HAPPENED IN THE US ECONOMY DURING THE SIX-MONTH PERIOD ENDING
JUNE 30, 2010?
A. News in the U.S. clearly showed a slowing in economic activity beginning
with the employment data reported in May and June. While headline non-farm
payroll figures were skewed by census workers added in May and taken away in
June, private payrolls declined from an increase of 241,000 in April to an
increase of 83,000 in June. The unemployment rate fell in June from 9.7% to
9.5% due mainly to a decline in the participation rate, which was not viewed
as a favorable sign. The housing market weakened as new home sales slumped
after the $8,000 tax credit offered to first-time homebuyers ended in April.
Inflation in the US remained low at just 1.2% reported in May (Personal
Consumption Expenditure Core Price Index, year-over-year).
The Federal Reserve's outlook for slow economic growth and low inflation did
not change during the first half of 2010 and therefore the fed funds target
rate remained unchanged throughout the six months. In Washington, a finance
reform bill intended to overhaul financial regulation was passed by the
House of Representatives and awaited action by the Senate, which raised
uncertainty around the banking sector.
2
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[GRAPHIC]
Q. WHAT WERE THE PRIMARY DRIVERS BEHIND FUND PERFORMANCE?
A. Through April, the Fund outperformed its benchmark but events in May and
June caused relative performance to turn negative. As the European debt
crisis heightened fears around the global recovery, many investors shunned
riskier asset classes such as high yield and emerging market debt to buy US
Treasuries pushing treasury yields downward. The Fund's exposure to these
two asset classes, plus overweight positions in investment grade credit and
commercial MBS were a drag on performance. The Fund's shorter duration
relative to the benchmark also impacted relative return negatively as
interest rates declined.
3
Income Fund
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Understanding Your Fund's Expenses
As a shareholder of the Fund, you incur ongoing fees and expenses, which
include portfolio management fees, distribution and service fees (for
shareholders of Class 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,
2010.
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 $1,000 = 8.6), then multiply the result by the
number given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholders reports of other funds.
Please note that the expenses shown in the table for "Actual" and
"Hypothetical" do not reflect any transaction costs, such as sales charges or
redemption fees. Additionally, the expenses shown do not reflect the fees or
charges associated with variable contracts through which shares of the Fund are
offered.
JANUARY 1, 2010 - JUNE 30, 2010
- ----------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ----------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
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Class 1 1,000.00 1,039.55 4.05
Class 4 1,000.00 1,037.66 6.21
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HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
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Class 1 1,000.00 1,020.61 4.01
Class 4 1,000.00 1,018.52 6.16
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*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.80% FOR CLASS
1 SHARES AND 1.23% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1, 2010 - JUNE
30, 2010), 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, 2010 WERE AS
FOLLOWS: 3.95% FOR CLASS 1 SHARES, AND 3.77% FOR CLASS 4 SHARES. PAST
PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
4
Income Fund
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CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
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[CHART]
Income Fund Barclays Capital U.S. Aggregate Bond Index
-------------- ----------------------------------------------
Jun 1, 2000 10,000.00 10,000.00
Dec 1, 2000 10,711.05 10,734.62
Dec 1, 2001 11,506.59 11,641.00
Dec 1, 2002 12,644.03 12,834.78
Dec 1, 2003 13,099.21 13,361.58
Dec 1, 2004 13,547.20 13,941.31
Dec 1, 2005 13,823.20 14,279.88
Dec 1, 2006 14,427.43 14,898.74
Dec 1, 2007 15,123.85 15,936.68
Dec 1, 2008 14,350.60 16,771.80
Dec 1, 2009 15,481.85 17,766.43
Jun 1, 2010 16,094.12 18,713.85
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AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
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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/(A)/
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GEI Income 3.95% 11.39% 3.09% 4.87% 16,094
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Barclays Capital U.S. Aggregate
Bond Index 5.33% 9.50% 5.54% 6.47% 18,714
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Morningstar peer group average* 5.48% 13.35% 4.66% 5.48%
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CLASS 4 SHARES
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[CHART]
Income Fund Barclays Capital U.S. Aggregate Bond Index
------------- --------------------------------------------
May 1, 2008 10,000.00 10,000.00
Jun 1, 2008 9,896.19 9,918.70
Sep 1, 2008 9,679.93 9,870.25
Dec 1, 2008 9,411.57 10,322.24
Mar 1, 2009 9,338.26 10,334.19
Jun 1, 2009 9,457.39 10,518.40
Sep 1, 2009 9,988.91 10,912.22
Dec 1, 2009 10,111.32 10,934.39
Mar 1, 2010 10,358.86 11,129.23
Jun 1, 2010 10,492.16 11,517.48
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AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
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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/(A)/
- ---------------------------------------------------------------------------------
GEI Income 3.77% 10.94% 2.24% 10,492
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Barclays Capital U.S. Aggregate
Bond Index 5.33% 9.50% 6.75% 11,517
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Morningstar peer group average* 5.48% 13.35%
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INVESTMENT PROFILE [GRAPHIC]
A mutual 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 under normal circumstances in
debt securities.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2010++
as a % of Market Value
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Market Value of $58,300 (in thousands)
[CHART]
Corporate Notes 38.1%
Mortgage-Backed 35.9%
U.S. Treasuries 13.9%
Asset-Backed and Other 11.5%
Other Investments 0.4%
Federal Agencies 0.2%
QUALITY RATINGS AS OF JUNE 30, 2010
as a % of Market Value
- --------------------------------------------------------------------------------
MOODY'S / S&P / PERCENTAGE OF
FITCH RATING ** MARKET VALUE
--------------------------------
Aaa / AAA 54.42%
--------------------------------
Aa / AA 2.92%
--------------------------------
A / A 14.81%
--------------------------------
Baa / BBB 14.17%
--------------------------------
Ba / BB and lower 13.68%
--------------------------------
100.00%
--------------------------------
(A)ENDING VALUE OF A $10,000 INVESTMENT FOR THE TEN-YEAR PERIOD OR SINCE
INCEPTION, WHICHEVER IS LESS.
* 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 214, 212, 185 AND 159
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
**MOODY'S INVESTORS SERVICES INC, STANDARD & POOR'S AND FITCH ARE NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATIONS.
+ TOTAL RETURNS FOR THE PERIOD ENDED JUNE 30, 2010 ARE NOT ANNUALIZED.
++THE SECURITIES INFORMATION REGARDING HOLDINGS, ALLOCATIONS AND OTHER
CHARACTERISTICS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF SECURITIES THAT THE
FUND HAS BOUGHT AND THE DIVERSITY OF AREAS IN WHICH THE FUND MAY INVEST AS OF
A PARTICULAR DATE. IT MAY NOT BE REPRESENTATIVE OF THE FUND'S CURRENT OR
FUTURE INVESTMENTS AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL A PARTICULAR SECURITY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE. THE PERFORMANCE SHOWN ON
THE GRAPHS AND TABLES DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES AND DO NOT
REFLECT THE FEES OR CHARGES THAT WOULD BE ASSOCIATED WITH VARIABLE CONTRACTS
THROUGH WHICH SHARES OF THE FUND ARE OFFERED.
5
INCOME FUND
Schedule of Investments June 30, 2010 (unaudited)
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INCOME FUND
PRINCIPAL
AMOUNT VALUE
BONDS AND NOTES -- 94.7% +
---------------------------------------------------------------------------
U.S. TREASURIES -- 14.0%
U.S. Treasury Bonds
4.38% 11/15/39.............. $ 248,700 $ 268,479
4.50% 08/15/39.............. 233,200 256,848
4.63% 02/15/40.............. 1,691,600 1,901,463 /(f)/
U.S. Treasury Notes
0.59% 04/30/12.............. 199,300 200,795 /(c)/
2.50% 04/30/15.............. 1,541,500 1,596,296
3.63% 02/15/20.............. 3,657,000 3,863,847 /(f)/
4.50% 11/15/10.............. 20,000 20,318
8,108,046
FEDERAL AGENCIES -- 0.2%
Federal Home Loan Mortgage Corp.
8.25% 06/01/26.............. 60,000 83,295 /(f,h)/
AGENCY MORTGAGE BACKED -- 22.8%
Federal Home Loan Mortgage Corp.
4.50% 06/01/33 - 02/01/35... 40,685 42,550 /(f)/
5.00% 07/01/35.............. 178,082 188,858 /(f)/
5.50% 05/01/20 - 01/01/38... 347,210 375,820 /(f)/
6.00% 04/01/17 - 11/01/37... 751,621 822,734 /(f)/
6.50% 02/01/29.............. 352 392 /(f)/
7.00% 10/01/16 - 08/01/36... 94,975 106,608 /(f)/
7.50% 09/01/12 - 09/01/33... 17,071 19,376 /(f)/
8.00% 11/01/30.............. 16,836 19,429 /(f)/
8.50% 04/01/30 - 05/01/30... 21,425 24,945 /(f)/
5.50% TBA................... 180,000 193,134 /(b)/
Federal National Mortgage Assoc.
4.00% 05/01/19 - 06/01/19... 161,912 171,117 /(f)/
4.50% 05/01/18 - 06/01/40... 2,447,816 2,556,384 /(f)/
5.00% 03/01/34 - 06/01/40... 1,910,180 2,025,072 /(f)/
5.25% 04/01/37.............. 7,488 7,806 /(g)/
5.50% 12/01/13 - 04/01/38... 2,338,299 2,522,620 /(f)/
5.64% 03/01/37.............. 2,730 2,847 /(g)/
6.00% 06/01/14 - 07/01/35... 1,398,856 1,537,452 /(f)/
6.50% 07/01/17 - 08/01/34... 206,907 228,915 /(f)/
7.00% 03/01/15 - 02/01/34... 69,834 77,628 /(f)/
7.50% 08/01/13 - 03/01/34... 107,649 121,850 /(f)/
8.00% 12/01/12 - 11/01/33... 79,334 91,610 /(f)/
8.50% 05/01/31.............. 4,213 4,909 /(f)/
9.00% 04/01/16 - 12/01/22... 9,816 10,770 /(f)/
5.00% TBA................... 547,000 583,581 /(b)/
7.00% TBA................... 210,000 232,993 /(b)/
Government National Mortgage Assoc.
3.13% 12/20/24.............. 2,855 2,925 /(f,g)/
3.38% 02/20/23 - 02/20/26... 10,072 10,321 /(f,g)/
4.50% 08/15/33 - 09/15/34... 230,126 241,559 /(f)/
6.00% 04/15/27 - 09/15/36... 326,725 360,616 /(f)/
6.50% 04/15/19 - 08/15/36... 279,356 310,499 /(f)/
7.00% 03/15/12 - 10/15/36... 174,233 195,780 /(f)/
PRINCIPAL
AMOUNT VALUE
7.50% 11/15/31 - 10/15/33... $ 7,313 $ 8,325 /(f)/
8.00% 12/15/29.............. 2,655 3,080 /(f)/
8.50% 10/15/17.............. 12,170 13,353 /(f)/
9.00% 11/15/16 - 12/15/21... 33,271 36,928 /(f)/
13,152,786
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.8%
Fannie Mae Whole Loan
0.97% 08/25/43.............. 309,893 9,592 /(e,f,k)/
Federal Home Loan Mortgage Corp.
0.12% 09/25/43.............. 1,190,764 13,082 /(e,f,g,k)/
8.00% 02/01/23 - 07/01/24... 4,337 950 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC
5.00% 05/15/38.............. 77,025 82,431
5.50% 04/15/17.............. 42,347 1,731 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC (Class YQ)
5.00% 05/15/17.............. 33,103 1,417 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC (Series 1980) (Class OF)
7.50% 07/15/27.............. 8,756 2,002 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2543) (Class LR)
7.50% 01/15/16.............. 5,627 5,676 /(f)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2631) (Class DI)
5.50% 06/15/33.............. 233,254 50,166 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2642) (Class AW)
4.50% 03/15/19.............. 10,136 57 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2643) (Class IM)
4.50% 03/15/18.............. 159,681 12,411 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2645) (Class BI)
4.50% 02/15/18.............. 28,281 1,704 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2647) (Class DI)
4.50% 10/15/16.............. 23,631 494 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2656) (Class IU)
5.00% 04/15/28.............. 79,911 1,010 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2722) (Class PI)
5.00% 06/15/28.............. 32,439 1,049 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2763) (Class JI)
5.00% 10/15/18.............. 101,456 8,620 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2781) (Class IC)
5.00% 11/15/17 - 05/15/18... 89,192 5,085 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2795) (Class IC)
5.00% 07/15/17.............. 21,855 653 /(e,f,k)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2852) (Class OJ)
9.91% 09/15/34.............. 48,999 46,911 /(c,d)/
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements on page 20.
6
INCOME FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
Federal Home Loan Mortgage Corp.
STRIPS (Class IO)
5.00% 12/01/34............. $ 98,178 $ 18,104 /(e,f,k)/
Federal Home Loan Mortgage STRIPS
5.58% 08/01/27............. 1,121 922 /(c,d,f)/
Federal National Mortgage Assoc.
REMIC
5.00% 08/25/38............. 76,926 81,891
Federal National Mortgage Assoc.
REMIC (Class 109J)
7.00% 09/25/20............. 592 649 /(f)/
Federal National Mortgage Assoc.
REMIC (Class B)
1.84% 12/25/22............. 276 260 /(c,d,f)/
Federal National Mortgage Assoc.
REMIC (Class BZ)
5.50% 01/25/33............. 158,462 174,610 /(f)/
Federal National Mortgage Assoc.
REMIC (Class CS)
7.35% 08/25/16............. 71,553 2,288 /(e,f,g,k)/
Federal National Mortgage Assoc.
REMIC (Class VZ)
5.00% 10/25/35............. 73,635 74,454
Federal National Mortgage Assoc.
REMIC (Series 1992) (Class K)
1008.00% 05/25/22............. 6 152 /(e,f,k)/
Federal National Mortgage Assoc.
REMIC (Series 2003)
5.00% 08/25/17............. 59,354 2,737 /(e,f,k)/
7.15% 05/25/18............. 430,792 50,885 /(e,f,g,k)/
Federal National Mortgage Assoc.
REMIC (Series 2003) (Class HI)
5.00% 10/25/22............. 61,771 4,457 /(e,f,k)/
Federal National Mortgage Assoc.
REMIC (Series 2003) (Class IJ)
5.00% 02/25/32............. 147,163 13,482 /(e,f,k)/
Federal National Mortgage Assoc.
REMIC (Series 2003) (Class IO)
1.20% 12/25/42............. 74,491 1,668 /(e,f,g,k)/
Federal National Mortgage Assoc.
REMIC (Series 2003) (Class KI)
4.50% 05/25/18............. 34,760 1,096 /(e,f,k)/
Federal National Mortgage Assoc.
REMIC (Series 2003) (Class SL)
15.85% 03/25/31............. 215,612 231,916 /(f,g)/
Federal National Mortgage Assoc.
REMIC (Series 2008) (Class ZW)
5.00% 07/25/38............. 62,011 65,840
Federal National Mortgage Assoc.
STRIPS
5.50% 11/25/39............. 504,223 79,566 /(e,f,k)/
6.00% 01/01/35............. 63,485 9,383 /(e,f,k)/
Federal National Mortgage Assoc.
STRIPS (Class 2)
4.50% 08/01/35............. 147,599 26,568 /(e,f,k)/
5.00% 03/25/38............. 129,852 18,651 /(e,f,k)/
5.50% 12/01/33............. 59,273 10,096 /(e,f,k)/
7.50% 11/01/23............. 26,896 4,777 /(e,f,k)/
8.00% 08/01/23 - 07/01/24.. 9,341 2,079 /(e,f,k)/
PRINCIPAL
AMOUNT VALUE
8.50% 07/25/22.............. $ 419 $ 92 /(e,f,k)/
9.00% 05/25/22.............. 276 60 /(e,f,k)/
Federal National Mortgage Assoc.
STRIPS (Series 354) (Class 1)
4.41% 11/01/34.............. 218,984 198,440 /(c,d,f)/
Federal National Mortgage Assoc.
STRIPS (Series 364) (Class 1)
4.50% 09/01/35.............. 271,069 48,792 /(e,f,k)/
Federal National Mortgage Assoc.
STRIPS (Series 364) (Class 13)
6.00% 09/01/35.............. 157,546 22,382 /(e,f,k)/
Federal National Mortgage Assoc.
STRIPS (Series 378) (Class 1)
4.50% 01/01/36.............. 218,814 39,386 /(e,f,k)/
Federal National Mortgage Assoc.
STRIPS (Series 387) (Class 1)
5.00% 05/25/38.............. 138,608 20,316 /(e,f,k)/
Government National Mortgage Assoc.
5.00% 10/20/37 - 09/20/38... 400,702 65,804 /(e,f,k)/
6.10% 08/20/39.............. 603,148 70,156 /(e,f,k)/
Government National Mortgage Assoc.
(Class IC)
5.90% 04/16/37.............. 171,394 21,064 /(e,f,k)/
Vendee Mortgage Trust
0.39% 04/15/40.............. 319,870 6,589 /(e,k)/
Vendee Mortgage Trust (Class 2003)
0.86% 05/15/33.............. 191,514 7,702 /(e,k)/
1,622,355
ASSET BACKED -- 3.1%
Bear Stearns Asset Backed Securities
Trust (Class 2A2)
23.57% 11/25/35.............. 513,509 473,694 /(c,f,g)/
Chase Funding Mortgage Loan Asset-
Backed Certificates (Class IB)
5.75% 05/25/32.............. 21,907 11,065 /(f,g,j)/
Chase Funding Mortgage Loan Asset-
Backed Certificates (Class IIA2)
1.92% 02/25/33.............. 19,166 18,261 /(c,f,g)/
Citicorp Residential Mortgage
Securities Inc. (Series 2006) (Class
A5)
6.04% 09/25/36.............. 60,000 53,025
Countrywide Asset-Backed Certificates
1.21% 05/25/33.............. 9,067 6,210 /(f,g)/
Countrywide Asset-Backed Certificates
(Class AF4)
5.31% 08/25/35.............. 750,000 690,029 /(f,g)/
Countrywide Asset-Backed Certificates
(Class AF6)
4.74% 10/25/35.............. 54,648 47,796 /(g)/
Mid-State Trust (Class A3)
7.54% 07/01/35.............. 1,930 1,875 /(f,j)/
Popular ABS Mortgage Pass-Through
Trust (Class AF4)
5.30% 11/25/35.............. 50,000 42,862
Residential Asset Mortgage Products
Inc. (Class A2)
7.48% 06/25/32.............. 19,766 15,576 /(c,f,g)/
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements on page 20.
7
INCOME FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
Residential Asset Securities Corp.
(Series 2002) (Class A2b)
37.91% 07/25/32......... $ 4,193 $ 2,104 /(c,f,g)/
Saxon Asset Securities Trust
5.23% 08/25/35......... 493,224 453,512 /(g)/
1,816,009
CORPORATE NOTES -- 38.4%
AES El Salvador Trust
6.75% 02/01/16......... 100,000 93,493 /(a)/
AES Panama S.A.
6.35% 12/21/16......... 30,000 30,872 /(a)/
Agilent Technologies Inc.
5.50% 09/14/15......... 46,000 49,513
Alliance One International Inc.
10.00% 07/15/16......... 95,000 96,663 /(a)/
AMC Entertainment Inc.
8.75% 06/01/19......... 83,000 83,415
America Movil SAB de C.V.
5.00% 03/30/20......... 100,000 103,317 /(a)/
American Tower Corp.
4.63% 04/01/15......... 40,000 41,609
Amsted Industries Inc.
8.13% 03/15/18......... 109,000 108,728 /(a)/
Anadarko Petroleum Corp.
6.20% 03/15/40......... 134,000 106,018
Anheuser-Busch InBev Worldwide Inc.
5.00% 04/15/20......... 136,000 142,193 /(a,f)/
5.38% 11/15/14......... 89,000 97,305 /(a)/
ARAMARK Corp.
8.50% 02/01/15......... 212,000 214,120 /(f)/
Arizona Public Service Co.
6.25% 08/01/16......... 165,000 184,402 /(f)/
AT&T Inc.
6.40% 05/15/38......... 148,000 162,718 /(f)/
6.70% 11/15/13......... 108,000 124,640 /(f)/
Avis Budget Car Rental LLC
9.63% 03/15/18......... 52,000 52,520 /(a)/
Banco do Brasil Cayman
8.50% 10/29/49......... 200,000 220,500 /(a,f)/
Banco Mercantil del Norte S.A.
6.14% 10/13/16......... 14,000 13,965 /(g)/
Bank of America Corp.
4.50% 04/01/15......... 80,000 80,858
5.63% 07/01/20......... 50,000 50,397
5.75% 12/01/17......... 25,000 25,927
6.50% 08/01/16......... 260,000 281,378 /(f)/
BE Aerospace Inc.
8.50% 07/01/18......... 134,000 140,700 /(f)/
BlackRock Inc.
5.00% 12/10/19......... 88,000 93,533
Boise Paper Holdings LLC
8.00% 04/01/20......... 66,000 65,835 /(a)/
Bombardier Inc.
7.75% 03/15/20......... 124,000 128,650 /(a,f)/
Boston Scientific Corp.
4.50% 01/15/15......... 42,000 41,258
CA Inc.
5.38% 12/01/19......... 114,000 120,856 /(f)/
PRINCIPAL
AMOUNT VALUE
6.13% 12/01/14........ $ 32,000 $ 35,412
Calpine Corp.
7.25% 10/15/17........ 25,000 24,000 /(a)/
Cantor Fitzgerald LP
7.88% 10/15/19........ 64,000 66,221 /(a)/
Cargill Inc.
5.20% 01/22/13........ 162,000 174,461 /(a,f)/
6.00% 11/27/17........ 63,000 72,191 /(a)/
Case New Holland Inc.
7.88% 12/01/17........ 32,000 32,240 /(a)/
CBS Corp.
5.75% 04/15/20........ 116,000 124,506
CCO Holdings LLC
7.88% 04/30/18........ 32,000 32,160 /(a)/
8.13% 04/30/20........ 40,000 40,900 /(a)/
Cellco Partnership
5.55% 02/01/14........ 106,000 118,841
7.38% 11/15/13........ 79,000 92,616
Cenovus Energy Inc.
6.75% 11/15/39........ 63,000 72,331 /(a)/
Central American Bank for Economic
Integration
5.38% 09/24/14........ 70,000 74,111 /(a)/
CFG Investment SAC
9.25% 12/19/13........ 100,000 103,000 /(f)/
Chesapeake Energy Corp.
7.25% 12/15/18........ 17,000 17,553
Cincinnati Bell Inc.
8.25% 10/15/17........ 122,000 114,070 /(f)/
8.75% 03/15/18........ 80,000 72,600
Citigroup Inc.
5.00% 09/15/14........ 79,000 79,016
5.13% 05/05/14........ 102,000 104,026 /(f)/
6.38% 08/12/14........ 222,000 235,798 /(f)/
8.50% 05/22/19........ 352,000 419,628 /(f)/
City National Capital Trust I
9.63% 02/01/40........ 64,000 67,350
Clarendon Alumina Production Ltd.
8.50% 11/16/21........ 155,000 156,550 /(a,f)/
Comcast Corp.
6.40% 03/01/40........ 68,000 73,190
6.50% 01/15/15........ 62,000 71,160
Community Health Systems Inc.
8.88% 07/15/15........ 154,000 158,813 /(f)/
Consolidated Edison Company of New
York Inc.
6.65% 04/01/19........ 74,000 89,837
Consolidated Edison Company of New
York Inc. (Series 2008)
5.85% 04/01/18........ 45,000 51,445
Corp Nacional del Cobre de Chile
5.63% 09/21/35........ 14,000 14,305 /(a)/
Corp Pesquera Inca SAC
9.00% 02/10/17........ 10,000 9,775 /(a)/
COX Communications Inc.
6.25% 06/01/18........ 83,000 92,550 /(a)/
7.13% 10/01/12........ 57,000 63,333 /(f)/
Credit Suisse
6.00% 02/15/18........ 19,000 19,826
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements on page 20.
8
INCOME FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
Credit Suisse AG
5.40% 01/14/20............ $ 100,000 $ 99,426 /(f)/
Credit Suisse First Boston International
for CJSC The EXIM of Ukraine
7.65% 09/07/11............ 100,000 98,500
Crown Castle International Corp.
7.13% 11/01/19............ 130,000 127,075
Crown Castle Towers LLC
6.11% 01/15/40............ 66,000 72,439 /(a)/
CVS Caremark Corp.
3.25% 05/18/15............ 70,000 71,103
5.75% 06/01/17............ 38,000 42,274
6.13% 09/15/39............ 94,000 100,480
DASA Finance Corp.
8.75% 05/29/18............ 122,000 132,065
Denbury Resources Inc.
8.25% 02/15/20............ 66,000 68,970
DirecTV Holdings LLC
4.75% 10/01/14............ 70,000 74,135
5.20% 03/15/20............ 80,000 83,377
5.88% 10/01/19............ 76,000 83,021
DISH DBS Corp.
7.13% 02/01/16............ 26,000 26,065
Drummond Company Inc.
7.38% 02/15/16............ 94,000 88,360
9.00% 10/15/14............ 67,000 67,335 /(a)/
El Paso Corp.
8.05% 10/15/30............ 67,000 66,236
EnCana Corp.
6.50% 02/01/38............ 67,000 74,463
European Investment Bank
4.88% 01/17/17............ 100,000 111,534 /(f)/
Exelon Corp.
4.90% 06/15/15............ 100,000 106,792
Exelon Generation Company LLC
5.20% 10/01/19............ 47,000 49,998
6.25% 10/01/39............ 47,000 50,205
Fibria Overseas Finance Ltd.
7.50% 05/04/20............ 119,000 120,785 /(a)/
Ford Motor Credit Company LLC
7.00% 04/15/15............ 200,000 197,834
Gaz Capital SA for Gazprom
9.25% 04/23/19............ 100,000 115,000
Genworth Financial Inc.
8.63% 12/15/16............ 64,000 68,250 /(f)/
GlaxoSmithKline Capital Inc.
4.85% 05/15/13............ 66,000 72,158 /(f)/
Globo Comunicacao e Participacoes S.A.
7.25% 04/26/22............ 100,000 104,000 /(a,f)/
Hana Bank
4.50% 10/30/15............ 100,000 99,784 /(a)/
Hartford Financial Services Group Inc.
5.50% 03/30/20............ 136,000 132,000
HCA Inc.
9.25% 11/15/16............ 254,000 269,240 /(f)/
Health Management Associates Inc.
6.13% 04/15/16............ 87,000 82,433
Host Hotels & Resorts LP (REIT)
9.00% 05/15/17............ 81,000 86,670
PRINCIPAL
AMOUNT VALUE
HSBC Finance Corp.
5.00% 06/30/15............... $ 234,000 $ 244,155
5.70% 06/01/11............... 135,000 139,525
6.75% 05/15/11............... 95,000 98,894 /(f)/
HSBC Holdings PLC
6.50% 05/02/36............... 100,000 103,717 /(f)/
6.80% 06/01/38............... 250,000 269,420 /(f)/
Icahn Enterprises LP
8.00% 01/15/18............... 86,000 83,420 /(a)/
IIRSA Norte Finance Ltd.
8.75% 05/30/24............... 157,413 173,942 /(a,f)/
Illinois Power Co.
9.75% 11/15/18............... 98,000 128,663
Ingles Markets Inc.
8.88% 05/15/17............... 140,000 142,450
Intelsat Subsidiary Holding Company
S.A.
8.50% 01/15/13............... 64,000 64,480
8.88% 01/15/15............... 69,000 70,121
Intergas Finance BV
6.38% 05/14/17............... 100,000 100,000 /(a)/
Intergen N.V.
9.00% 06/30/17............... 288,000 286,560 /(a)/
International Paper Co.
7.50% 08/15/21............... 162,000 189,685
JP Morgan Chase Capital XXV (Series Y)
6.80% 10/01/37............... 33,000 32,616
JPMorgan Chase & Co.
5.13% 09/15/14............... 40,000 42,685
JPMorgan Chase Bank NA
5.88% 06/13/16............... 19,000 20,786
JPMorgan Chase Capital XXVII
7.00% 11/01/39............... 95,000 96,609
Kazakhstan Temir Zholy Finance BV
6.50% 05/11/11............... 100,000 101,000
Kraft Foods Inc.
5.38% 02/10/20............... 112,000 120,014
Kreditanstalt fuer Wiederaufbau
3.50% 03/10/14............... 340,000 359,006
4.13% 10/15/14............... 132,000 142,686
4.50% 07/16/18............... 231,000 251,053
L-3 Communications Corp.
5.88% 01/15/15............... 82,000 80,975
Levi Strauss & Co.
7.63% 05/15/20............... 100,000 98,000 /(a)/
Lincoln National Corp.
6.25% 02/15/20............... 34,000 36,425
8.75% 07/01/19............... 79,000 96,821
Lloyds TSB Bank PLC
5.80% 01/13/20............... 179,000 168,957 /(a)/
Majapahit Holding BV
7.25% 10/17/11............... 100,000 105,000 /(a)/
7.75% 10/17/16 - 01/20/20.... 200,000 219,250 /(a)/
Merrill Lynch & Company Inc.
6.05% 08/15/12............... 110,000 116,957
6.88% 04/25/18............... 110,000 117,346
Midamerican Energy Holdings Co.
6.13% 04/01/36............... 115,000 126,612 /(f)/
Morgan Stanley
5.50% 01/26/20............... 100,000 96,740
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements on page 20.
9
INCOME FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
5.63% 09/23/19...... $ 125,000 $ 120,927
6.00% 04/28/15...... 67,000 70,020
7.30% 05/13/19...... 166,000 178,520
Morgan Stanley (Series F)
6.63% 04/01/18...... 100,000 104,813
Motiva Enterprises LLC
6.85% 01/15/40...... 66,000 75,429 /(a)/
Mylan Inc.
7.88% 07/15/20...... 90,000 91,800 /(a)/
NAK Naftogaz Ukraine
9.50% 09/30/14...... 100,000 103,795 /(l)/
National Agricultural Cooperative
Federation
5.00% 09/30/14...... 58,000 60,361 /(a)/
Navistar International Corp.
8.25% 11/01/21...... 64,000 64,960
NET Servicos de Comunicacao S.A.
7.50% 01/27/20...... 100,000 104,500 /(a)/
New Communications Holdings Inc.
8.25% 04/15/17...... 92,000 92,345 /(a)/
Newmont Mining Corp.
6.25% 10/01/39...... 142,000 154,967
News America Inc.
6.65% 11/15/37...... 96,000 107,741
Nexen Inc.
6.20% 07/30/19...... 113,000 126,873
6.40% 05/15/37...... 156,000 162,679
Nisource Finance Corp.
6.13% 03/01/22...... 62,000 66,177
Noble Group Ltd.
6.75% 01/29/20...... 100,000 97,000 /(a)/
NRG Energy Inc.
7.38% 02/01/16...... 175,000 174,125
Omnicare Inc.
7.75% 06/01/20...... 58,000 59,160
Pacific Gas & Electric Co.
5.80% 03/01/37...... 105,000 114,119
PacifiCorp
6.25% 10/15/37...... 2,000 2,348
PAETEC Holding Corp.
8.88% 06/30/17...... 18,000 18,000 /(a)/
8.88% 06/30/17...... 28,000 28,000
Pemex Finance Ltd.
9.03% 02/15/11...... 9,750 9,896 /(f)/
Pemex Project Funding Master Trust
6.63% 06/15/38...... 20,000 20,405
Petrobras International Finance Co.
5.75% 01/20/20...... 42,000 42,296
Petroleos Mexicanos
4.88% 03/15/15...... 100,000 103,500 /(a)/
6.00% 03/05/20...... 30,000 31,500 /(a)/
8.00% 05/03/19...... 10,000 11,900
Petroleum Company of Trinidad &
Tobago Ltd.
6.00% 05/08/22...... 100,000 94,285
Pioneer Natural Resources Co.
7.50% 01/15/20...... 58,000 59,775
Plains All American Pipeline LP
4.25% 09/01/12...... 97,000 101,341
PRINCIPAL
AMOUNT VALUE
Plains Exploration & Production Co.
7.63% 06/01/18............... $ 32,000 $ 31,280
Principal Financial Group Inc.
8.88% 05/15/19............... 45,000 55,177
Prudential Financial Inc.
3.63% 09/17/12............... 31,000 31,929
3.88% 01/14/15............... 100,000 100,711
5.15% 01/15/13............... 73,000 77,258
7.38% 06/15/19............... 66,000 76,425
QVC Inc.
7.50% 10/01/19............... 78,000 76,635 /(a)/
RailAmerica Inc.
9.25% 07/01/17............... 76,000 79,610
Republic Services Inc.
5.25% 11/15/21............... 64,000 67,338 /(a)/
5.50% 09/15/19............... 44,000 47,613 /(a)/
Reynolds Group Issuer Inc.
7.75% 10/15/16............... 167,000 163,243 /(a)/
Roche Holdings Inc.
6.00% 03/01/19............... 76,000 88,532 /(a)/
Rockies Express Pipeline LLC
5.63% 04/15/20............... 192,000 182,615 /(a)/
RR Donnelley & Sons Co.
4.95% 04/01/14............... 100,000 101,906 /(f)/
7.63% 06/15/20............... 68,000 67,416
RSHB Capital SA for OJSC Russian
Agricultural Bank
6.30% 05/15/17............... 100,000 99,250 /(a)/
Sabine Pass LNG LP
7.25% 11/30/13............... 105,000 94,500
SBA Telecommunications Inc.
8.00% 08/15/16............... 28,000 28,980 /(a)/
8.25% 08/15/19............... 42,000 44,205 /(a)/
Security Benefit Life Insurance
8.75% 05/15/16............... 47,000 41,008 /(a)/
Simon Property Group LP (REIT)
5.65% 02/01/20............... 100,000 105,906
Solutia Inc.
7.88% 03/15/20............... 66,000 65,835
Southern Copper Corp.
5.38% 04/16/20............... 6,000 6,014
6.75% 04/16/40............... 15,000 14,827
7.50% 07/27/35............... 100,000 107,930
Spirit Aerosystems Inc.
7.50% 10/01/17............... 37,000 36,260
Talisman Energy Inc.
7.75% 06/01/19............... 27,000 33,147
Telecom Italia Capital S.A.
6.00% 09/30/34............... 94,000 80,533
7.18% 06/18/19............... 68,000 73,210
Telefonica Emisiones SAU
3.73% 04/27/15............... 76,000 75,778
5.13% 04/27/20............... 84,000 84,193
Tesoro Corp. (Series B)
6.63% 11/01/15............... 164,000 153,750
The AES Corp.
8.00% 10/15/17 - 06/01/20.... 121,000 121,935
The Dow Chemical Co.
5.90% 02/15/15............... 90,000 98,354
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements on page 20.
10
INCOME FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
8.55% 05/15/19...... $ 98,000 $ 119,963
The Goldman Sachs Group Inc.
5.38% 03/15/20...... 480,000 474,296 /(f)/
The Kroger Co.
6.15% 01/15/20...... 98,000 113,207
The Potomac Edison Co.
5.35% 11/15/14...... 95,000 103,264 /(f)/
The Travelers Companies Inc.
5.80% 05/15/18...... 78,000 85,553
The Williams Companies Inc.
7.88% 09/01/21...... 71,000 81,373
Time Warner Cable Inc.
5.00% 02/01/20...... 76,000 77,721
6.75% 07/01/18...... 58,000 66,577
7.50% 04/01/14...... 52,000 60,419
Time Warner Inc.
5.88% 11/15/16...... 83,000 93,566
6.20% 03/15/40...... 68,000 71,724
TNK-BP Finance S.A.
7.25% 02/02/20...... 15,000 14,982 /(a)/
TransDigm Inc.
7.75% 07/15/14...... 38,000 38,000 /(a)/
UPC Germany GmbH
8.13% 12/01/17...... 100,000 98,000 /(a)/
USB Capital XIII Trust
6.63% 12/15/39...... 98,000 103,325
Valero Energy Corp.
6.13% 02/01/20...... 132,000 135,643
Vedanta Resources PLC
9.50% 07/18/18...... 100,000 106,250 /(a)/
Verizon Communications Inc.
6.35% 04/01/19...... 30,000 34,714
6.40% 02/15/38...... 70,000 77,145
6.90% 04/15/38...... 76,000 88,822
8.75% 11/01/18...... 40,000 51,999
Virgin Media Finance PLC
8.38% 10/15/19...... 100,000 101,250
WEA Finance LLC
6.75% 09/02/19...... 64,000 71,133 /(a)/
7.50% 06/02/14...... 100,000 113,326 /(a)/
Weatherford International Ltd.
6.50% 08/01/36...... 68,000 61,620
Williams Partners LP
5.25% 03/15/20...... 56,000 57,264 /(a)/
6.30% 04/15/40...... 99,000 99,466 /(a)/
Windstream Corp.
7.88% 11/01/17...... 176,000 171,820
Woodside Finance Ltd.
4.50% 11/10/14...... 165,000 168,285 /(a)/
Woori Bank
4.50% 10/07/15...... 100,000 99,325 /(a)/
Wyeth
5.50% 03/15/13...... 108,000 119,456
Wynn Las Vegas LLC
7.88% 05/01/20...... 90,000 90,450 /(a)/
XL Capital Ltd.
5.25% 09/15/14...... 142,000 145,298
PRINCIPAL
AMOUNT VALUE
Xstrata Finance Canada Ltd.
5.80% 11/15/16...... $ 62,873 $ 67,399 /(a)/
22,225,270
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 10.7%
Banc of America Commercial
Mortgage Inc.
5.93% 02/10/51...... 150,000 156,590
Banc of America Commercial
Mortgage Inc. (Class A)
5.49% 02/10/51...... 131,250 132,804 /(f)/
Banc of America Commercial
Mortgage Inc. (Class A4)
5.63% 07/10/46...... 166,000 170,601 /(f)/
Banc of America Commercial
Mortgage Inc. (Class C)
5.88% 04/10/49...... 100,000 16,333 /(f,g,j)/
Banc of America Funding Corp. (Class
B1)
5.45% 03/20/36...... 68,727 2,862 /(f,g,j)/
Banc of America Mortgage Securities
Inc. (Class B1)
5.13% 01/25/36...... 49,043 4,728 /(f,g,j)/
Banc of America Mortgage Securities
Inc. (Class B2)
5.13% 01/25/36...... 24,522 319 /(f,g,j)/
Bear Stearns Commercial Mortgage
Securities (Class A2)
5.63% 04/12/38...... 25,000 25,240 /(g)/
Bear Stearns Commercial Mortgage
Securities (Class A4)
5.47% 01/12/45...... 100,000 103,469
5.69% 06/11/50...... 170,000 172,086 /(f,g)/
Bear Stearns Commercial Mortgage
Securities (Class AJ)
5.62% 03/11/39...... 50,000 43,228 /(g)/
5.91% 06/11/40...... 60,000 37,952 /(g)/
Bear Stearns Commercial Mortgage
Securities (Class AM)
5.84% 09/11/42...... 70,000 62,239
5.92% 06/11/50...... 80,000 69,094 /(g)/
Bear Stearns Commercial Mortgage
Securities (Series 2007) (Class D)
6.18% 09/11/42...... 20,000 6,962 /(f,g,j)/
Citigroup Commercial Mortgage Trust
(Class AJ)
5.92% 03/15/49...... 50,000 41,367 /(g)/
Citigroup Commercial Mortgage Trust
(Series 2006) (Class AJ)
5.48% 10/15/49...... 60,000 39,411
Citigroup Commercial Mortgage Trust
(Series 2006) (Class AM)
5.65% 10/15/48...... 70,000 61,173
Commercial Mortgage Pass Through
Certificates (Class A4)
5.96% 06/10/46...... 150,000 159,485 /(f,g)/
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements on page 20.
11
INCOME FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
Countrywide Commercial Mortgage
Trust (Class A4)
5.70% 09/12/49........ $ 100,000 $ 99,571
Countrywide Commercial Mortgage
Trust (Class AM)
5.46% 07/12/46........ 150,000 126,939 /(g)/
Credit Suisse First Boston Mortgage
Securities Corp. (Class CB1)
5.34% 10/25/35........ 72,217 4,624 /(f,g,j)/
Credit Suisse Mortgage Capital
Certificates (Class A3)
5.47% 09/15/39........ 217,000 213,262 /(f)/
Credit Suisse Mortgage Capital
Certificates (Class C)
5.73% 02/15/39........ 150,000 90,088
Credit Suisse Mortgage Capital
Certificates (Class CB1)
5.65% 02/25/36........ 37,919 2,801 /(f,g,j)/
Federal National Mortgage Assoc.
REMIC
6.15% 09/25/37........ 388,218 43,000 /(e,k)/
6.20% 07/25/37........ 197,776 24,499 /(e,k)/
6.34% 10/25/35........ 286,320 37,061 /(e,k)/
Federal National Mortgage Assoc.
REMIC (Series 2005) (Class SC)
6.33% 10/25/35........ 429,481 62,757 /(e,k)/
Government National Mortgage Assoc.
6.15% 04/20/40........ 597,741 93,479 /(c,e)/
6.15% 05/20/40........ 628,728 91,078 /(e,k)/
Greenwich Capital Commercial Funding
Corp.
6.09% 07/10/38........ 350,000 365,849 /(g)/
Greenwich Capital Commercial Funding
Corp. (Class A2)
5.60% 12/10/49........ 50,000 52,052
Greenwich Capital Commercial Funding
Corp. (Class A4)
5.74% 12/10/49........ 323,000 317,698 /(f)/
Greenwich Capital Commercial Funding
Corp. (Class AM)
6.09% 07/10/38........ 158,000 135,978
GS Mortgage Securities Corp. II (Class
A4)
5.55% 04/10/38........ 230,000 236,650 /(g)/
Indymac INDA Mortgage Loan Trust
(Class B1)
5.12% 01/25/36........ 99,191 3,882 /(f,g,j)/
Indymac INDA Mortgage Loan Trust
(Class B2)
5.12% 01/25/36........ 73,162 563 /(f,g,j)/
JP Morgan Chase Commercial
Mortgage Securities Corp.
5.41% 05/15/47........ 55,000 29,400
6.06% 04/15/45........ 70,000 61,368
JP Morgan Chase Commercial
Mortgage Securities Corp. (Class A4)
5.34% 08/12/37........ 150,000 160,825 /(g)/
5.44% 06/12/47........ 160,000 159,795
5.79% 02/12/51........ 160,000 161,873 /(g)/
PRINCIPAL
AMOUNT VALUE
6.07% 02/12/51........... $ 110,000 $ 106,270
JP Morgan Chase Commercial
Mortgage Securities Corp. (Class AJ)
5.50% 06/12/47........... 30,000 17,605 /(g)/
JP Morgan Chase Commercial
Mortgage Securities Corp. (Class
AM)
6.10% 02/12/51........... 120,000 102,267 /(g)/
JP Morgan Chase Commercial
Mortgage Securities Corp. (Class F)
6.40% 02/12/51........... 40,000 9,545 /(g,j)/
LB-UBS Commercial Mortgage Trust
(Class A4)
5.16% 02/15/31........... 70,000 72,817
5.66% 03/15/39........... 250,000 258,463 /(g)/
LB-UBS Commercial Mortgage Trust
(Class AJ)
6.32% 04/15/41........... 30,000 19,412 /(g)/
LB-UBS Commercial Mortgage Trust
(Class F)
6.45% 07/15/40........... 70,000 10,499 /(g,j)/
LB-UBS Commercial Mortgage Trust
(Series 2001) (Class B)
6.65% 07/14/16........... 34,000 34,849 /(f,j)/
MASTR Alternative Loans Trust (Series
2003) (Class 15X)
5.00% 08/25/18........... 98,012 10,207 /(e,f,j,k)/
Merrill Lynch Mortgage Trust (Series
2006) (Class B)
5.84% 05/12/39........... 70,000 36,577
Morgan Stanley Capital I
5.36% 11/12/41........... 175,000 147,992
5.94% 10/15/42........... 76,000 44,873
Morgan Stanley Capital I (Class A3)
5.71% 07/12/44........... 100,000 106,043 /(f)/
Morgan Stanley Capital I (Class A4)
5.45% 02/12/44........... 173,000 171,923 /(g)/
5.81% 12/12/49........... 210,000 217,457
Morgan Stanley Capital I (Class AJ)
5.39% 11/12/41........... 280,000 180,900 /(f,g)/
Morgan Stanley Capital I (Class AM)
5.98% 08/12/41........... 70,000 64,784 /(g)/
6.46% 01/11/43........... 70,000 62,960
Morgan Stanley Capital I (Class B)
5.94% 10/15/42........... 50,000 32,128
Morgan Stanley Capital I (Series 2006)
(Class A2)
5.28% 12/15/43........... 102,000 104,602 /(f)/
OBP Depositor LLC Trust
4.65% 07/15/45........... 50,000 50,000 /(a)/
Puma Finance Ltd. (Class A)
5.42% 10/11/34........... 50,316 48,549 /(c,f,g)/
Residential Funding Mortgage
Securities I (Class M1)
5.75% 01/25/36........... 95,134 7,138 /(f,j)/
Residential Funding Mortgage
Securities I (Class M2)
5.75% 01/25/36........... 46,138 1,125 /(f,j)/
Wachovia Bank Commercial
Mortgage Trust (Class A3)
5.25% 12/15/43........... 120,000 119,956
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements on page 20.
12
INCOME FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
Wachovia Bank Commercial Mortgage
Trust (Class AJ)
5.52% 01/15/45........ $ 90,000 $ 64,989 /(g)/
Wachovia Bank Commercial Mortgage
Trust (Class AM)
5.47% 01/15/45........ 70,000 60,325 /(g)/
Wachovia Bank Commercial Mortgage
Trust (Series 2006) (Class AJ)
6.19% 06/15/45........ 30,000 20,605 /(g)/
WAMU Commercial Mortgage
Securities Trust (Series 2005) (Class
AJ)
3.52% 05/25/36........ 70,000 70,705 /(a,c)/
Wells Fargo Mortgage Backed
Securities Trust (Class B1)
5.50% 01/25/36........ 149,990 20,623 /(f,j)/
6,157,223
SOVEREIGN BONDS -- 2.2%
Government of Belize
6.00% 02/20/29........ 27,100 20,054 /(h)/
Government of Brazil
8.00% 01/15/18........ 67,556 78,364
8.25% 01/20/34........ 66,000 87,120
Government of Costa Rica
10.00% 08/01/20........ 25,000 33,625 /(a)/
Government of El Salvador
7.65% 06/15/35........ 20,000 21,200 /(a)/
Government of Grenada
2.50% 09/15/25........ 13,000 5,980 /(a,f,h)/
Government of Indonesia
11.63% 03/04/19........ 100,000 143,750 /(a)/
Government of Lebanon
6.38% 03/09/20........ 42,000 42,001
Government of Panama
6.70% 01/26/36........ 56,000 61,740
Government of Peruvian
6.55% 03/14/37........ 84,000 92,820
Government of Philippine
6.50% 01/20/20........ 100,000 109,800
Government of Poland
6.38% 07/15/19........ 7,000 7,744
Government of Turkey
5.63% 03/30/21........ 100,000 99,000
Government of Uruguay
6.88% 09/28/25........ 20,114 22,427
Government of Venezuela
1.31% 04/20/11........ 13,000 11,993 /(g)/
5.38% 08/07/10........ 99,000 98,258
10.75% 09/19/13........ 34,000 29,580
Republic of Dominican
9.50% 09/27/11........ 37,546 39,236
Russian Foreign Bond - Eurobond
5.00% 04/29/20........ 100,000 96,500 /(a)/
7.50% 03/31/30........ 81,690 92,090 /(h)/
United Mexican States
5.13% 01/15/20........ 40,000 41,600
6.05% 01/11/40........ 50,000 52,750
1,287,632
PRINCIPAL
AMOUNT VALUE
MUNICIPAL BONDS AND NOTES -- 0.5%
American Municipal Power-Ohio Inc.
6.05% 02/15/43......... $ 50,000 $ 49,619
Municipal Electric Authority of Georgia
6.64% 04/01/57......... 103,000 99,749
New Jersey State Turnpike Authority
7.41% 01/01/40......... 110,000 133,991
New Jersey Transportation Trust Fund
Authority
6.88% 12/15/39......... 15,000 15,819
299,178
TOTAL BONDS AND NOTES
(COST $53,937,157).................... 54,751,794
NUMBER OF
SHARES VALUE
------------------------------------------------------------------------------
PREFERRED STOCK -- 0.2%
------------------------------------------------------------------------------
Citigroup Capital XII
(COST $85,625)........................ 3,425 85,591 /(g)/
------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.4%
------------------------------------------------------------------------------
GEI Investment Fund
(COST $294,984)....................... 256,636 /(i)/
TOTAL INVESTMENT IN SECURITIES
(COST $54,317,766).................... 55,094,021
------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 5.5%
------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class 0.05%
(COST $3,206,446).................... 3,206,446 /(c,i)/
TOTAL INVESTMENTS
(COST $57,524,212).................... 58,300,467
LIABILITIES IN EXCESS OF OTHER
ASSETS, NET -- (0.8)%................. (475,892)
------------
NET ASSETS -- 100.0%................... $ 57,824,575
============
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements on page 20.
13
INCOME FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
- ------------------
OTHER INFORMATION
- ------------------
The Fund had the following long futures contracts open at June 30, 2010
(unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
------------------------------------------------------------------
2 Yr. U.S.
Treasury
Notes Futures September 2010 30 $6,564,844 $ 9,496
5 Yr. U.S.
Treasury
Notes Futures September 2010 39 4,615,711 76,221
The Fund had the following short futures contracts open at June 30, 2010
(unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
----------------------------------------------------------------------
Ultra Long U.S.
Treasury
Bond
Futures September 2010 3 $ (407,438) $ (21,447)
10 Yr. U.S.
Treasury
Notes
Futures September 2010 113 (13,847,797) (256,154)
---------
$(191,884)
=========
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements on page 20.
14
Notes to Schedule of Investments June 30, 2010 (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
information regarding holdings, allocations and other characteristics are
presented to illustrate examples of securities that the Fund has bought and the
diversity of areas in which the Fund may invest as of a particular date. It may
not be representative of the Fund's current or future investments and should
not be construed as a recommendation to purchase or sell a particular security.
Please see the Fund's prospectus for complete descriptions of investment
objective, 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, 2010, these securities amounted to
$6,660,837 or 11.52% of the net assets of the Fund. These securities have
been determined to be liquid using procedures established by the Board of
Trustees.
(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, 2010, 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, 2010 .
(h)Step coupon bond. Security becomes interest bearing at a future date.
(i)GE Asset Management, the investment adviser of the Fund, also serves as
investment adviser of the GEI Investment Fund and the GE Funds-GE Money
Market Fund
(j)Illiquid securities. At June 30, 2010, these securities amounted to $150,000
or 0.26% of net assets for the Fund. These securities have been determined
to be illiquid using procedures established by the Board of Directors of the
GE Investments Funds, Inc.
(k)Coupon amount represents the coupon of the underlying mortgage securities on
which monthly interest payments are based.
(l)Securities in default
+ Percentages are based on net assets as of June 30, 2010.
Abbreviations:
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
STRIPS Separate Trading of Registered Interest and
Principal of Security
TBA To be announced
15
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
INCOME FUND
----------------------------------------------------------------------- ------------
CLASS 1
---------------------------------------------------------------------- ------------
6/30/10+ 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05 6/30/10+
-------- -------- -------- -------- -------- -------- --------
INCEPTION DATE 1/3/95
Net asset value, beginning of
period.......................... $10.62 $10.26 $11.50 $11.80 $11.84 $12.25 $10.62
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income
(loss)........................ 0.23 0.37 0.56 0.81 0.56 0.61 0.05
Net realized and unrealized
gains/(losses) on
investments................... 0.19 0.45 (1.16) (0.25) (0.04) (0.36) 0.35
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM
INVESTMENT OPERATIONS........... 0.42 0.82 (0.60) 0.56 0.52 0.25 0.40
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.......... -- 0.46 0.64 0.82 0.56 0.61 --
Net realized gains............. -- -- -- -- -- 0.05 --
Return of capital.............. -- -- 0.00/(b)/ 0.04 -- 0.00/(b)/ --
- ------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS.............. -- 0.46 0.64 0.86 0.56 0.66 --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period.......................... $11.04 $10.62 $10.26 $11.50 $11.80 $11.84 $11.02
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/(A)/................ 3.95% 7.88% (5.21)% 4.83% 4.37% 2.04% 3.77%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of period (in
thousands).................... $57,814 $59,532 $68,731 $93,480 $126,732 $116,558 $10
Ratios to average net
assets:
Net investment
income*..................... 4.33% 4.01% 4.63% 5.07% 5.07% 4.49% 3.91%
Net Expenses*................ 0.80%/(c)/ 0.84%/(c)/ 0.63%/(c)/ 0.61% 0.61% 0.60% 1.23%/(c)/
Gross Expense*............... 0.82% 0.84% 0.65% 0.61% 0.61% 0.60% 1.25%
Portfolio turnover rate...... 175% 251% 385% 448% 270% 311% 175%
--------------------------
CLASS 4
--------------------------
12/31/09 12/31/08
-------- --------
INCEPTION DATE 5/1/08
Net asset value, beginning of
period.......................... $10.24 $11.56
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income
(loss)........................ 0.16 0.37**
Net realized and unrealized
gains/(losses) on
investments................... 0.63 (1.08)
- -----------------------------------------------------------
TOTAL INCOME FROM
INVESTMENT OPERATIONS........... 0.79 (0.71)
- -----------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.......... 0.41 0.61
Net realized gains............. -- --
Return of capital.............. -- 0.00/(b)/
- -----------------------------------------------------------
TOTAL DISTRIBUTIONS.............. 0.41 0.61
- -----------------------------------------------------------
Net asset value, end of
period.......................... $10.62 $10.24
- -----------------------------------------------------------
TOTAL RETURN/(A)/................ 7.43% (6.16)%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of period (in
thousands).................... $10 $9
Ratios to average net
assets:
Net investment
income*..................... 3.56% 4.33%
Net Expenses*................ 1.29%/(c)/ 1.08%/(c)/
Gross Expense*............... 1.29% 1.10%
Portfolio turnover rate...... 251% 385%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a)Total returns are historical and assume changes in share price, reinvestment
of dividends and capital gains distributions and do not include the effect
of insurance contract charges. Past performance does not guarantee future
results.
(b)Less than $0.01 per share.
(c)Reflects GE Asset Management's waiver of a portion of the Fund's management
fee in an amount equal to the management fee earned by GE Asset Management
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.
16
Statement of Assets INCOME
and Liabilities JUNE 30, 2010 (UNAUDITED) FUND
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $54,022,782)......... $ 54,837,385
Investments in affiliated securities, at market (cost $294,984). 256,636
Short-term affiliated investments (at amortized cost)........... 3,206,446
Receivable for investments sold................................. 1,632,441
Income receivables.............................................. 617,489
- --------------------------------------------------------------------------------
TOTAL ASSETS.................................................. 60,550,397
- --------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased............................... 2,641,548
Payable for fund shares redeemed................................ 69,212
Payable to GEAM................................................. 22,659
Accrued other expenses.......................................... (16,357)
Variation margin payable........................................ 8,760
- --------------------------------------------------------------------------------
TOTAL LIABILITIES............................................. 2,725,822
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $ 57,824,575
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in................................................. 67,911,109
Undistributed (distribution in excess of) net investment income. 1,270,279
Accumulated net realized gain (loss)............................ (11,941,184)
Net unrealized appreciation/(depreciation) on:
Investments................................................... 776,255
Futures....................................................... (191,884)
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $ 57,824,575
- --------------------------------------------------------------------------------
CLASS 1:
NET ASSETS........................................................ $ 57,814,086
Shares outstanding ($0.01 par value; unlimited shares authorized). 5,234,483
Net asset value per share......................................... $11.04
CLASS 4:
NET ASSETS........................................................ $ 10,489
Shares outstanding ($0.01 par value; unlimited shares authorized). 952
Net asset value per share......................................... $11.02
See Notes to Financial Statements.
17
Statement of Operations INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED) FUND
- ------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend............................................................ $ 2,082
Interest............................................................ 1,499,294
Interest from affiliated investments................................ 288
- ------------------------------------------------------------------------------------
TOTAL INCOME.......................................................... 1,501,664
- ------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees.................................... 146,865
Distributors Fees (Note 6)
Class 4........................................................... 23
Transfer agent...................................................... 8,949
Director's fees..................................................... 1,087
Custody and accounting expenses..................................... 63,712
Professional fees................................................... 11,007
Registration expenses............................................... 1,373
Other expenses...................................................... 7,738
- ------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT........................ 240,754
- ------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser............................ (6,780)
- ------------------------------------------------------------------------------------
Net expenses........................................................ 233,974
- ------------------------------------------------------------------------------------
NET INVESTMENT INCOME................................................. 1,267,690
- ------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments....................................................... 1,019,336
Futures........................................................... (638,043)
Foreign currency transactions..................................... (3,662)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON:
Investments....................................................... 924,754
Futures........................................................... (264,225)
- ------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments.............. 1,038,160
- ------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... $2,305,850
- ------------------------------------------------------------------------------------
See Notes to Financial Statements.
18
Statements of INCOME
Changes in Net Assets FUND
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2010 DECEMBER 31,
(UNAUDITED) 2009
- --------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss).......................................................... $ 1,267,690 $ 2,476,231
Net realized gain (loss) on investments, futures and foreign currency transactions..... 377,631 (5,280,365)
Net increase (decrease) in unrealized appreciation/(depreciation) on investments and
futures.............................................................................. 660,529 7,431,427
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations................................................ 2,305,850 4,627,293
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1.............................................................................. -- (2,472,834)
Class 4.............................................................................. -- (379)
- --------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS...................................................................... -- (2,473,213)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions...................... 2,305,850 2,154,080
- --------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1.............................................................................. 607,041 1,389,310
Class 4.............................................................................. 100 --
Value of distributions reinvested
Class 1.............................................................................. -- 2,472,834
Class 4.............................................................................. -- 379
Cost of shares redeemed
Class 1.............................................................................. (4,630,910) (15,214,264)
Class 4.............................................................................. (100) --
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions........................................ (4,023,869) (11,351,741)
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................................................. (1,718,019) (9,197,661)
NET ASSETS
Beginning of period...................................................................... 59,542,594 68,740,255
- --------------------------------------------------------------------------------------------------------------------------
End of period............................................................................ $57,824,575 $ 59,542,594
- --------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD............. $ 1,270,279 $ 2,589
- --------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold................................................................................ 55,970 130,515
Issued for distributions reinvested........................................................ -- 232,626
Shares redeemed............................................................................ (425,737) (1,460,217)
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares..................................................... (369,767) (1,097,076)
- --------------------------------------------------------------------------------------------------------------------------
CLASS 4
Shares sold................................................................................ 9 --
Issued for distributions reinvested........................................................ -- 36
Shares redeemed............................................................................ (9) --
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares..................................................... -- 36
- --------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
19
Notes to Financial Statements June 30, 2010 (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 Fund 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
References to Level 1, Level 2 and Level 3 below are the level classifications
in the fair value hierarchy and are described in the Fair Value Measurements
section.
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 the NASDAQ are valued using the NASDAQ Official Closing Price, which
may not necessarily represent the last sale price. Level 1 securities primarily
are publicly-traded equity securities. If no sales occurred on the exchange or
NASDAQ that day, the portfolio security generally is valued using the last
reported bid price. In those circumstances the Fund classifies the investment
securities in Level 2.
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. These securities are included in Level 2. In the absence of
a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations and would be classified in
Level 3.
Short-term investments of sufficient credit quality 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 and these are included in Level
2.
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 and these are
also included in Level 2.
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. These securities would be classified in Level 3. 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 of the Fund in the appropriate circumstances.
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. In these circumstances the Fund classifies the investment
20
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
securities in Level 2. 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. In those circumstances the Fund
classified the investment securities in Level 3. 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.
Portfolio securities may be valued using techniques other than market
quotations, under the circumstances described under above. The value
established for a portfolio security may be different than what would be
produced through the use of another methodology or if it had been priced using
market quotations. Portfolio securities that are valued using techniques other
than market quotations, including "fair valued" securities, may be subject to
greater fluctuation in their value from one day to the next than would be the
case if market quotations were used. In addition, there is no assurance that
the Fund could sell a portfolio security for the value established for it at
any time and it is possible that the Fund would incur a loss because a
portfolio security is sold at a discount to its established 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. 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. The Fund's income, expenses (other than distribution
fees) and realized and unrealized gains and losses are allocated proportionally
each day among each the Fund's respective share classes based upon the relative
net assets of each share class.
FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 1, 2008 for all financial instruments accounted for at fair value.
For financial assets and liabilities, fair value is the price the Fund would
receive 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 or 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 inputs are observable or whose
significant value drivers are observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
Policies and procedures are maintained to value investments using the best and
most relevant data available. In addition, GEAM performs periodic reviews of
the methodologies used by independent pricing services including price
validation of individual securities.
The following section describes the valuation methodologies the Fund uses to
measure different financial investments at fair value.
When available, the Fund uses quoted market prices to determine the 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, pricing information is obtained
from an independent pricing vendor. The pricing vendor uses various pricing
models for each asset class that are consistent with what other market
participants would use. The inputs and
21
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
assumptions to the model of the pricing vendor are derived from market
observable sources including: benchmark yields, reported trades, broker/dealer
quotes, issuer spreads, benchmark securities, bids, offers, and other
market-related data. Since many fixed income securities do not trade on a daily
basis, the methodology of the pricing vendor uses available information as
applicable such as benchmark curves, benchmarking of like securities, sector
groupings, and matrix pricing. The pricing vendor considers all available
market observable inputs in determining the evaluation for a security. Thus,
certain securities may not be priced using quoted prices, but rather determined
from market observable information. These investments are included in Level 2
and primarily comprise our portfolio of corporate fixed income, government,
mortgage and asset-backed securities. In infrequent circumstances, pricing
vendors may provide the Fund with valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
included in Level 3.
The Fund uses non-binding broker quotes as the primary basis for valuation when
there is limited, or no, relevant market activity for a specific investment or
for other investments that share similar characteristics. The Fund has not
adjusted the prices obtained. Investment securities priced using non-binding
broker quotes are included in Level 3. As is the case with the primary pricing
vendor, third-party brokers do not provide access to their proprietary
valuation models, inputs and assumptions. Accordingly, GEAM conducts internal
reviews of pricing for all such investment securities periodically to ensure
reasonableness of valuations used in our financial statements. These reviews
are designed to identify prices that appear stale, those that have changed
significantly from prior valuations, and other anomalies that may indicate that
a price may not be accurate. Based on the information available, GEAM believes
that the fair values provided by the brokers are representative of prices that
would be received to sell the assets at the measurement date (exit prices).
Other financial investments are derivative investments 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.
The Fund uses closing prices for derivatives included in Level 1, which are
traded either on exchanges or liquid over-the counter markets. Derivative
assets and liabilities included in Level 2 primarily represent interest rate
swaps, cross-currency swaps and foreign currency and commodity forward and
option contracts. Derivative assets and liabilities included in Level 3
primarily represent interest rate products that contain embedded optionality or
prepayment features.
Transfers in and out of Level 3 are considered to occur at the beginning of the
period.
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. For example, money
market securities are valued using amortized cost, in accordance with the
Investment Company Act of 1940. Generally, amortized cost reflects the current
fair value of a security, but since the value is not obtained from a quoted
price in an active market, such securities are reflected as Level 2. Fair value
determinations are required for securities whose value is affected by a
significant event that will materially affect the value of a domestic or
foreign security and which occurs subsequent to the time of the close of the
principal market on which such domestic or foreign security trades but prior to
the calculation of the Fund's NAV.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objective 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
22
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 of foreign denominated securities from
the fluctuations arising from changes in the market prices of those 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.
DERIVATIVES 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 objective. The Fund may enter into derivative transactions for the
purpose of hedging against the effects of changes in the value of portfolio
securities due to anticipated changes in market conditions, to gain market
exposure for residual and accumulating cash positions, and for managing the
duration of fixed-income investments. 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 and 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.
FUTURES CONTRACTS The Fund may invest in interest rate, financial, stock and
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
23
Notes to Financial Statements June 30, 2010 (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.
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.
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.
24
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
The Fund is subject to ASC 740, INCOME TAXES. ASC 740 provides guidance for
financial accounting and reporting for the effects of income taxes that result
from an entity's activities during the year. ASC 740 also provides guidance
regarding how certain uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements. ASC 740 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.
There are no adjustments to the Fund's net assets required under ASC 740. The
Fund's 2006, 2007, 2008 and 2009 fiscal years tax returns are still open to
examination by the Federal and applicable state tax authorities.
At June 30, 2010, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation) on
Tax Purposes Appreciation Depreciation Investments
----------------------------------------------------------------
$57,668,685 $2,714,351 $(2,082,568) $631,782
As of December 31, 2009, 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 12/31/2013
1,322,182 12/31/2014
1,315,125 12/31/2015
972,866 12/31/2016
7,442,089 12/31/2017
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, 2009 as follows:
Capital Currency
----------------
$-- $--
The tax composition of distributions paid during the years ended December 31,
2009 and December 31, 2008 were as follows:
Ordinary Long-Term Return of
Income Capital Gains Capital Total
---------------------------------------------------
2009 $2,473,213 $-- $ -- $2,473,213
2008 4,014,342 -- 49,303 4,063,645
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays any dividends from net
investment income annually. The Fund also declares and pays any 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
25
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
investment income per share in the Financial Highlights table excludes these
adjustments.
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.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued FASB Accounting
Standards Codification (ASC) effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The ASC is an
aggregation of previously issued authoritative U.S. generally accepted
accounting principles (GAAP) in one comprehensive set of guidance organized by
subject area. In accordance with the ASC, references to previously issued
accounting standards have been replaced by ASC references. Subsequent revisions
to GAAP will be incorporated into the ASC through Accounting StandardsUpdates
(ASU).
The Fund adopted ASC 855, SUBSEQUENT EVENTS effective October 2009. ASC 855
establishes principles and requirements for subsequent events, in particular
(a) the period after the balance sheet date during which management of a
reporting entity shall evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; (b) the
circumstances under which an entity shall recognize events or transactions
occurring after the balance sheet date in its financial statements; and (c) the
disclosures that an entity shall make about events or transactions that
occurred after the balance sheet date.
In January 2010, FASB issued ASU 2010-06, IMPROVING DISCLOSURES ABOUT FAIR
VALUE MEASUREMENTS. ASU 2010-06 requires reporting entities to make new
disclosures about the amounts and reasons for significant transfers in and out
of Level 1 and Level 2 fair value measurements and inputs and valuation
techniques used to measure fair value for both recurring and nonrecurring fair
value
measurements that fall in either Level 2 or Level 3, and information on
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new disclosures are effective for interim and
annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures will
be effective for fiscal years beginning after December 15, 2010, and for
interim periods within those fiscal years. GEAM does not believe the adoption
of ASU 2010-06 will materially impact the financial statement amounts.
3. FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 2008. This guidance establishes a new framework for measuring fair
value and expands related disclosures. Broadly, the 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. It also establishes a three-level valuation
hierarchy based upon observable and non-observable inputs.
26
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
The following tables present the Fund's investments measured at fair value on a
recurring basis at June 30, 2010:
Level 1 Level 2 Level 3 Total
- -------------------------------------------------------------------------------------------------------------------
Investments in Securities
Bonds and Notes -- U.S. Treasuries $ -- $ 8,108,046 $ -- $ 8,108,046
Bonds and Notes -- Federal Agencies -- 83,295 -- 83,295
Bonds and Notes -- Agency Mortgage Backed -- 13,152,786 -- 13,152,786
Bonds and Notes -- Agency Collateralized Mortgage Obligations -- 1,291,830 330,525 1,622,355
Bonds and Notes -- Asset Backed -- 1,804,944 11,065 1,816,009
Bonds and Notes -- Corporate Notes -- 22,225,270 -- 22,225,270
Bonds and Notes -- Non-Agency Collateralized Mortgage Obligations -- 6,107,792 49,431 6,157,223
Bonds and Notes -- Sovereign Bonds -- 1,287,632 -- 1,287,632
Bonds and Notes -- Municipal Bonds and Notes -- 299,178 -- 299,178
Preferred Stock 85,591 -- -- 85,591
Other Investments -- 256,636 -- 256,636
Short-Term Investments 3,206,446 -- -- 3,206,446
- -------------------------------------------------------------------------------------------------------------------
Total Investments in Securities $3,292,037 $54,617,409 $391,021 $58,300,467
- -------------------------------------------------------------------------------------------------------------------
Other Financial Instruments
Futures Contracts -- Unrealized Appreciation $ 85,717 $ -- $ -- $ 85,717
Futures Contracts -- Unrealized Depreciation (277,601) -- -- (277,601)
- -------------------------------------------------------------------------------------------------------------------
Total Other Financial Instruments $ (191,884) $ -- $ -- $ (191,884)
- -------------------------------------------------------------------------------------------------------------------
The following table presents the changes in Level 3 investments measured on a
recurring basis for the period ended June 30, 2010:
Bonds and
Bonds and Bonds and Bonds and Notes -- Bonds and Notes --
Notes -- Agency Notes -- Agency Notes -- Corporate Non-Agency
Mortgage Backed Collateralized Asset Backed Notes Collateralized Total
- ----------------------------------------------------------------------------------------------------------------------
Balance at 12/31/09 $ 466,009 $ 956,816 $11,581 $ 137,977 $ 73,481 $1,645,864
Accrued discounts/
premiums -- 76,486 -- -- -- 76,486
Realized gain (loss) -- (45,780) 28 -- (137,851) (183,603)
Change in unrealized
gain (loss) -- (96,631) 718 -- 179,486 83,573
Net purchases (sales) -- (707,067) (1,262) -- (59,881) (768,210)
Net transfers in and out
of Level 3 (466,009) 146,701 -- (137,977) (5,804) (463,089)
- ----------------------------------------------------------------------------------------------------------------------
Balance at 06/30/10 $ -- $ 330,525 $11,065 $ -- $ 49,431 $ 391,021
- ----------------------------------------------------------------------------------------------------------------------
Change in unrealized gain
(loss) relating to securities
still held at 06/30/10 $ -- $ (52,743) $ 718 $ -- $ 25,699 $ (26,326)
27
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
4. DERIVATIVES TRANSACTIONS
Shown below are the derivative contracts entered into by the Fund, summarized
by primary risk exposure.
Asset Derivatives June 30, 2010 Liability Derivatives June 30, 2010
-------------------------------------- ---------------------------------------
Derivatives not Location in the Location in
accounted for as Statements the Statements
hedging instruments of Assets Fair of Assets Fair
under ASC 815 and Liabilities Value ($) and Liabilities Value ($)
- ------------------------ ----------------------------- --------- ---------------------------- ----------
Interest Rate Contracts Receivables, Net Assets -- Liabilities, Net Assets --
Net unrealized appreciation/ Net unrealized appreciation/
(depreciation) on Futures 85,717* (depreciation) on Futures (277,601)*
- --------------------------------------------------------------------------------------------------------
*INCLUDES CUMULATIVE APPRECIATION/DEPRECIATION OF FUTURES CONTRACTS AS REPORTED
IN THE SCHEDULE OF INVESTMENTS AND WITHIN THE COMPONENTS OF NET ASSETS SECTION
OF THE STATEMENTS OF ASSETS AND LIABILITIES. ONLY THE CURRENT DAY'S VARIATION
MARGIN IS REPORTED WITHIN THE RECEIVABLES AND/OR PAYABLES OF THE STATEMENTS OF
ASSETS AND LIABILITIES.
Refer to the Schedule of Investments.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Total Notional of
Derivatives not accounted Location in the Futures/Options Realized Gain or
for as hedging instruments Statements of Contracts (Loss) on Derivatives
under ASC 815 Operations Purchased/(Sold) ($) Recognized in Income ($)
- --------------------------------------------------------------------------------------------------------
Interest Rate Contracts Realized gain/(loss) on
futures, Increase/(decrease)
in unrealized appreciation/ 83,258,001/
(depreciation) on futures (84,020,966) (638,043)
- --------------------------------------------------------------------------------------------------------
Change in Unrealized
Derivatives not accounted Appreciation/(Depreciation)
for as hedging instruments on Derivatives
under ASC 815 Recognized in Income ($)
- -------------------------------------------------------
Interest Rate Contracts
(264,225)
- -------------------------------------------------------
5. 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 ("State Street"). The revolving credit facility
requires the payment of a commitment fee equal to 0.15% 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. Generally, borrowings under the credit facilities would accrue interest
at the Federal Funds Rate plus 50 basis points (0.50%) 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 six-month ended
June 30, 2010.
6. FEES AND COMPENSATION 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%.
GEAM waives a portion of the Fund's management fee in the amount equal to the
management fee earned by GEAM with respect to the Fund's investment in the
GE Funds -- GE Money Market 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
28
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 is 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.)
7. 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, 2010 were as follows:
U.S. Government Securities
--------------------------
Purchases Sales
--------------------------
$60,122,741 $56,643,260
Other Securities
-----------------------
Purchases Sales
-----------------------
$34,951,965 $39,034,563
SECURITY LENDING For the six-month period ended June 30, 2010, the Fund did not
participate in securities lending.
8. SUBSEQUENT EVENTS
Subsequent events after the balance sheet date through the date that the
financial statements were issued have been evaluated in the preparation of the
Financial Statements. There are no items to report.
29
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 61
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 -- 13 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; 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;
Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993 and GE Institutional Funds since 1997; 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 2003;
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 49
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 GEAM from
February 1997 to July 2007; Vice President and Associate General Counsel of
GEAM from October 1992 to February 1997; Secretary of GE Funds from 1997 to
July 2007 and Vice President from September 2003 to June 2007; Secretary of GE
Institutional Funds and the fund from 1997 to July 2007, and Vice President
from September 2003 to July 2007; Vice President of Elfun Funds and GE
Savings & Security Funds from October 2003 to July 2007; Assistant Secretary of
Elfun Funds and GE Savings & Security Funds from 1998 to July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds and General Electric Pension
Trust, since July 2007.
30
Additional Information (unaudited)
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 44
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 5 years (Vice President); 2 years (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Commercial Administrative Officer
of GEAM since April 2010; Senior Vice President and Deputy General Counsel at
GE Asset Management from October 2007 to April 2010; 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
Secretary of GE Funds and GE Institutional Funds since July 2007; Vice
President and Assistant Secretary of GE Institutional Funds and GE Investments
Funds, Inc. from September 2003 to 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
- --------------------------------------------------------------------------------
ROBERT HERLIHY
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Chief Compliance Officer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 4 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Chief Compliance Officer of GEAM,
GE Funds, GE Institutional Funds, Elfun Funds, and GE Savings and Security
Funds since July 2005; Manager of Fund Administration at GEAM from 2002-2005.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
- --------------------------------------------------------------------------------
EUNICE TSANG
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 50
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- less than one year
PRINCIPAL OCCUPATIONS(S) DURING PAST 5 YEARS Treasurer of GE Funds, GE
Institutional Funds, Elfun Funds and GE Savings and Security Funds since
January 2010; GEAM Operational Controllership and Technical Accounting Manager
since December 2007; Financial Planning & Analysis Manager -- Performance
Leader from June 2005 to December 2007; GEAM Quality Black Belt from 2001 to
June 2005; Financial Planning & Analysis Manager from 2000 to 2001; and Mutual
Fund Assistant Controller from October 1997 to 2000.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
31
Additional Information (unaudited)
- ---------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 64
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Vice President of Walden Capital Management
since 1996.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since 1997; Trustee of Fordham University from 1989 to 1995
and 2001 to 2007 and Trustee Emeritus since 2007; Trustee of Neuro Science
Research Institute since 1986; Trustee of Gregorian University Foundation from
1992 to 2007; Director of Artes medical from 2006 to 2008.
- --------------------------------------------------------------------------------
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 -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since July 2007 from
Fairfield University. From 1983 to July 2007, Vice President and Treasurer of
Fairfield University.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 74
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997; 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 1-800-493-3042.
32
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
Kimberley Costello
Michelle Matzelle
TREASURER
Eunice Tsang
ASSISTANT TREASURER
Leslie Spadone
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
Cheryl H. Beacock, SENIOR VICE PRESIDENT, HUMAN RESOURCES
Daniel O. Colao, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER -- MUTUAL FUNDS &
INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT AND CHIEF INVESTMENT OFFICER -- FIXED INCOME
INVESTMENTS
Ralph R. Layman, PRESIDENT AND CHIEF INVESTMENT OFFICER -- PUBLIC EQUITY
INVESTMENTS
Maureen B. Mitchell, PRESIDENT -- INSTITUTIONAL SALES AND MARKETING
Matthew J. Simpson, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST
Don W. Torey, PRESIDENT -- ALTERNATIVE INVESTMENTS
John J. Walker, EXECUTIVE VICE PRESIDENT, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT -- INVESTMENT STRATEGIES
33
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 1-800-493-3042; (ii) on the Fund's
website at http://www.geam.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.geam.com; and (ii) on the Commission's website at
http://www.sec.gov.
[LOGO] GE
GE Investments Funds, Inc.
Core Value Equity Fund Letter from the Chairman
- ----------------------------------------------------------------------------
[PHOTO] 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, 2010.
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
The six-months ended June 30, 2010 presented investors with an extremely
challenging market environment after global equity markets tumbled in the
second half of the period due primarily to concerns about sovereign default
risk and slowing global growth. U.S. equities (S&P 500 Index) declined 6.7%
over the six-month period, while international stocks (MSCI EAFE Index) fell
13.2%.
At the start of 2010, equity markets experienced a selloff in January and early
February as investors reacted negatively to signs that there was a lower
probability of a V-shaped recovery. Concerns about new global financial
regulation, policy tightening in China, and high levels of U.S. and European
debt, especially Greek sovereign debt, further fueled the volatility. Stocks
reversed these losses in the second half of the first quarter, rising steadily
as optimism about corporate earnings changed the tone in the market. The S&P
500 Index advanced 5.4%, for the first quarter of 2010 and indexes tracking
smaller capitalization stocks enjoyed even greater advances. Gains were more
subdued in non-U.S. equity markets, with the MSCI EAFE Index advancing 0.9%
during the same quarter as fears of sovereign credit risk in Europe
overshadowed stronger earnings reports. Regionally, Japan took top honors in
the first quarter, rising 8.2% based on relatively attractive stock valuations.
Canada rose 6.0%, followed by the Pacific Rim (+3.1%), and Emerging Markets
(+2.4%). The U.K. fell 0.6% while Continental Europe dropped 2.4% as Greece's
budget deficit crisis raised concerns about other highly indebted Eurozone
countries, including Portugal, Italy, Ireland, Spain, and even the United
Kingdom. The U.S. bond market returned 1.8% (Barclays Capital U.S. Aggregate
Bond Index) in the first quarter helped by another solid performance by the
credit related sectors. Fixed income securities outside the U.S. performed
similarly, however the Barclays Global Aggregate Un-hedged Bond Index lost 0.3%
(in U.S. dollar terms) due primarily to the strengthening dollar versus other
major currencies.
Although the second quarter of 2010 started quietly, stocks plunged in May as
concerns about Europe's sovereign debt problems pressured equity markets and
many investors sought defensive investments such as gold and treasury bonds.
Adding to Greece's sovereign debt woes, anxieties around contagion grew as
Spain stepped further into the European debt crisis amid credit downgrades
driven by its deteriorating economy and public finances. In June, the 2010 G20
Toronto Summit confirmed that the industrialized world leaders were committed
to reducing budget deficits through austerity measures. Some investors,
however, worried that these measures could reduce global growth and slow the
economic recovery. Several other concerns fuelled greater risk aversion during
the second quarter including increased evidence of slower growth in China, a
new resource tax in Australia, an alarming May 6th "flash crash" which sent
U.S. stocks plummeting within minutes, impending U.S. financial reform
legislation, and the spreading impact of BP's massive oil spill in the Gulf of
Mexico. At quarter end, the S&P 500 Index and the MSCI EAFE Index had tumbled
11.4% and 14.0%, respectively, in the three months ended June 30. Regionally,
Emerging Markets fared best during the second quarter, down 8.4%, followed by
Japan (-10.1%), Canada (-10.5%) and the U.K. (-13.9%). The worst performing
regions were Europe (-15.8%) and the Pacific Rim (-14.3%). In this environment,
U.S. Treasuries were the "safe" investment of choice for many investors seeking
to avoid riskier asset classes. The "flight to quality" pulled treasury yields
down across all maturity periods. The Barclays Capital U.S.
[LOGO] GE
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Core Value Equity Fund
- ----------------------------------------------------
Aggregate Bond Index returned 3.49% in the second quarter, while the Barclays
Capital Global Aggregate Un-hedged Bond Index lost 0.04% over the same
three-month period owing mainly to widening spreads in European peripheral
countries and the declining euro.
Against a backdrop of weakening investor sentiment, financial markets posted
disparate results for the six- and twelve-month periods ended June 30, 2010.
TOTAL RETURNS AS OF JUNE 30, 2010 6-MONTH 12-MONTH
- -----------------------------------------------------------------------------
U.S. equities (S&P 500 Index) -6.7 14.4
Global equities (MSCI World Index) -9.8 10.2
International equities (MSCI EAFE Index) -13.2 5.9
Emerging Markets equities (MSCI EM Index) -6.2 23.2
Small-cap U.S. equities (Russell 2000 Index) -2.0 21.5
Mid-cap U.S. equities (Russell Mid Cap Index) -2.1 25.1
U.S. fixed income (Barclays Capital U.S. Aggregate Bond
Index) 5.3 9.5
U.S. short-term government fixed income (Barclays Capital
1-3 Year U.S. Government Bond Index) 1.9 2.9
U.S. tax-exempt income (Barclays Capital 10-Year U.S.
Municipal Bond Index) 4.1 9.6
- -----------------------------------------------------------------------------
OUTLOOK
In the face of the fiscal concerns throughout much of Europe and signs of
slowing economic activity around the globe, the wall of worry has become
exceedingly high for investors who want to see credible government budgets that
balance fiscal austerity and economic growth. At the core of the uncertainty,
in our view, is the issue of excessive borrowing, now afflicting sovereign
markets and reminding us that the financial crisis is not yet over. Our
economic view for the second half of 2010 still favors positive, albeit slow
growth which we believe should keep interest rates at record lows for months to
come. We also believe that the policy measures implemented in Europe will
improve sentiment towards sovereign and bank debt over the balance of the year.
But many challenges remain on the horizon, including the risk of fiscal policy,
taxation and regulation missteps that could hamper the recovery. As a result,
continued market volatility appears to be the one sure thing we can predict
with certainty.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. Today's
uncertain environment is why we believe it is important for long-term investors
to maintain a disciplined, diversified investment strategy consistent with
their goals, time horizon and risk tolerance. While diversified portfolios are
not immune to market downturns, history suggests they can put investors in a
position to benefit from a 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.
AUGUST 2010
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
GE Investments Funds, Inc.
Core Value Equity Fund
Semi-Annual Report
JUNE 30, 2010
[LOGO] GE
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...................................... 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, 2010 (unaudited)
- -----------------------------------------------------------------------------
Information on the following performance pages relating to the GE Investments
Core Value Equity Fund (the "Fund") total returns and Schedule of Investments
is unaudited. All other information, including the portfolio manager Q&A pages,
is also 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 fees and 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
800-493-3042 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in the 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 the Fund is subject to risk, including
possible loss of principal invested.
The S&P 500(R) 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. They do not reflect the
actual cost of Investing in the instruments that comprise the Index.
The peer universe of the underlying annuity funds used for the peer group
average annual total return calculation is based on the blend of Morningstar
peer categories, as shown. Morningstar is an independent mutual fund rating
service. The 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 that of the Fund.
(C)2010 Morningstar, Inc. All Rights Reserved. The Morningstar information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not 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 of 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
- --------------------------------------------------------------------------------
[PHOTO] Stephen V. Gelhaus
STEPHEN V. GELHAUS
[PHOTO] Paul C. Reinhardt
PAUL C. REINHARDT
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.
PAUL REINHARDT IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS SERVED
AS THE LEAD PORTFOLIO MANAGER OF THE CORE VALUE EQUITY FUND SINCE APRIL 2002.
MR. REINHARDT JOINED GE ASSET MANAGEMENT IN 1982 AS AN EQUITY ANALYST AND HAS
BEEN A PORTFOLIO MANAGER SINCE 1987.
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, 2010?
A. For the six-month period ended June 30, 2010, the Core Value Equity Fund
returned -8.71% for Class 1 shares and -8.83% for Class 4 shares. The S&P
500 Index, the Fund's benchmark, returned -6.65%, and the Fund's Morningstar
peer group of 465 US Insurance Large Blend funds returned an average of
-7.01% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED THE FUND PERFORMANCE?
A. The six-months ended June 30, 2010 presented U.S. equity investors with an
extremely challenging market environment, as the investment climate changed
strikingly in the middle of the period. In the first three months, the U.S.
and global economies continued their gradual recovery, which was, for the
most part, reflected by further gains in U.S. stock prices. In this
environment, the S&P 500 advanced over 5%. However, beginning in April
concerns grew that Europe's debt crisis would halt the recovery, and the
markets witnessed a rise in risk aversion. Stocks tumbled after reaching a
peak in mid April, and defensively positioned sectors performed best. From
April through June the S&P 500 declined over 11%.
In the six-month period, telecommunication and utilities stocks went from
being the worst performers, to the best performing sectors in the S&P 500.
Similarly, the performance of financials stocks flip-flopped as the mood
turned from euphoria to fear: financials made double-digit gains (+11%) in
the first three months of the period, and double digit losses (-13%) from
April 1 through June 30. Concerns surrounding financial sector reform and
the Goldman Sachs civil fraud suit also pressured the sector. All the while,
U.S. central bank reassurances that interest rates would remain low and
improving corporate earnings worked to pare U.S. equity losses in the second
half of the period.
In the end, every single S&P 500 sector declined during the half-year
period, with the worst returns among the materials (-12%), energy (-12%) and
technology (-11%) sectors. Materials and energy were affected by growth
concerns, a strengthening dollar which weighed on commodities and the
catastrophic BP oil well explosion in the Gulf of Mexico. The industrials
(-1%), consumer discretionary (-2%) and consumer staples (-3%) sectors held
up the best in the schizophrenic market environment. In general, small cap
companies outperformed large caps, with S&P 500 stocks below $3 billion in
market cap returning -0.6% versus returns of -8% for stocks over $10 billion
in market cap.
2
- --------------------------------------------------------------------------------
[GRAPHIC]
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund struggled to keep pace in an investing environment favoring
smaller-cap, low quality companies during the first half of this year. The
key contributions came from strong stock selection among materials and
utilities stocks, although our financials, technology, consumer
discretionary and health care stock selections weighed most on returns. In a
down-market, the Fund's overweighting in the defensive consumer staples
sector bolstered returns. Our staples holdings also outperformed the S&P 500
staples, led by strength in seasonings manufacturer McCormick (+6%), Clorox
(+4%) and PepsiCo (+2%). Positive performances among our utilities holdings
also contributed to the Fund's returns during the period -- Dominion was the
standout performer, advancing 2%. Several Fund holdings put forth strong
gains in a volatile environment, but lagging selections in their respective
sectors mitigated their contributions to relative returns. Some examples
included Time Warner (+1%), Prudential Financial (+8%), Barrick Gold (+16%
amid rising gold prices) and Union Pacific Corp. (+10%).
In terms of negative drivers, underweighting consumer discretionary hurt
performance, as it was one of the leading S&P 500 sectors during the period.
Specifically, the Fund did not participate in a 7% run-up in leisure stocks,
as hotels and restaurant stocks locked in strong gains in the first three
months of the period. Volatility in the financial sector had a significant
negative impact on the Fund. European sovereign debt concerns and
uncertainties about the terms of U.S. financial re-regulation created a
challenging investment environment. In addition, our capital markets
holdings, such as State Street (-22%), were pressured by their equity market
sensitivity. Underweighting banks that rallied (e.g., Citigroup +14%)
pressured Fund returns, and while the managers have avoided the REIT's
because of valuation concerns, this defensive group outperformed and also
detracted from performance.
Within technology, not owning Apple (+7%) -- one of the quarter's
top-performing stocks -- hurt the most. Given our relative-value discipline,
Apple was not held in the portfolio but made up a significant weight in the
index. Microsoft (-23%) and Western Union (-20%) were also underperformers,
in a period where investors began to debate the emergence of a double-dip
recession. We continued to believe these large blue chip technology
companies have the ability to generate good free cash flow that can be used
to the benefit of patient shareholders. While gold rallied in a fearful
investment environment, other commodities didn't fare as well pressuring
companies like Potash Corp. (-20%) and Freeport McMoran (-26% on weak copper
prices). Other holdings which dragged on returns included Omnicom (-11%) and
Baxter International (-27% and eliminated).
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. The Fund continued to emphasize financially strong companies that the
investment team believes can gain market share in a slow-growth economic
environment. The biggest changes in positioning included initiating an
overweight in consumer staples, and going underweight in financials.
Consumer discretionary and information technology continued to be
underweighted sectors in the portfolio.
As smaller cap, more cyclical stocks outperformed, the valuation of
large-cap, multinational consumer staples companies became even more
compelling. In this environment we increased our holdings in Archer Daniels
Midland, Clorox, Kraft, and Oracle. We also built our overweight in energy,
taking advantage of valuations in the sector, and anticipating long-term
supply-demand imbalances. We initiated positions in Suncor, Hess and
Weatherford International, while adding to our ExxonMobil position. At the
end of the period, staples and energy represented the Fund's largest
overweights.
We funded these purchases with proceeds from our financials sales, including
eliminations of MetLife post the announcement of the firm's purchase of
AIG's life insurance business. We also sold Baxter International, Boston
Scientific, CVS Caremark and Alliant Techsystems due to fundamental
concerns. In addition, we eliminated Nike and trimmed Cardinal Health and
Rockwell Collins on price strength.
3
Core Value Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund, you incur ongoing fees and expenses, which
include portfolio management fees, professional fees, distribution and service
fees (for shareholders of Class 4), 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,
2010.
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 $1,000 = 8.6), then multiply the result by the
number given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholders reports of other funds.
Please note that the expenses shown in the table for both "Actual" and
"Hypothetical" do not reflect any transaction costs, such as sales charges or
redemption fees. Additionally, the expenses shown do not reflect the fees or
charges associated with variable contracts through which shares of the Fund are
offered.
JANUARY 1, 2010 - JUNE 30, 2010
- ----------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ----------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ----------------------------------------------------------------------------------------------
Class 1 1,000.00 912.94 5.22
Class 4 1,000.00 911.69 7.25
- ----------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ----------------------------------------------------------------------------------------------
Class 1 1,000.00 1,019.15 5.51
Class 4 1,000.00 1,017.06 7.65
- ----------------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.10% FOR CLASS
1 SHARES AND 1.53% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1, 2010 - JUNE
30, 2010), 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, 2010 WERE AS
FOLLOWS: -8.71% FOR CLASS 1 SHARES, AND -8.83% FOR CLASS 4 SHARES. PAST
PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
4
Core Value Equity Fund (unaudited)
- ---------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[CHART]
Core Value
Date Equity Fund S&P 500 Index
- ----------- --------------- -------------
Jun 1, 2000 $10,000.00 $10,000.00
Dec 1, 2000 10,008.61 9,123.06
Dec 1, 2001 9,132.55 8,036.32
Dec 1, 2002 7,528.31 6,260.14
Dec 1, 2003 9,338.99 8,058.57
Dec 1, 2004 10,232.81 8,935.45
Dec 1, 2005 10,648.22 9,374.94
Dec 1, 2006 12,549.01 10,855.47
Dec 1, 2007 13,816.28 11,452.03
Dec 1, 2008 9,265.55 7,215.03
Dec 1, 2009 11,619.26 9,124.45
Jun 1, 2010 10,607.63 8,517.29
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 4/28/00)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS+ YEAR YEAR YEAR $10,000 INVESTMENT (A)
---------------------------------------------------------------------------
Core Value Equity Fund -8.71% 9.58% 0.76% 0.59% 10,608
---------------------------------------------------------------------------
S&P 500 Index -6.65% 14.43% -0.79% -1.59% 8,517
---------------------------------------------------------------------------
Morningstar peer group
average* -7.01% 13.44% -0.98% -1.60%
---------------------------------------------------------------------------
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[CHART]
Date Core Value Equity Fund S&P 500 Index
- ----------- ---------------------- --------------
May 1, 2008 10,000.00 10,000.00
Jun 1, 2008 9,419.55 9,275.57
Sep 1, 2008 8,818.74 8,499.21
Dec 1, 2008 6,923.44 6,634.20
Mar 1, 2009 6,176.69 5,903.65
Jun 1, 2009 7,211.48 6,844.05
Sep 1, 2009 8,235.59 7,912.13
Dec 1, 2009 8,636.37 8,389.91
Mar 1, 2010 8,990.85 8,841.83
Jun 1, 2010 7,873.71 7,831.63
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
SIX ONE SINCE ENDING VALUE OF A
MONTHS+ YEAR INCEPTION $10,000 INVESTMENT (A)
- --------------------------------------------------------------------------------
Core Value Equity Fund -8.83% 9.18% -10.44% 7,874
- --------------------------------------------------------------------------------
S&P 500 Index -6.65% 14.43% -10.68% 7,832
- --------------------------------------------------------------------------------
Morningstar peer group average* -7.01% 13.44%
- --------------------------------------------------------------------------------
INVESTMENT PROFILE [GRAPHIC]
A mutual fund designed for investors
who seek long-term growth of capital
and future income by investing at
least 80% of its net assets under
normal circumstances in common and
preferred stocks and other types of
equity securities. 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, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $17,932 (in thousands)
[CHART]
Information Technology 16.2%
Financials 15.4%
Consumer Staples 14.3%
Energy 12.7%
Healthcare 12.3%
Industrials 8.3%
Consumer Discretionary 8.0%
Utilities 4.9%
Materials 3.8%
Telecommunication Services 2.8%
Short-Term 1.3%
Other Investments 0.1%
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2010++
as a % of Market Value
--------------------------------------------
International Business Machines Corp. 3.29%
--------------------------------------------
The Procter & Gamble Co. 3.18%
--------------------------------------------
Exxon Mobil Corp. 2.97%
--------------------------------------------
PepsiCo Inc. 2.67%
--------------------------------------------
Time Warner Inc. 2.52%
--------------------------------------------
Johnson & Johnson 2.44%
--------------------------------------------
Microsoft Corp. 2.37%
--------------------------------------------
Omnicom Group Inc. 2.06%
--------------------------------------------
Chevron Corp. 2.06%
--------------------------------------------
Bank of America Corp. 2.06%
--------------------------------------------
(A)ENDING VALUE OF A $10,000 INVESTMENT FOR THE TEN-YEAR PERIOD OR SINCE
INCEPTION, WHICHEVER IS LESS.
* 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
U.S. INSURANCE LARGE BLEND PEER GROUP CONSISTING OF 465, 461, 394 AND 298
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
+ TOTAL RETURNS FOR THE PERIOD ENDED JUNE 30/TH/, 2010 ARE NOT ANNUALIZED.
++THE SECURITIES INFORMATION REGARDING HOLDINGS, ALLOCATIONS AND OTHER
CHARACTERISTICS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF SECURITIES THAT THE
FUND HAS BOUGHT AND THE DIVERSITY OF AREAS IN WHICH THE FUND MAY INVEST AS OF
A PARTICULAR DATE. IT MAY NOT BE REPRESENTATIVE OF THE FUND'S CURRENT OR
FUTURE INVESTMENTS AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL A PARTICULAR SECURITY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE. THE PERFORMANCE SHOWN IN
THE GRAPHS AND TABLES DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
5
CORE VALUE EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
CORE VALUE EQUITY FUND
NUMBER
OF SHARES VALUE
COMMON STOCK -- 97.2% +
--------------------------------------------------------------------
AEROSPACE & DEFENSE -- 2.6%
Honeywell International Inc............ 6,745 $ 263,257
ITT Corp............................... 2,669 119,891
Rockwell Collins Inc................... 1,540 81,820
464,968
BEVERAGES -- 3.2%
Molson Coors Brewing Co................ 2,053 86,965
PepsiCo Inc............................ 7,848 478,336
565,301
BIOTECHNOLOGY -- 1.9%
Amgen Inc.............................. 5,029 264,525 /(a)/
Gilead Sciences Inc.................... 2,269 77,781 (a)
342,306
CAPITAL MARKETS -- 4.4%
Ameriprise Financial Inc............... 5,748 207,675
Invesco Ltd............................ 3,592 60,453
Morgan Stanley......................... 4,516 104,816
State Street Corp...................... 4,824 163,148 (b)
The Bank of New York Mellon Corp....... 10,059 248,357
784,449
CHEMICALS -- 0.9%
Potash Corp of Saskatchewan Inc........ 1,899 163,770
COMMERCIAL BANKS -- 1.6%
Regions Financial Corp................. 9,238 60,786
US Bancorp............................. 5,646 126,188
Wells Fargo & Co....................... 3,987 102,067
289,041
COMMUNICATIONS EQUIPMENT -- 0.8%
Cisco Systems Inc...................... 6,775 144,375 /(a)/
COMPUTERS & PERIPHERALS -- 2.0%
Hewlett-Packard Co..................... 8,366 362,081
DIVERSIFIED FINANCIAL SERVICES -- 4.0%
Bank of America Corp................... 25,661 368,749
JPMorgan Chase & Co.................... 9,506 348,015
716,764
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.1%
AT&T Inc............................... 10,521 254,503
Verizon Communications Inc............. 4,619 129,424
383,927
NUMBER
OF SHARES VALUE
ELECTRIC UTILITIES -- 3.0%
Edison International................ 6,159 $ 195,364
Entergy Corp........................ 2,208 158,137
NextEra Energy Inc.................. 1,472 71,775
Northeast Utilities................. 4,567 116,367
541,643
ELECTRICAL EQUIPMENT -- 0.5%
ABB Ltd. ADR........................ 4,903 84,724
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.6%
Corning Inc......................... 6,673 107,769
ENERGY EQUIPMENT & SERVICES -- 1.6%
Halliburton Co...................... 2,567 63,020
National Oilwell Varco Inc.......... 1,437 47,522
Schlumberger Ltd.................... 2,617 144,825
Weatherford International Ltd....... 2,052 26,963 (a)
282,330
FOOD & STAPLES RETAILING -- 0.5%
Safeway Inc......................... 4,106 80,724
FOOD PRODUCTS -- 4.2%
Archer-Daniels-Midland Co........... 7,186 185,543
Kraft Foods Inc..................... 10,853 303,884
McCormick & Company Inc............. 4,292 162,924
Nestle S.A. ADR..................... 2,053 99,037
751,388
HEALTHCARE EQUIPMENT & SUPPLIES -- 2.0%
Becton Dickinson and Co............. 2,463 166,548
Covidien PLC........................ 4,723 189,770
356,318
HEALTHCARE PROVIDERS & SERVICES -- 2.1%
Cardinal Health Inc................. 4,414 148,355
McKesson Corp....................... 1,232 82,741
Omnicare Inc........................ 6,159 145,968
377,064
HOUSEHOLD PRODUCTS -- 4.8%
Clorox Co........................... 4,670 290,287
The Procter & Gamble Co............. 9,495 569,510
. 859,797
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.3%
Calpine Corp........................ 4,619 58,754 (a)
INDUSTRIAL CONGLOMERATES -- 0.4%
Siemens AG ADR...................... 803 71,893
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements on page 14.
6
CORE VALUE EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
INSURANCE -- 5.0%
ACE Ltd................................ 5,132 $ 264,195
AON Corp............................... 2,874 106,683
PartnerRe Ltd.......................... 1,369 96,022
Principal Financial Group Inc.......... 6,,775 158,806
Prudential Financial Inc............... 5,132 275,383
901,089
IT SERVICES -- 4.6%
International Business Machines Corp... 4,773 589,370
The Western Union Co................... 15,397 229,569
818,939
LIFE SCIENCES TOOLS & SERVICES -- 1.1%
Life Technologies Corp................. 1,745 82,451 (a)
Thermo Fisher Scientific Inc........... 2,207 108,253 (a)
190,704
MACHINERY -- 2.1%
Deere & Co............................. 4,003 222,887
Eaton Corp............................. 2,453 160,524
383,411
MEDIA -- 6.3%
News Corp.............................. 5,640 67,454
Omnicom Group Inc...................... 10,778 369,685
The Walt Disney Co..................... 7,698 242,487
Time Warner Inc........................ 15,632 451,921
1,131,547
METALS & MINING -- 2.5%
Allegheny Technologies Inc............. 4,362 192,757
Barrick Gold Corp...................... 3,079 139,817
Freeport-McMoRan Copper & Gold Inc..... 1,950 115,304
447,878
MULTILINE RETAIL -- 0.3%
Target Corp............................ 1,129 55,513
MULTI-UTILITIES -- 1.6%
Dominion Resources Inc................. 7,185 278,347
OIL, GAS & CONSUMABLE FUELS -- 11.1%
Apache Corp............................ 2,463 207,360
Chesapeake Energy Corp................. 2,310 48,395
Chevron Corp........................... 5,440 369,158
Devon Energy Corp...................... 3,233 196,954
El Paso Corp........................... 9,197 102,179
Exxon Mobil Corp....................... 9,320 531,892
Marathon Oil Corp...................... 9,238 287,209
Occidental Petroleum Corp.............. 2,023 156,074
Suncor Energy Inc...................... 3,080 90,675
1,989,896
NUMBER
OF SHARES VALUE
PAPER & FOREST PRODUCTS -- 0.4%
Weyerhaeuser Co.................... 1,796 $ 63,219
PERSONAL PRODUCTS -- 0.2%
Avon Products Inc.................. 1,227 32,516
PHARMACEUTICALS -- 5.3%
Abbott Laboratories................ 1,283 60,019
Bristol-Myers Squibb Co............ 10,624 264,963
Johnson & Johnson.................. 7,419 438,166
Pfizer Inc......................... 12,831 182,970
946,118
ROAD & RAIL -- 1.3%
Union Pacific Corp................. 3,285 228,340
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 4.5%
Intel Corp......................... 15,327 298,110
KLA-Tencor Corp.................... 3,336 93,008
Microchip Technology Inc........... 2,823 78,310
NVIDIA Corp........................ 2,053 20,961 (a)
Taiwan Semiconductor Manufacturing
Company Ltd. ADR.................. 11,804 115,207
Texas Instruments Inc.............. 8,468 197,135
802,731
SOFTWARE -- 3.7%
Microsoft Corp..................... 18,476 425,133
Oracle Corp........................ 11,343 243,421
668,554
SPECIALTY RETAIL -- 1.4%
Bed Bath & Beyond Inc.............. 2,698 100,042 /(a)/
Lowe's Companies Inc............... 7,390 150,904
250,946
TOBACCO -- 1.6%
Altria Group Inc................... 1,540 30,862
Philip Morris International Inc.... 5,389 247,032
277,894
WIRELESS TELECOMMUNICATION SERVICES -- 0.7%
American Tower Corp................ 2,823 125,624 /(a)/
TOTAL COMMON STOCK
(COST $17,287,313)................ 17,382,652
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements on page 14.
7
CORE VALUE EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
-----------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 1.8%
-----------------------------------------------------------------------
Financial Select Sector SPDR Fund...... 4,613 $ 63,706 /(d)/
Industrial Select Sector SPDR Fund..... 9,194 252,375 /(d)/
TOTAL EXCHANGE TRADED FUNDS
(COST $420,914)....................... 316,081
-----------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
-----------------------------------------------------------------------
GEI Investment Fund
(COST $10,160)........................ 8,839 /(c)/
TOTAL INVESTMENTS IN SECURITIES
(COST $17,718,387).................... 17,707,572
-----------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.3%
-----------------------------------------------------------------------
GE Money Market Fund Institutional
Class 0.05%
(COST $224,638)....................... 224,638 /(c,e)/
TOTAL INVESTMENTS
(COST $17,943,025).................... 17,932,210
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (0.3)%......................... (61,996)
-----------
NET ASSETS -- 100.0%................... $17,870,214
===========
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements on page 14.
8
Notes to Schedule of Investments June 30, 2010 (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
information regarding holdings, allocations and other characteristics are
presented to illustrate examples of securities that the Fund has bought and the
diversity of areas in which the Fund may invest as of a particular date. It may
not be representative of the Fund's current or future investments and should
not be construed as a recommendation to purchase or sell a particular security.
Please see the Fund's prospectus for complete descriptions of investment
objective, policies, risks and permissible investments.
(a)Non-income producing security.
(b)State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(c)GE Asset Management, the investment adviser of the Fund, also serves as
investment adviser of the GEI Investment Fund and the GE Funds-GE Money
Market Fund
(d)Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank
& Trust Co., the Fund's custodian and accounting agent.
(e)Coupon amount represents effective yield.
* Less than 0.05%.
+ Percentages are based on net assets as of June 30, 2010.
Abbreviations:
ADR American Depository Receipt
SPDR Standard & Poors Depository Receipts
9
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
CORE VALUE EQUITY FUND
-------------------------------------------------------------------- -------------------------
CLASS 1 CLASS 4
-------------------------------------------------------------------- -------------------------
6/30/2010+ 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05 6/30/10+ 12/31/09
-------------------------------------------------------------------- --------------------------
INCEPTION DATE 4/28/00
Net asset value, beginning of
period....................... $8.04 $6.48 $10.16 $10.70 $10.01 $ 9.77 $8.04 $6.49
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income....... 0.04 0.08 0.11 0.12 0.17 0.11 (0.02) 0.01
Net realized and
unrealized
gains/(losses) on
investments................ (0.74) 1.57 (3.46) 0.97 1.62 0.29 (0.69) 1.60
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS........ (0.70) 1.65 (3.35) 1.09 1.79 0.40 (0.71) 1.61
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income....... -- 0.09 0.12 0.12 0.17 0.12 -- 0.06
Net realized gains.......... -- 0.00 0.21 1.51 0.93 0.04 -- 0.00
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS........... -- 0.09 0.33 1.63 1.10 0.16 -- 0.06
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period....................... $7.34 $8.04 $6.48 $10.16 $10.70 $10.01 $ 7.33 $8.04
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/(A)/............. (8.71)% 25.40% (32.94)% 10.10% 17.85% 4.06% (8.83)% 24.74%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of period
(in thousands)............. $17,862 $21,847 $20,361 $37,765 $39,683 $37,115 $8 $9
Ratios to average net
assets:
Net investment income
(loss)*.................. 0.91% 1.16% 1.18% 0.96% 1.55% 1.13% 0.49% 0.72%
Net Expenses*............. 1.10%/(b)/ 1.24%/(b)/ 0.95%/(b)/ 0.81% 0.81% 0.80% 1.53%/(b)/ 1.69%/(b)/
Gross expenses*........... 1.10% 1.24% 0.95% 0.81% 0.81% 0.80% 1.53% 1.69%
Portfolio turnover
rate..................... 19% 61% 68% 45% 42% 36% 19% 61%
--------------
--------------
12/31/08
-------------
INCEPTION DATE 5/1/08
Net asset value, beginning of
period....................... $9.82
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income....... 0.05**
Net realized and
unrealized
gains/(losses) on
investments................ (3.08)
- --------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS........ (3.03)
- --------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income....... 0.09
Net realized gains.......... 0.21
- --------------------------------------------
TOTAL DISTRIBUTIONS........... 0.30
- --------------------------------------------
Net asset value, end of
period....................... $6.49
- --------------------------------------------
TOTAL RETURN/(A)/............. (30.77)%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of period
(in thousands)............. $7
Ratios to average net
assets:
Net investment income
(loss)*.................. 0.95%
Net Expenses*............. 1.40%/(b)/
Gross expenses*........... 1.40%
Portfolio turnover
rate..................... 68%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a)Total returns are historical and assume changes in share price, reinvestment
of dividends and capital gains distributions, and do not include the effect
of insurance contract charges. Past performance does not guarantee future
results.
(b)Reflects GE Asset Management's waiver of a portion of the Fund's management
fee in an amount equal to the management fee earned by GE Asset Management
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
Statement of Assets CORE VALUE
and Liabilities JUNE 30, 2010 (UNAUDITED) EQUITY
FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $17,708,227)......... $17,698,733
Investments in affiliated securities, at market (cost $10,160).. 8,839
Short-term affiliated investments (at amortized cost)........... 224,638
Receivable for investments sold................................. 18,665
Income receivables.............................................. 22,834
Receivable for fund shares sold................................. 535
- -------------------------------------------------------------------------------
TOTAL ASSETS.................................................. 17,974,244
- -------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed................................ 3,321
Payable to GEAM................................................. 10,093
Accrued other expenses.......................................... 90,616
- -------------------------------------------------------------------------------
TOTAL LIABILITIES............................................. 104,030
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $17,870,214
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in................................................. 21,809,720
Undistributed (distribution in excess of) net investment income. 95,099
Accumulated net realized gain (loss)............................ (4,023,790)
Net unrealized appreciation/(depreciation) on:
Investments................................................... (10,815)
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $17,870,214
- -------------------------------------------------------------------------------
CLASS 1:
NET ASSETS........................................................ $17,862,342
Shares outstanding ($0.01 par value; unlimited shares authorized). 2,433,915
Net asset value per share......................................... $7.34
CLASS 4:
NET ASSETS........................................................ $ 7,872
Shares outstanding ($0.01 par value; unlimited shares authorized). 1,074
Net asset value per share......................................... $7.33
See Notes to Financial Statements.
11
Statement of Operations CORE VALUE
FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED) EQUITY
FUND
- -------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend............................................................ $ 209,650
Interest............................................................ 1,191
Interest from affiliated investments................................ 18
Less: Foreign taxes withheld........................................ (1,130)
- -------------------------------------------------------------------------------------
TOTAL INCOME.......................................................... 209,729
- -------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees.................................... 68,037
Distributors Fees (Note 6)
Class 4........................................................... 19
Transfer agent...................................................... 8,940
Director's fees..................................................... 355
Custody and accounting expense...................................... 20,137
Professional fees................................................... 9,441
Registration expenses............................................... 766
Other expenses...................................................... 7,399
- -------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT........................ 115,094
- -------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser............................ (464)
- -------------------------------------------------------------------------------------
Net expenses........................................................ 114,630
- -------------------------------------------------------------------------------------
NET INVESTMENT INCOME................................................. 95,099
- -------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments....................................................... 273,410
Futures........................................................... (8,701)
Foreign currency transactions..................................... 1
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON:
Investments....................................................... (2,063,603)
Futures........................................................... 1,659
- -------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments.............. (1,797,234)
- -------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... $(1,702,135)
- -------------------------------------------------------------------------------------
See Notes to Financial Statements.
12
Statements of CORE VALUE
Changes in Net Assets EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED JUNE 30, YEAR ENDED
2010 DECEMBER 31,
(UNAUDITED) 2009
- ------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income...................................................... $ 95,099 $ 229,050
Net realized gain (loss) on investments, futures
and foreign currency transactions......................................... 264,710 (2,785,679)
Net increase (decrease) in unrealized appreciation / (depreciation)
on investments and futures................................................ (2,061,944) 7,048,101
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations..................................... (1,702,135) 4,491,472
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1................................................................... -- (233,609)
Class 4................................................................... -- (60)
- ------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS........................................................... -- (233,669)
- ------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions........... (1,702,135) 4,257,803
- ------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1................................................................... 124,267 615,077
Class 4................................................................... -- --
Value of distributions reinvested
Class 1................................................................... -- 233,609
Class 4................................................................... -- 60
Cost of shares redeemed
Class 1................................................................... (2,407,301) (3,618,774)
Class 4................................................................... -- --
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions............................. (2,283,034) (2,770,028)
- ------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS....................................... (3,985,169) 1,487,775
NET ASSETS
Beginning of period........................................................... 21,855,383 20,367,608
- ------------------------------------------------------------------------------------------------------------
End of period................................................................. $17,870,214 $21,855,383
- ------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD.. $ 95,099 $ --
- ------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold..................................................................... 15,409 91,344
Issued for distributions reinvested............................................. -- 28,806
Shares redeemed................................................................. (299,652) (545,161)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares.......................................... (284,243) (425,011)
- ------------------------------------------------------------------------------------------------------------
CLASS 4
Shares sold..................................................................... -- --
Issued for distributions reinvested............................................. -- 7
Shares redeemed................................................................. -- --
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares.......................................... -- 7
- ------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
13
Notes to Financial Statements June 30, 2010 (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 Fund 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 the Fund.
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
References to Level 1, Level 2 and Level 3 below are the level classifications
in the fair value hierarchy and are described in the Fair Value Measurements
section.
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 the NASDAQ are valued using the NASDAQ Official Closing Price, which
may not necessarily represent the last sale price. Level 1 securities primarily
include publicly-traded equity securities. If no sales occurred on the exchange
or NASDAQ that day, the portfolio security generally is valued using the last
reported bid price. In those circumstances the Fund classifies the investment
securities in Level 2.
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. These securities are included in Level 2. In the absence of
a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations and would be classified in
Level 3.
Short-term investments of sufficient credit quality 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 and these are included in Level
2.
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 and are also
included in Level 2.
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. These securities
would be classified in Level 3. 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 of
the Fund in the appropriate circumstances.
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
14
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
In these circumstances the Fund classifies the investment securities in Level
2. 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. In these circumstances the Fund
classifies the investment securities in Level 3. 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.
Portfolio securities may be valued using techniques other than market
quotations, under the circumstances described under above. The value
established for a portfolio security may be different than what would be
produced through the use of another methodology or if it had been priced using
market quotations. Portfolio securities that are valued using techniques other
than market quotations, including "fair valued" securities, may be subject to
greater fluctuation in their value from one day to the next than would be the
case if market quotations were used. In addition, there is no assurance that
the Fund could sell a portfolio security for the value established for it at
any time and it is possible that the Fund would incur a loss because a
portfolio security is sold at a discount to its established 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. 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. The Fund's income, expenses (other than distribution
fees) and realized and unrealized gains and losses are allocated proportionally
each day among each the Fund's respective share classes based upon the relative
net assets of each share class.
FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 1, 2008 for all financial instruments accounted for at fair value.
For financial assets and liabilities, fair value is the price the Fund would
receive 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 or 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 inputs are observable or whose
significant value drivers are observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
Policies and procedures are maintained to value investments using the best and
most relevant data available. In addition, GEAM performs periodic reviews of
the methodologies used by independent pricing services including price
validation of individual securities.
The following section describes the valuation methodologies the Fund uses to
measure different financial investments at fair value.
When available, the Fund uses quoted market prices to determine the 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, pricing information is obtained
from an independent pricing vendor. The pricing vendor uses various pricing
models for each asset class that are consistent with what other market
participants would use. The inputs and assumptions to the
15
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
model of the pricing vendor are derived from market observable sources
including: benchmark yields, reported trades, broker/dealer quotes, issuer
spreads, benchmark securities, bids, offers, and other market-related data.
Since many fixed income securities do not trade on a daily basis, the
methodology of the pricing vendor uses available information as applicable such
as benchmark curves, benchmarking of like securities, sector groupings, and
matrix pricing. The pricing vendor considers all available market observable
inputs in determining the evaluation for a security. Thus, certain securities
may not be priced using quoted prices, but rather determined from market
observable information. These investments are included in Level 2 and primarily
comprise our portfolio of corporate fixed income, government, mortgage and
asset-backed securities. In infrequent circumstances, pricing vendors may
provide the Fund with valuations that are based on significant unobservable
inputs, and in those circumstances the investment securities are included in
Level 3.
The Fund uses non-binding broker quotes as the primary basis for valuation when
there is limited, or no, relevant market activity for a specific investment or
for other investments that share similar characteristics. The Fund has not
adjusted the prices obtained. Investment securities priced using non-binding
broker quotes are included in Level 3. As is the case with the primary pricing
vendor, third-party brokers do not provide access to their proprietary
valuation models, inputs and assumptions. Accordingly, GEAM conducts internal
reviews of pricing for all such investment securities periodically to ensure
reasonableness of valuations used in our financial statements. These reviews
are designed to identify prices that appear stale, those that have changed
significantly from prior valuations, and other anomalies that may indicate that
a price may not be accurate. Based on the information available, GEAM believes
that the fair values provided by the brokers are representative of prices that
would be received to sell the assets at the measurement date (exit prices).
Other financial investments are derivative investments 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.
The Fund uses closing prices for derivatives included in Level 1, which are
traded either on exchanges or liquid over-the counter markets. Derivative
assets and liabilities included in Level 2 primarily represent interest rate
swaps, cross-currency swaps and foreign currency and commodity forward and
option contracts. Derivative assets and liabilities included in Level 3
primarily represent interest rate products that contain embedded optionality or
prepayment features.
Transfers in and out of Level 3 are considered to occur at the beginning of the
period.
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. For example, money
market securities are valued using amortized cost, in accordance with the
Investment Company Act of 1940. Generally, amortized cost reflects the current
fair value of a security, but since the value is not obtained from a quoted
price in an active market, such securities are reflected as Level 2. Fair value
determinations are required for securities whose value is affected by a
significant event that will materially affect the value of a domestic or
foreign security and which occurs subsequent to the time of the close of the
principal market on which such domestic or foreign security trades but prior to
the calculation of the Fund's NAV.
REPURCHASE AGREEMENTS The Fund may engage into repurchase agreement
transactions with respect to instruments that are consistent with the Fund's
investment objective 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
16
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 of foreign denominated securities from
the fluctuations arising from changes in the market prices of those 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.
DERIVATIVES The Fund is subject to equity price risk and foreign currency
exchange rate risk in the normal course of pursuing its investment objective.
The Fund may enter into derivative transactions for the purpose of hedging
against the effects of changes in the value of portfolio securities due to
anticipated changes in market conditions and to gain market exposure for
residual and accumulating cash positions. 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 and 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.
FUTURES CONTRACTS The Fund may invest in interest rate, financial, stock and
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 investments.
The Fund will not enter into a transaction involving options for speculative
purposes. The Fund's
17
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
The Fund is subject to ASC 740, INCOME TAXES. ASC 740 provides guidance for
financial accounting and reporting for the effects of income taxes that result
from an entity's activities during the year. ASC 740 also provides guidance
regarding how certain uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements. ASC 740 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.
There are no adjustments to the Fund's net assets required under ASC 740. The
Fund's 2006, 2007, 2008 and 2009 fiscal years tax returns are still open to
examination by the Federal and applicable state tax authorities.
At June 30, 2010, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation) on
Tax Purposes Appreciation Depreciation Investments
-----------------------------------------------------------------
$18,630,198 $1,102,649 $(1,800,637) $(697,988)
As of December 31, 2009, 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
---------------------
$3,590,467 12/31/2017
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, 2009 as follows:
Capital Currency
----------------
$31,175 $--
18
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
The tax composition of distributions paid during the years ended December 31,
2009 and December 31, 2008 were as follows:
Ordinary Long-Term
Income Capital Gains Total
---------------------------------------
2009 $ 233,669 $ -- $233,669
2008 350,157 633,810 983,967
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays any dividends from net
investment income annually. The Fund also declares and pays any 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, 2009 were as follows:
Undistributed
Net Investment Accumulated
Income Net Realized Loss Paid in Capital
------------------------------------------------
$4,619 $(21,456) $16,837
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.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued FASB Accounting
Standards Codification (ASC) effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The ASC is an
aggregation of previously issued authoritative U.S. generally accepted
accounting principles (GAAP) in one comprehensive set of guidance organized by
subject area. In accordance with the ASC, references to previously issued
accounting standards have been replaced by ASC references. Subsequent revisions
to GAAP will be incorporated into the ASC through Accounting StandardsUpdates
(ASU).
The Fund adopted ASC 855, SUBSEQUENT EVENTS effective October 2009. ASC 855
establishes principles and requirements for subsequent events, in particular
(a) the period after the balance sheet date during which management of a
reporting entity shall evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; (b) the
circumstances under which an entity shall recognize events or transactions
occurring after the balance sheet date in its financial statements; and (c) the
disclosures that an entity shall make about events or transactions that
occurred after the balance sheet date.
In January 2010, FASB issued ASU 2010-06, IMPROVING DISCLOSURES ABOUT FAIR
VALUE MEASUREMENTS. ASU 2010-06 requires reporting entities to make new
disclosures about the amounts and reasons for significant transfers in and out
of Level 1 and Level 2 fair value measurements and inputs and valuation
techniques used to measure fair value for both recurring and nonrecurring fair
value measurements that fall in either Level 2 or Level 3, and information on
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new disclosures are effective for interim and
annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures will
be effective for fiscal years beginning after December 15, 2010, and for
interim periods within those fiscal years. GEAM does not believe the adoption
of ASU 2010-06 will materially impact the financial statement amounts.
19
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
3. FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 2008. This guidance establishes a new framework for measuring fair
value and expands related disclosures. Broadly, the 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. IT ALSO ESTABLISHES A THREE-LEVEL VALUATION
HIERARCHY BASED UPON OBSERVABLE AND NON-OBSERVABLE INPUTS.
The following tables present the Fund's investments measured at fair value on a
recurring basis at June 30, 2010:
Level 1 Level 2 Level 3 Total
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
Common Stock $17,382,652 $ -- $-- $17,382,652
Exchanged Traded Funds 316,081 -- -- 316,081
Other Investments -- 8,839 -- 8,839
Short-Term Investments 224,638 -- -- 224,638
------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES $17,923,371 $8,839 $-- $17,932,210
------------------------------------------------------------------------
4. DERIVATIVES TRANSACTIONS
There were no derivative contracts as of June 30, 2010.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Total Notional of
Derivatives not accounted Location in the Futures/Options Realized Gain or
for as hedging instruments Statements of Contracts (Loss) on Derivatives
under ASC 815 Operations Purchased/(Sold) $ Recognized in Income $
- -------------------------------------------------------------------------------------------------------
Equity Contracts Realized gain/(loss) on
Futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on Futures 2,148,770/(2,474,938) (8,701)
- -------------------------------------------------------------------------------------------------------
Change in Unrealized
Derivatives not accounted Appreciation/(Depreciation)
for as hedging instruments on Derivatives
under ASC 815 Recognized in Income $
- -------------------------------------------------------
Equity Contracts
1,659
- -------------------------------------------------------
5. 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 ("State Street"). The revolving credit facility
requires the payment of a commitment fee equal to 0.15% 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. Generally, borrowings under the credit facilities would accrue interest
at the Federal Funds Rate plus 50 basis points (0.50%) 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 six-month period
ended June 30, 2010.
6. FEES AND COMPENSATION 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%.
GEAM waives a portion of the Fund's management fee in the amount equal to the
management fee earned by GEAM with respect to the Fund's investment in the GE
Funds -- GE Money Market Fund.
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
20
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 is 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.)
7. 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, 2010 were as follows:
Purchases Sales
---------------------
$3,960,858 $5,831,944
SECURITY LENDING for the six-month period ended June 30, 2010, the Fund did not
participate in securities lending.
8. SUBSEQUENT EVENTS
Subsequent events after the balance sheet date through the date that the
financial statements were issued, have been evaluated in the preparation of the
Financial Statements. There are no items to report.
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 61
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 -- 13 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; 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;
Director of GEAM since 1988.
Number of Portfolios in Fund Complex Overseen by Director 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993 and GE Institutional Funds since 1997; 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 2003;
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 49
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 GEAM from
February 1997 to July 2007; Vice President and Associate General Counsel of
GEAM from October 1992 to February 1997; Secretary of GE Funds from 1997 to
July 2007; and Vice President from September 2003 to June 2007; Secretary of GE
Institutional Funds and the Fund from 1997 to July 2007, and Vice President
from September 2003 to July 2007; Vice President of Elfun Funds and GE
Savings & Security Funds from October 2003 to July 2007; Assistant Secretary of
Elfun Funds and GE Savings & Security Funds from 1998 to July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds and General Electric Pension
Trust, since July 2007.
22
Additional Information (unaudited)
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 44
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 5 years (Vice President); 2 years (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Commercial Administrative Officer
of GEAM since April 2010; Senior Vice President and Deputy General Counsel at
GE Asset Management from October 2007 to April 2010; 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
Secretary of GE Funds and GE Institutional Funds since July 2007; Vice
President and Assistant Secretary of GE Institutional Funds and GE Investments
Funds, Inc. from September 2003 to 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
- --------------------------------------------------------------------------------
ROBERT HERLIHY
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Chief Compliance Officer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 4 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Chief Compliance Officer of GEAM,
GE Funds, GE Institutional Funds, Elfun Funds, and GE Savings and Security
Funds since July 2005; Manager of Fund Administration at GEAM from 2002-2005.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
- --------------------------------------------------------------------------------
EUNICE TSANG
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 50
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- less than one year
PRINCIPAL OCCUPATIONS(S) DURING PAST 5 YEARS Treasurer of GE Funds, GE
Institutional Funds, Elfun Funds and GE Savings and Security Funds since
January 2010; GEAM Operational Controllership and Technical Accounting Manager
since December 2007; Financial Planning & Analysis Manager -- Performance
Leader from June 2005 to December 2007; GEAM Quality Black Belt from 2001 to
June 2005; Financial Planning & Analysis Manager from 2000 to 2001; and Mutual
Fund Assistant Controller from October 1997 to 2000.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
23
Additional Information (unaudited)
- ---------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 64
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Vice President of Walden Capital Management
since 1996.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since 1997; Trustee of Fordham University from 1989 to 1995
and 2001 to 2007 and Trustee Emeritus since 2007; Trustee of Neuro Science
Research Institute since 1986; Trustee of Gregorian University Foundation from
1992 to 2007; Director of Medical from 2006 to 2008.
- --------------------------------------------------------------------------------
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 -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since July 2007 from
Fairfield University. From 1983 to July 2007, Vice President and Treasurer of
Fairfield University.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 74
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997. 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 1-800-493-3042.
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
Kimberley Costello
Michelle Matzelle
TREASURER
Eunice Tsang
ASSISTANT TREASURER
Leslie Spadone
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
Cheryl H. Beacock, SENIOR VICE PRESIDENT, HUMAN RESOURCES
Daniel O. Colao, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER -- MUTUAL FUNDS &
INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT AND CHIEF INVESTMENT OFFICER -- FIXED INCOME
INVESTMENTS
Ralph R. Layman, PRESIDENT AND CHIEF INVESTMENT OFFICER -- PUBLIC EQUITY
INVESTMENTS
Maureen B. Mitchell, PRESIDENT -- INSTITUTIONAL SALES AND MARKETING
Matthew J. Simpson, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST
Don W. Torey, PRESIDENT -- ALTERNATIVE INVESTMENTS
John J. Walker, EXECUTIVE VICE PRESIDENT, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT AND CHIEF INVESTMENT OFFICER -- 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 1-800-493-3042; (ii) on the Fund's
website at http://www.geam.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.geam.com; and (ii) on the Commission's website at
http://www.sec.gov.
[LOGO] GE
GE Investments Funds, Inc.
International Equity Fund Letter from the Chairman
- ----------------------------------------------------------------------------
[PHOTO] 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,
2010. 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
The six-months ended June 30, 2010 presented investors with an extremely
challenging market environment after global equity markets tumbled in the
second half of the period due primarily to concerns about sovereign default
risk and slowing global growth. U.S. equities (S&P 500 Index) declined 6.7%
over the six-month period, while international stocks (MSCI EAFE Index) fell
13.2%.
At the start of 2010, equity markets experienced a selloff in January and early
February as investors reacted negatively to signs that there was a lower
probability of a V-shaped recovery. Concerns about new global financial
regulation, policy tightening in China, and high levels of U.S. and European
debt, especially Greek sovereign debt, further fueled the volatility. Stocks
reversed these losses in the second half of the first quarter, rising steadily
as optimism about corporate earnings changed the tone in the market. The S&P
500 Index advanced 5.4%, for the first quarter of 2010 and indexes tracking
smaller capitalization stocks enjoyed even greater advances. Gains were more
subdued in non-U.S. equity markets, with the MSCI EAFE Index advancing 0.9%
during the same quarter as fears of sovereign credit risk in Europe
overshadowed stronger earnings reports. Regionally, Japan took top honors in
the first quarter, rising 8.2% based on relatively attractive stock valuations.
Canada rose 6.0%, followed by the Pacific Rim (+3.1%), and Emerging Markets
(+2.4%). The U.K. fell 0.6% while Continental Europe dropped 2.4% as Greece's
budget deficit crisis raised concerns about other highly indebted Eurozone
countries, including Portugal, Italy, Ireland, Spain, and even the United
Kingdom. The U.S. bond market returned 1.8% (Barclays Capital U.S. Aggregate
Bond Index) in the first quarter helped by another solid performance by the
credit related sectors. Fixed income securities outside the U.S. performed
similarly, however the Barclays Global Aggregate Un-hedged Bond Index lost 0.3%
(in U.S. dollar terms) due primarily to the strengthening dollar versus other
major currencies.
Although the second quarter of 2010 started quietly, stocks plunged in May as
concerns about Europe's sovereign debt problems pressured equity markets and
many investors sought defensive investments such as gold and treasury bonds.
Adding to Greece's sovereign debt woes, anxieties around contagion grew as
Spain stepped further into the European debt crisis amid credit downgrades
driven by its deteriorating economy and public finances. In June, the 2010 G20
Toronto Summit confirmed that the industrialized world leaders were committed
to reducing budget deficits through austerity measures. Some investors,
however, worried that these measures could reduce global growth and slow the
economic recovery. Several other concerns fuelled greater risk aversion during
the second quarter including increased evidence of slower growth in China, a
new resource tax in Australia, an alarming May 6th "flash crash" which sent
U.S. stocks plummeting within minutes, impending U.S. financial reform
legislation, and the spreading impact of BP's massive oil spill in the Gulf of
Mexico. At quarter end, the S&P 500 Index and the MSCI EAFE Index had tumbled
11.4% and 14.0%, respectively, in the three months ended June 30. Regionally,
Emerging Markets fared best during the second quarter, down 8.4%, followed by
Japan (-10.1%), Canada (-10.5%) and the U.K. (-13.9%). The worst performing
regions were Europe (-15.8%) and the Pacific Rim (-14.3%). In this environment,
U.S. Treasuries were the "safe" investment of choice for many investors seeking
to avoid riskier asset classes. The "flight to quality" pulled treasury yields
down across all maturity periods. The Barclays Capital U.S.
[LOGO] GE
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
International Equity Fund
- ----------------------------------------------------
Aggregate Bond Index returned 3.49% in the second quarter, while the Barclays
Capital Global Aggregate Un-hedged Bond Index lost 0.04% over the same
three-month period owing mainly to widening spreads in European peripheral
countries and the declining euro.
Against a backdrop of weakening investor sentiment, financial markets posted
disparate results for the six- and twelve-month periods ended June 30, 2010.
TOTAL RETURNS AS OF JUNE 30, 2010 6-MONTH 12-MONTH
- -----------------------------------------------------------------------------
U.S. equities (S&P 500 Index) -6.7 14.4
Global equities (MSCI World Index) -9.8 10.2
International equities (MSCI EAFE Index) -13.2 5.9
Emerging Markets equities (MSCI EM Index) -6.2 23.2
Small-cap U.S. equities (Russell 2000 Index) -2.0 21.5
Mid-cap U.S. equities (Russell Mid Cap Index) -2.1 25.1
U.S. fixed income (Barclays Capital U.S. Aggregate Bond
Index) 5.3 9.5
U.S. short-term government fixed income (Barclays Capital
1-3 Year U.S. Government Bond Index) 1.9 2.9
U.S. tax-exempt income (Barclays Capital 10-Year U.S.
Municipal Bond Index) 4.1 9.6
- -----------------------------------------------------------------------------
OUTLOOK
In the face of the fiscal concerns throughout much of Europe and signs of
slowing economic activity around the globe, the wall of worry has become
exceedingly high for investors who want to see credible government budgets that
balance fiscal austerity and economic growth. At the core of the uncertainty,
in our view, is the issue of excessive borrowing, now afflicting sovereign
markets and reminding us that the financial crisis is not yet over. Our
economic view for the second half of 2010 still favors positive, albeit slow
growth which we believe should keep interest rates at record lows for months to
come. We also believe that the policy measures implemented in Europe will
improve sentiment towards sovereign and bank debt over the balance of the year.
But many challenges remain on the horizon, including the risk of fiscal policy,
taxation and regulation missteps that could hamper the recovery. As a result,
continued market volatility appears to be the one sure thing we can predict
with certainty.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. Today's
uncertain environment is why we believe it is important for long-term investors
to maintain a disciplined, diversified investment strategy consistent with
their goals, time horizon and risk tolerance. While diversified portfolios are
not immune to market downturns, history suggests they can put investors in a
position to benefit from a 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.
August 2010
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
GE Investments Funds, Inc.
International Equity Fund
Semi-Annual Report
JUNE 30, 2010
[LOGO] GE
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...................................... 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, 2010 (unaudited)
- -----------------------------------------------------------------------------
Information on the following performance pages relating to the GE Investments
International Equity Fund (the "Fund") total returns and Schedule of
Investments is unaudited. All other information, including the portfolio
manager Q&A pages, is also 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 fees and 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
800-493-3042 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in the 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 the 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 does 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 MSCI(R) EAFE(R) 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.
They do not reflect the actual cost of investing in the instruments that
comprise the Index.
The peer universe of the underlying annuity funds used for the peer group
average annual total return calculation is based on a blend of Morningstar peer
categories, as shown. Morningstar is an independent mutual fund rating service.
The 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 that of the Fund.
(C)2010 Morningstar, Inc. All Rights Reserved. The Morningstar information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not 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 of 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
- --------------------------------------------------------------------------------
[PHOTO] Ralph R. Layman
Ralph R. Layman
The International Equity Fund is managed by a team of portfolio managers that
includes Brian Hopkinson, Ralph R. Layman, Paul Nestro, Jonathan L. Passmore
and Michael J. Solecki. 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.
Ralph R. Layman is President and Chief Investment Officer -- Public Equities
and a Director at 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 and President --International
Equities in March 2007.
Brian Hopkinson is a Senior Vice President of GE Asset Management. He has been
a portfolio manager for the Fund since 1997. 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 and Co-Chief Investment Officer
- -- International Equities 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.
Q. HOW DID THE INTERNATIONAL EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND
MORNINGSTAR PEER GROUP FOR THE SIX-MONTH ENDED JUNE 30, 2010?
A. For the six-month period ended June 30, 2010, the International Equity Fund
returned -16.33% for Class 1 shares and -16.00% for Class 4 shares. The MSCI
EAFE Index, the Fund's benchmark, returned -13.23% and the Fund's
Morningstar peer group of 146 US Insurance Foreign Large Blend funds
returned an average of -13.15% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED THE FUND'S PERFORMANCE?
A. Growing concern over the direction of the global economy spurred the
period's weakness, especially in May, despite upgrades in 2010 GDP growth
projections and good Q1 earnings. Disarray in Europe over sovereign debt and
lack of transparency regarding regulatory reform and capital requirements
all served to keep investors uncommitted. The U.S. Dollar was strong for
much of the period, acting as a headwind for overseas market returns and
volumes have generally been light, in our view reflecting the lack of real
trend in market sentiment as investors await further information.
2
- --------------------------------------------------------------------------------
[GRAPHIC]
Q. WHAT DOMESTIC OR WORLD EVENTS HAD A MAJOR IMPACT ON FINANCIAL MARKETS?
A. Deteriorating financials in some small European countries have been the main
driver of sentiment during the period. Faced with potential default, Greece
has quickly introduced budgetary solutions to repair the budget, backed by a
massive ECB/IMF loan package. Meanwhile, budgetary excesses in other
countries have reminded investors this is not an exclusively Greek issue.
Where austerity measures have been announced, it appears investors are
assuming that the growth outlook will be lower. The massive oil spill in the
Gulf of Mexico has brought new fears of economic privation to the southern
U.S. coast and jobless rates have remained stubbornly high as a result.
Q. WHICH STOCKS AND SECTORS SIGNIFICANTLY AFFECTED PERFORMANCE?
A. Positive contributions came from holdings in energy, notably an underweight
in BP which fell over 50% during the period as a result of the unfolding oil
spill crisis. On the negative side, financials continued to exert an
influence on the portfolio with several European banks and a Japanese
investment bank performing poorly. The European names, BNP Paribas, Credit
Agricole and Santander were all hit on perceived association with the
deteriorating European debt market. Although the banks were modestly
involved in Greece, if at all, guilt by association was sufficient to send
prices sharply lower.
Q. DID THE WEIGHTINGS/COUNTRY ALLOCATION OF THE FUND CHANGE? WHY?
A. The shifting environment in Japan and Europe led to allocation changes based
on domestic- or export-focus (Japan) or exposure to non-Euro markets
(Europe). Overall the weight of Japanese holdings diminished due to
increased political uncertainty and, in our view receding potential for
reform in the domestic market. However, individual companies where we still
foresee great opportunities overseas, especially in China, were increased.
In Europe, holdings in industrials and IT were increased, the former due to
the export potential arising from a weaker Euro, and the latter due to
evidence of corporate spend restarting after a protracted slowdown during
the crisis.
Q. WHAT WERE THE MAJOR BUYS AND SELLS FOR THE PERIOD AND WHY?
A. Japanese holdings were reduced based on deteriorating conditions for certain
companies, including MUFG, Nomura Holdings, Shiseido and Yamada Denki, while
holdings in European banks, such as Credit Agricole and BNP Paribas, were
also reduced. Conversely, several IT companies were added based on optimism
over corporate spend, including Cap Gemini, Autonomy and SAP in software and
Delta Electronics in hardware. Stocks that we believed could benefit from
Euro weakness, such as Siemens, Philips and EADS were added as were
particular financials, such as Unicredit and Deutsche Boerse which, in our
view had been unduly punished by the market rattled by the sovereign debt
crisis.
3
International Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund, you incur ongoing fees and expenses, which
include portfolio management fees, distribution and service fees (for
shareholders of Class 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,
2010.
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 $1,000 = 8.6), then multiply the result by the
number given for your class under the heading "Expenses paid during period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholders reports of other funds.
Please note that the expenses shown in the table for both "Actual" and
"Hypothetical" do not reflect any transaction costs, such as sales charges or
redemption fees. Additionally, the expenses shown do not reflect the fees or
charges associated with variable contracts through which shares of the Fund are
offered.
JANUARY 1, 2010 - JUNE 30, 2010
- ----------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ----------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ----------------------------------------------------------------------------------------------
Class 1 1,000.00 836.73 7.42
Class 4 1,000.00 840.00 9.53
- ----------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ----------------------------------------------------------------------------------------------
Class 1 1,000.00 1,016.57 8.15
Class 4 1,000.00 1,014.33 10.44
- ----------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 1.63% for Class
1 shares and 2.09% for Class 4 shares (for the period January 1, 2010 - June
30, 2010), 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, 2010 were as
follows: -16.33% for Class 1 shares, and -16.00% for Class 4 shares. Past
performance does not guarantee future results.
4
International Equity Fund (unaudited)
- ---------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[CHART]
International Equity Fund MSCI EAFE Index
-------------------------- ------------------
Jun 1, 2000 10,000.00 10,000.00
Dec 1, 2000 8,533.45 8,946.71
Dec 1, 2001 6,753.52 7,012.97
Dec 1, 2002 5,144.14 5,895.10
Dec 1, 2003 7,094.15 8,169.78
Dec 1, 2004 8,218.49 9,823.92
Dec 1, 2005 9,713.83 11,153.64
Dec 1, 2006 12,112.33 14,091.58
Dec 1, 2007 14,895.22 15,667.08
Dec 1, 2008 8,068.08 8,870.94
Dec 1, 2009 10,301.50 11,689.79
Jun 1, 2010 8,619.62 10,143.28
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 5/1/95)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS+ YEAR YEAR YEAR $10,000 INVESTMENT/(A)/
- ------------------------------------------------------------------------------------
International Equity Fund -16.33% -0.80% 1.12% -1.47% $ 8,620
- ------------------------------------------------------------------------------------
MSCI EAFE Index -13.23% 5.92% 0.88% 0.14% $10,143
- ------------------------------------------------------------------------------------
Morningstar peer group average* -13.15% 5.64% 0.70% -1.04%
- ------------------------------------------------------------------------------------
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[CHART]
International Equity Fund MSCI EAFE Index
--------------------------- -----------------
May 1, 2008 10,000.00 10,000.00
Jun 1, 2008 9,233.98 9,271.53
Sep 1, 2008 7,298.05 7,365.34
Dec 1, 2008 5,521.08 5,895.73
Mar 1, 2009 4,692.92 5,074.07
Jun 1, 2009 5,935.16 6,364.50
Sep 1, 2009 6,763.33 7,603.53
Dec 1, 2009 6,982.68 7,769.16
Mar 1, 2010 6,982.68 7,836.39
Jun 1, 2010 5,865.45 6,741.34
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
SIX ONE SINCE ENDING VALUE OF A
MONTHS+ YEAR INCEPTION $10,000 INVESTMENT/(A)/
- ---------------------------------------------------------------------------------
International Equity Fund -16.00% -1.17% -21.82% $5,865
- ---------------------------------------------------------------------------------
MSCI EAFE Index -13.23% 5.92% -16.66% $6,741
- ---------------------------------------------------------------------------------
Morningstar peer group average* -13.15% 5.64%
- ---------------------------------------------------------------------------------
INVESTMENT PROFILE [GRAPHIC]
A mutual fund designed for investors
who seek long-term growth of capital
by investing at least 80% of its net
assets under normal circumstances in
common and preferred stocks and other
types of equity securities. The Fund
invests primarily (meaning at least
65%) in companies in both developed
and emerging market countries outside
the United States.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $13,532 (in thousands)
[CHART]
Continental Europe 46.7%
United Kingdom 20.1%
Japan 15.6%
Emerging Asia 6.4%
Canada 3.8%
Latin America 3.3%
Pacific Rim 1.8%
Emerging Europe 1.4%
United States 0.9%
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Nestle S.A. 3.19%
--------------------------------------------------------
Siemens AG 2.54%
--------------------------------------------------------
HSBC Holdings PLC 2.45%
--------------------------------------------------------
Roche Holding AG 2.18%
--------------------------------------------------------
Nomura Holdings Inc. 2.02%
--------------------------------------------------------
Cie Generale d'Optique Essilor International S.A. 1.95%
--------------------------------------------------------
Reckitt Benckiser Group PLC 1.93%
--------------------------------------------------------
BHP Billiton PLC 1.91%
--------------------------------------------------------
Koninklijke Philips Electronics N.V. 1.87%
--------------------------------------------------------
Banco Santander S.A. 1.85%
--------------------------------------------------------
(a)Ending value of a $10,000 investment for the ten-year period or since
inception, whichever is less.
* 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
U.S. Insurance Foreign Large Blend peer group consisting of 146, 143, 116 and
86 underlying annuity funds, respectively.
+ Total return for the period ended June 30, 2010 is not annualized.
++The securities information regarding holdings, allocations and other
characteristics are presented to illustrate examples of securities that the
Fund has bought and the diversity of areas in which the Fund may invest as of
a particular date. It may not be representative of the Fund's current or
future investments and should not be construed as a recommendation to
purchase or sell a particular security.
See Notes to Performance on page 1 for further information, including an
explanation of Morningstar peer categories.
Past performance does not predict future performance. The performance shown in
the graphs and tables do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares and do not
reflect the fees or charges that would be associated with variable contracts
through which shares of the Fund are offered.
5
INTERNATIONAL EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
NUMBER
OF SHARES VALUE
COMMON STOCK -- 93.9% +
-----------------------------------------------------------------------
AUSTRALIA -- 1.1%
Brambles Ltd.......................... 17,290 $ 79,011
Paladin Energy Ltd.................... 24,051 71,862 /(a)/
150,873
BRAZIL -- 2.4%
Banco Santander Brasil S.A............ 11,600 119,250
Petroleo Brasileiro S.A. ADR.......... 3,645 108,621 /(c)/
Vale S.A. ADR......................... 5,410 113,718
341,589
CANADA -- 3.6%
Kinross Gold Corp..................... 2,486 42,578
Potash Corporation of Saskatchewan
Inc.................................. 2,618 225,892
Research In Motion Ltd................ 2,788 137,295 /(a)/
Suncor Energy Inc..................... 3,603 106,227
511,992
CHILE -- 0.4%
Sociedad Quimica y Minera de
Chile S.A. ADR....................... 1,558 50,806
CHINA -- 0.9%
China Mobile Ltd...................... 3,990 39,524
China South Locomotive and Rolling
Stock Corp........................... 120,949 82,528
122,052
DENMARK -- 1.0%
AP Moller -- Maersk A/S............... 17 134,113
FINLAND -- 0.3%
Nokia Oyj............................. 5,384 43,958
FRANCE -- 12.2%
AXA S.A............................... 8,355 127,854 (c)
BNP Paribas........................... 4,390 236,581 /(c)/
Cap Gemini S.A........................ 3,094 136,208
Cie Generale d'Optique Essilor
International S.A.................... 4,423 263,277
Credit Agricole S.A................... 5,650 58,718
Danone................................ 1,336 71,743
European Aeronautic Defence and Space
Company N.V.......................... 6,708 137,125
Safran S.A............................ 2,320 64,826
Schneider Electric S.A................ 1,762 178,260
Total S.A............................. 4,427 197,947
Veolia Environnement.................. 2,724 64,102
Vinci S.A............................. 2,153 89,546
Vivendi S.A........................... 4,296 87,450
1,713,637
NUMBER
OF SHARES VALUE
GERMANY -- 10.9%
Adidas AG............................ 2,673 $ 129,630
Bayer AG............................. 3,146 176,098
Daimler AG........................... 2,841 143,954
Deutsche Boerse AG................... 3,552 216,158
Linde AG............................. 2,209 232,665
Metro AG............................. 2,340 119,591
SAP AG............................... 2,434 108,415
Siemens AG........................... 3,833 343,397
ThyssenKrupp AG...................... 2,511 61,983
1,531,891
HONG KONG -- 0.7%
Esprit Holdings Ltd.................. 17,661 95,084
INDIA -- 0.7%
Larsen & Toubro Ltd.................. 2,477 95,820
IRELAND -- 0.8%
CRH PLC.............................. 5,495 113,404
ITALY -- 2.1%
ENI S.p.A............................ 6,449 118,577
UniCredit S.p.A...................... 79,269 175,640
294,217
JAPAN -- 15.0%
Daikin Industries Ltd................ 2,000 60,929
Fanuc Ltd............................ 600 67,696
Mitsubishi Corp...................... 6,000 124,025
Mitsubishi Estate Company Ltd........ 8,982 124,938
Mitsubishi Heavy Industries Ltd...... 18,000 62,043
Mitsubishi UFJ Financial Group Inc... 38,790 175,985
Nomura Holdings Inc.................. 50,042 273,172
Sony Financial Holdings Inc.......... 52 173,312
Sumitomo Metal Industries Ltd........ 97,002 219,139 (c)
Sumitomo Mitsui Financial Group Inc.. 1,741 49,233
Suzuki Motor Corp.................... 10,000 196,088
Taiyo Nippon Sanso Corp.............. 10,999 87,269
The Bank of Yokohama Ltd............. 26,130 119,430
Toyota Motor Corp.................... 2,646 90,836
Unicharm Corp........................ 1,500 169,006
Yamada Denki Company Ltd............. 1,731 113,007
2,106,108
MEXICO -- 0.4%
America Movil SAB de C.V. ADR........ 1,084 51,490
NETHERLANDS -- 3.2%
Heineken N.V......................... 1,368 58,083
Koninklijke Ahold N.V................ 7,627 94,503
Koninklijke Philips Electronics N.V.. 8,465 253,206
Unilever N.V......................... 1,743 47,680
453,472
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements on page 14.
6
INTERNATIONAL EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
RUSSIAN FEDERATION -- 0.5%
Mobile Telesystems OJSC ADR........ 3,730 $ 71,467
SOUTH AFRICA -- 0.8%
MTN Group Ltd...................... 9,014 118,272
SOUTH KOREA -- 2.0%
KB Financial Group Inc............. 1,915 73,403
Samsung Electronics Company Ltd.... 170 106,626
Samsung Electronics Company Ltd.
GDR............................... 320 101,360
281,389
SPAIN -- 2.8%
Banco Santander S.A................ 23,894 250,977 /(c)/
Iberdrola S.A...................... 11,109 62,544
Telefonica S.A..................... 4,574 84,874
398,395
SWEDEN -- 0.9%
Hennes & Mauritz AB................ 523 14,402
Telefonaktiebolaget LM Ericsson.... 10,502 116,720
131,122
SWITZERLAND -- 9.2%
Credit Suisse Group AG (Regd.)..... 4,146 155,806
Nestle S.A......................... 8,944 431,069
Novartis AG........................ 3,090 149,682
Roche Holding AG................... 2,146 295,242
Syngenta AG........................ 589 136,005
Zurich Financial Services AG....... 582 128,221
1,296,025
TAIWAN -- 2.6%
Delta Electronics Inc.............. 32,000 102,149
Taiwan Semiconductor Manufacturing
Company Ltd....................... 125,634 234,815
Taiwan Semiconductor Manufacturing
Company Ltd. ADR.................. 3,497 34,131
371,095
UNITED KINGDOM -- 19.4%
Autonomy Corporation PLC........... 3,686 100,609 (a)
BG Group PLC....................... 11,243 167,439
BHP Billiton PLC................... 9,960 258,594 (c)
Diageo PLC......................... 1,808 28,438
Experian PLC....................... 2,454 21,369
G4S PLC............................ 23,462 93,145
G4S PLC............................ 10,675 42,522
HSBC Holdings PLC.................. 36,205 331,200
Lloyds Banking Group PLC........... 211,959 167,558 (c)
National Grid PLC.................. 29,282 214,073
Prudential PLC..................... 31,032 234,375 (c)
Reckitt Benckiser Group PLC........ 5,608 261,201
Rio Tinto PLC...................... 4,972 218,634
NUMBER
OF SHARES VALUE
Royal Dutch Shell PLC.............. 5,613 $ 141,839
Tesco PLC.......................... 33,194 187,512
The Capita Group PLC............... 12,010 132,494
Vodafone Group PLC................. 57,544 118,728 (c)
2,719,730
TOTAL COMMON STOCK
(COST $14,609,772)................ 13,198,001
--------------------------------------------------------------------
RIGHTS -- 0.0%*
--------------------------------------------------------------------
Iberdrola S.A.
(COST $2,700)..................... 11,514 2,513 (a)
--------------------------------------------------------------------
PREFERRED STOCK -- 1.5%
--------------------------------------------------------------------
Fresenius SE....................... 1,076 71,191
Volkswagen AG...................... 1,582 139,054
TOTAL PREFERRED STOCK
(COST $219,465)................... 210,245
--------------------------------------------------------------------
OTHER INVESTMENTS -- 0.1%
--------------------------------------------------------------------
GEI Investment Fund
(COST $12,970).................... 11,284 /(d)/
TOTAL INVESTMENTS IN SECURITIES
(COST $14,844,907)................ 13,422,043
--------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.8%
--------------------------------------------------------------------
GE Money Market Fund Institutional
Class 0.05%
(COST $110,318)................... 110,318 (b,d)
TOTAL INVESTMENTS
(COST $14,955,225)................ 13,532,361
OTHER ASSETS AND LIABILITIES,
NET -- 3.7%....................... 522,075
------------
NET ASSETS -- 100.0%............... $ 14,054,436
============
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements on page 14.
7
INTERNATIONAL EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
OTHER INFORMATION
-------------------------
The Fund had the following long futures contracts open at June 30, 2010
(unaudited):
NUMBER CURRENT UNREALIZED
OF NOTIONAL APPRECIATION/
DESCRIPTION EXPIRATION DATE CONTRACTS VALUE (DEPRECIATION)
-----------------------------------------------------------------
DJ Stoxx 50
Index Futures September 2010 6 $188,733 $ 728
FTSE 100
Index Futures September 2010 1 73,017 (211)
Topix
Index Futures September 2010 1 94,756 214
-----
$ 731
=====
The Fund was invested in the following categories at June 30, 2010 (unaudited):
TOTAL PERCENTAGE (BASED
INDUSTRY ON MARKET VALUE)
-----------------------------------------------------------------
Commercial Banks 12.99%
Metals & Mining 6.76%
Oil, Gas & Consumable Fuels 6.74%
Chemicals 5.41%
Insurance 4.90%
Pharmaceuticals 4.59%
Industrial Conglomerates 4.41%
Automobiles 4.21%
Food Products 4.07%
Semiconductors & Semiconductor Equipment 3.52%
Capital Markets 3.17%
Food & Staples Retailing 2.97%
Household Products 3.18%
Wireless Telecommunication Services 2.95%
Commercial Services & Supplies 1.59%
Communications Equipment 2.20%
Specialty Retail 1.64%
Healthcare Equipment & Supplies 2.47%
Multi-Utilities 2.06%
Diversified Financial Services 1.60%
Electrical Equipment 1.32%
Software 1.54%
Professional Services 1.14%
Machinery 1.57%
Real Estate Management & Development 0.92%
Construction & Engineering 1.37%
IT Services 1.01%
Textiles, Apparel & Luxury Goods 0.96%
Trading Companies & Distributors 0.92%
Marine 0.99%
Aerospace & Defense 1.49%
Media 0.65%
Construction Materials 0.84%
Electronic Equipment, Instruments &
Components 0.75%
Diversified Telecommunication Services 0.63%
Beverages 0.64%
Electric Utilities 0.48%
Building Products 0.45%
-----
99.10%
=====
PERCENTAGE (BASED
SHORT-TERM AND OTHER INVESTMENTS ON MARKET VALUE)
----------------------------------------------------
Short-Term Investments 0.82%
Other Investments 0.08%
------
0.90%
------
------
100.00%
======
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements on page 14.
8
Notes to Schedule of Investments June 30, 2010 (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
information regarding holdings, allocations and other characteristics are
presented to illustrate examples of securities that the Fund has bought and the
diversity of areas in which the Fund may invest as of a particular date. It may
not be representative of the Fund's current or future investments and should
not be construed as a recommendation to purchase or sell a particular security.
Please see the Fund's prospectus for complete descriptions of investment
objective, policies, risks and permissible investments.
(a)Non-income producing security.
(b)Coupon amount represents effective yield.
(c)At June 30, 2010, 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)GE Asset Management, the investment adviser of the Fund, also serves as
investment adviser of the GEI Investment Fund and the GE Funds-GE Money
Market Fund.
* Less than 0.05%.
+ Percentages are based on net assets as of June 30, 2010.
Abbreviations:
ADR American Depository Receipt
GDR Global Depository Receipt
REGD. Registered
TBA To be announced
9
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
-------------------------------------------------------------------------------------------
CLASS 1
-------------------------------------------------------------------------------------------
6/30/10+ 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05 6/30/10+
-------------------------------------------------------------------------- ----------------
INCEPTION DATE 5/1/95
Net asset value,
beginning of period...... $0.49 $0.39 $14.67 $14.08 $11.42 $ 9.76 $0.50
INCOME/(LOSS) FROM
INVESTMENT
OPERATIONS:
Net investment income
(loss)................. -- 0.01 0.51 0.23 0.15 0.13 (0.02)
Net realized and
unrealized gains/
(losses) on
investments............ (0.08) 0.10 (7.04) 2.98 2.67 1.65 (0.06)
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT
OPERATIONS............... (0.08) 0.11 (6.53) 3.21 2.82 1.78 (0.08)
- -----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment
income................. -- 0.01 0.51 0.23 0.16 0.12 --
Net realized gains...... -- 0.00 7.24 2.39 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS....... -- 0.01 7.75 2.62 0.16 0.12 --
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period................... $0.41 $0.49 $ 0.39 $14.67 $14.08 $11.42 $0.42
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/(A)/......... (16.33)% 27.68% (45.83)% 22.98% 24.69% 18.19% (16.00)%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in
thousands)............. $14,049 $18,307 $17,920 $84,272 $80,648 $65,450 $6
Ratios to average net
assets:
Net investment
income*.............. 1.65% 1.28% 2.57% 1.30% 1.16% 1.19% 1.22%
Net Expenses*......... 1.63%/(b,c)/ 1.68%/(b,c)/ 1.18%/(b,c)/ 1.13% 1.13% 1.25% 2.09%/(b,c)/
Gross Expenses*....... 1.84% 1.88% 1.29% 1.13% 1.13% 1.25% 2.30%
Portfolio turnover
rate................. 25% 46% 41% 32% 34% 53% 25%
-------------------------------
CLASS 4
-------------------------------
12/31/09 12/31/08
------------------------------
INCEPTION DATE 5/1/08
Net asset value,
beginning of period...... $0.40 $14.36
INCOME/(LOSS) FROM
INVESTMENT
OPERATIONS:
Net investment income
(loss)................. (0.01) 0.10**
Net realized and
unrealized gains/
(losses) on
investments............ 0.12 (6.35)
- ---------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT
OPERATIONS............... 0.11 (6.25)
- ---------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment
income................. 0.01 0.47
Net realized gains...... 0.00 7.24
- ---------------------------------------------------------
TOTAL DISTRIBUTIONS....... 0.01 7.71
- ---------------------------------------------------------
Net asset value, end of
period................... $0.50 $ 0.40
- ---------------------------------------------------------
TOTAL RETURN/(A)/......... 26.47% (44.79)%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in
thousands)............. $7 $6
Ratios to average net
assets:
Net investment
income*.............. 0.77% 1.63%
Net Expenses*......... 213%/(b,c)/ 1.56%/(b,c)/
Gross Expenses*....... 2.33% 1.74%
Portfolio turnover
rate................. 46% 41%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a)Total returns are historical and assume changes in share price, reinvestment
of dividends and capital gains distributions and do not include the effect
of insurance contract charges. Past performance does not guarantee future
results.
(b)Reflects GE Asset Management's waiver of a portion of the Fund's management
fee in an amount equal to the management fee earned by GE Asset Management
with respect to the Fund's investment in the GE Funds -- GE Money Market
Fund.
(c)Reflects GE Asset Management'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, 2011. Please see Note 6 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, 2010 (UNAUDITED) EQUITY
FUND
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $14,831,937)......... $13,410,759
Investments in affiliated securities, at market (cost $12,970).. 11,284
Short-term affiliated investments (at amortized cost)........... 110,318
Foreign cash (cost $11,134)..................................... 11,130
Receivable for investments sold................................. 597,879
Income receivables.............................................. 60,870
Receivable for fund shares sold................................. 621
Variation margin receivable..................................... 3,523
Other assets.................................................... 70,659
- --------------------------------------------------------------------------------
TOTAL ASSETS.................................................. 14,277,043
- --------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased............................... 57,723
Payable for fund shares redeemed................................ 1,008
Payable to GEAM................................................. 8,943
Accrued other expenses.......................................... 154,722
Variation margin payable........................................ 211
- --------------------------------------------------------------------------------
Total Liabilities............................................... 222,607
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $14,054,436
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF :
Capital paid in................................................. 23,951,954
Undistributed (distribution in excess of) net investment income. 117,807
Accumulated net realized gain (loss)............................ (8,595,631)
Net unrealized appreciation/ (depreciation) on:
Investments................................................... (1,422,864)
Futures....................................................... 731
Foreign currency related transactions......................... 2,439
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $14,054,436
- --------------------------------------------------------------------------------
CLASS 1:
NET ASSETS........................................................ $14,048,542
Shares outstanding ($0.01 par value; unlimited shares authorized). 34,044,716
Net asset value per share......................................... $0.41
CLASS 4:
NET ASSETS........................................................ $ 5,894
Shares outstanding ($0.01 par value; unlimited shares authorized). 13,965
Net asset value per share......................................... $0.42
See Notes to Financial Statements.
11
Statement of Operations INTERNATIONAL
FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED) EQUITY
FUND
- --------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend............................................................ $ 302,679
Interest............................................................ 1,678
Interest from affiliated investments................................ 12
Less: Foreign taxes withheld........................................ (33,134)
- --------------------------------------------------------------------------------------
TOTAL INCOME.......................................................... 271,235
- --------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees.................................... 82,962
Distributors Fees (Note 6)
Class 4........................................................... 15
Transfer agent...................................................... 8,951
Director's fees..................................................... 312
Custody and accounting expenses..................................... 41,409
Professional fees................................................... 9,655
Registration expenses............................................... 961
Other expenses...................................................... 7,877
- --------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT........................ 152,142
- --------------------------------------------------------------------------------------
Less: Expenses waived or borne by the adviser....................... (16,561)
Less: Expenses reimbursed by the adviser............................ (540)
- --------------------------------------------------------------------------------------
Net expenses........................................................ 135,041
- --------------------------------------------------------------------------------------
NET INVESTMENT INCOME................................................. 136,194
- --------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments....................................................... (943,682)
Futures........................................................... (30,642)
Foreign currency transactions..................................... (13,503)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON:
Investments....................................................... (1,843,256)
Futures........................................................... 1,064
Foreign currency transactions..................................... (1,603)
- --------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments.............. (2,831,622)
- --------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... $(2,695,428)
- --------------------------------------------------------------------------------------
See Notes to Financial Statements.
12
Statements of INTERNATIONAL
Changes in Net Assets EQUITY
FUND
- ---------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2010 DECEMBER 31,
(UNAUDITED) 2009
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss)................................................................. $ 136,194 $ 219,728
Net realized gain (loss) on investments, futures, and foreign currency transactions........... (987,827) (4,777,508)
Net increase (decrease) in unrealized appreciation / (depreciation) on investments, futures
and foreign currency transactions........................................................... (1,843,795) 8,526,741
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations....................................................... (2,695,428) 3,968,961
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1..................................................................................... -- (293,918)
Class 4..................................................................................... -- (83)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS............................................................................. -- (294,001)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions............................. (2,695,428) 3,674,960
- ---------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1..................................................................................... 121,463 779,958
Class 4..................................................................................... -- --
Value of distributions reinvested
Class 1..................................................................................... -- 293,918
Class 4..................................................................................... -- 83
Cost of shares redeemed
Class 1..................................................................................... (1,685,681) (4,360,018)
Class 4..................................................................................... -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions............................................... (1,564,218) (3,286,059)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......................................................... (4,259,646) 388,901
NET ASSETS
Beginning of period............................................................................. 18,314,082 17,925,181
- ---------------------------------------------------------------------------------------------------------------------------------
End of period................................................................................... $14,054,436 $ 18,314,082
- ---------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD.................... $ 117,807 $ (18,387)
- ---------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold....................................................................................... 267,413 1,756,212
Issued for distributions reinvested............................................................... -- 599,686
Shares redeemed................................................................................... (3,606,464) (10,393,580)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares............................................................ (3,339,051) (8,037,682)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS 4
Shares sold....................................................................................... -- --
Issued for distributions reinvested............................................................... -- 163
Shares redeemed................................................................................... -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares............................................................ -- 163
- ---------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
13
Notes to Financial Statements June 30, 2010 (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 Fund 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
References to Level 1, Level 2 and Level 3 below are the level classifications
in the fair value hierarchy and are described in the Fair Value Measurements
section.
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 the NASDAQ are valued using the NASDAQ Official Closing Price, which
may not necessarily represent the last sale price. Level 1 securities primarily
include publicly traded equity securities. If no sales occurred on the exchange
or NASDAQ that day, the portfolio security generally is valued using the last
reported bid price. In these circumstances the Fund classifies the investment
securities in Level 2.
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. These securities are included in Level 2. In the absence of
a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations and would be classified in
Level 3.
Short-term investments of sufficient credit quality 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 and these are included in Level
2.
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 and these are
also included in Level 2.
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. These securities
would be classified in Level 3. 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 of
the Fund in the appropriate circumstances.
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. In these circumstances the Fund classifies the investment
14
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
securities in Level 2. 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. In these circumstances the Fund
classifies the investment securities in Level 3. 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.
Portfolio securities may be valued using techniques other than market
quotations, under the circumstances described under above. The value
established for a portfolio security may be different than what would be
produced through the use of another methodology or if it had been priced using
market quotations. Portfolio securities that are valued using techniques other
than market quotations, including "fair valued" securities, may be subject to
greater fluctuation in their value from one day to the next than would be the
case if market quotations were used. In addition, there is no assurance that
the Fund could sell a portfolio security for the value established for it at
any time and it is possible that the Fund would incur a loss because a
portfolio security is sold at a discount to its established 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. 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. The Fund's income, expenses (other than distribution
fees) and realized and unrealized gains and losses are allocated proportionally
each day among each the Fund's respective share classes based upon the relative
net assets of each share class.
FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, Fair Valuation Measurements and Disclosures effective
October 1, 2008 for all financial instruments accounted for at fair value.
For financial assets and liabilities, fair value is the price the Fund would
receive 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 or 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 inputs are observable or whose
significant value drivers are observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
Policies and procedures are maintained to value investments using the best and
most relevant data available. In addition, GEAM performs periodic reviews of
the methodologies used by independent pricing services including price
validation of individual securities.
The following section describes the valuation methodologies the Fund uses to
measure different financial investments at fair value.
When available, the Fund uses quoted market prices to determine the 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, pricing information is obtained
from an independent pricing vendor. The pricing vendor uses various pricing
models for each asset class that are consistent with what other market
participants would use. The inputs and
15
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
assumptions to the model of the pricing vendor are derived from market
observable sources including: benchmark yields, reported trades, broker/dealer
quotes, issuer spreads, benchmark securities, bids, offers, and other
market-related data. Since many fixed income securities do not trade on a daily
basis, the methodology of the pricing vendor uses available information as
applicable such as benchmark curves, benchmarking of like securities, sector
groupings, and matrix pricing. The pricing vendor considers all available
market observable inputs in determining the evaluation for a security. Thus,
certain securities may not be priced using quoted prices, but rather determined
from market observable information. These investments are included in Level 2
and primarily comprise our portfolio of corporate fixed income, government,
mortgage and asset-backed securities. In infrequent circumstances, pricing
vendors may provide the Fund with valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
included in Level 3.
The Fund uses non-binding broker quotes as the primary basis for valuation when
there is limited, or no, relevant market activity for a specific investment or
for other investments that share similar characteristics. The Fund has not
adjusted the prices obtained. Investment securities priced using non-binding
broker quotes are included in Level 3. As is the case with the primary pricing
vendor, third-party brokers do not provide access to their proprietary
valuation models, inputs and assumptions. Accordingly, GEAM conducts internal
reviews of pricing for all such investment securities periodically to ensure
reasonableness of valuations used in our financial statements. These reviews
are designed to identify prices that appear stale, those that have changed
significantly from prior valuations, and other anomalies that may indicate that
a price may not be accurate. Based on the information available, GEAM believes
that the fair values provided by the brokers are representative of prices that
would be received to sell the assets at the measurement date (exit prices).
Other financial investments are derivative investments 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.
The Fund uses closing prices for derivatives included in Level 1, which are
traded either on exchanges or liquid over-the counter markets. Derivative
assets and liabilities included in Level 2 primarily represent interest rate
swaps, cross-currency swaps and foreign currency and commodity forward and
option contracts. Derivative assets and liabilities included in Level 3
primarily represent interest rate products that contain embedded optionality or
prepayment features.
Transfers in and out of Level 3 are considered to occur at the beginning of the
period.
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. For example, money
market securities are valued using amortized cost, in accordance with the
Investment Company Act of 1940. Generally, amortized cost reflects the current
fair value of a security, but since the value is not obtained from a quoted
price in an active market, such securities are reflected as Level 2. Fair value
determinations are required for securities whose value is affected by a
significant event that will materially affect the value of a domestic or
foreign security and which occurs subsequent to the time of the close of the
principal market on which such domestic or foreign security trades but prior to
the calculation of the Fund's NAV.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objective 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
16
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 of foreign denominated securities from
the fluctuations arising from changes in the market prices of those 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.
DERIVATIVES The Fund is subject to equity price risk, and foreign currency
exchange rate risk in the normal course of pursuing its investment objective.
The Fund may enter into derivative transactions for the purpose of hedging
against the effects of changes in the value of portfolio securities due to
anticipated changes in market conditions and to gain market exposure for
residual and accumulating cash positions. 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 and 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.
FUTURES CONTRACTS The Fund may invest in interest rate, financial, stock and
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 investments. The
Fund will not enter into a transaction
17
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
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.
The Fund is subject to ASC 740, Income Taxes. ASC 740 provides guidance for
financial accounting and reporting for the effects of income taxes that result
from an entity's activities during the year. ASC 740 also provides guidance
regarding how certain uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements. ASC 740 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.
There are no adjustments to the Fund's net assets required under ASC 740. The
Fund's 2006, 2007, 2008 and 2009 fiscal years tax returns are still open to
examination by the Federal and applicable state tax authorities.
At June 30, 2010, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation) on
Tax Purposes Appreciation Depreciation Investments
-------------------------------------------------------------------
$16,884,484 $444,837 $(3,785,831) $(3,340,994)
18
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
As of December 31, 2009, 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.
As of December 31, 2009, the Fund has capital loss carryovers as follows:
Amount Expires
---------------------
$5,533,115 12/31/2017
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, 2009 as follows:
Capital Currency
-----------------
$400,202 $18,303
The tax composition of distributions paid during the years ended December 31,
2009 and December 31, 2008 were as follows:
Ordinary Long-Term
Income Capital Gains Total
------------------------------------------
2009 $ 294,001 $ -- $ 294,001
2008 1,428,534 15,855,213 17,283,747
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays any dividends from net
investment income annually. The Fund also declares and pays any 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.
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.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued FASB Accounting
Standards Codification (ASC) effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The ASC is an
aggregation of previously issued authoritative U.S. generally accepted
accounting principles (GAAP) in one comprehensive set of guidance organized by
subject area. In accordance with the ASC, references to previously issued
accounting standards have been replaced by ASC references. Subsequent revisions
to GAAP will be incorporated into the ASC through Accounting Standards Updates
(ASU).
The Fund adopted ASC 855, Subsequent Events effective October 2009. ASC 855
establishes principles and requirements for subsequent events, in particular
(a) the period after the balance sheet date during which management of a
reporting entity shall evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; (b) the
circumstances under which an entity shall recognize events or transactions
occurring after the balance sheet date in its financial statements; and (c) the
disclosures that an entity shall make about events or transactions that
occurred after the balance sheet date.
In January 2010, FASB issued ASU 2010-06, Improving Disclosures about Fair
Value Measurements. ASU 2010-06 requires reporting entities to make new
disclosures about the amounts and reasons for significant transfers in and out
of Level 1 and Level 2 fair value measurements and
19
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
inputs and valuation techniques used to measure fair value for both recurring
and nonrecurring fair value measurements that fall in either Level 2 or Level
3, and information on purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measures. The new disclosures are
effective for interim and annual reporting periods beginning after December 15,
2009, except for the disclosures about purchases, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measurements.
Those disclosures will be effective for fiscal years beginning after December
15, 2010, and for interim periods within those fiscal years. GEAM does not
believe the adoption of ASU 2010-06 will materially impact the financial
statement amounts.
3. FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, Fair Valuation Measurements and Disclosures effective
October 2008. This guidance establishes a new framework for measuring fair
value and expands related disclosures. Broadly, the 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. It also establishes a three-level valuation
hierarchy based upon observable and non-observable inputs.
The following tables present the Fund's investments measured at fair value on a
recurring basis at June 30, 2010:
Level 1 Level 2 Level 3 Total
- ----------------------------------------------------------------------------------------------
Investments in Securities
Common Stock $1,162,835 $12,035,166+ $-- $13,198,001
Preferred Stock -- 210,245+ -- 210,245
Rights -- 2,513+ -- 2,513
Other Investments -- 11,284 -- 11,284
Short-Term Investments 110,318 -- -- 110,318
- ----------------------------------------------------------------------------------------------
Total Investments in Securities $1,273,153 $12,259,208 $-- $13,532,361
- ----------------------------------------------------------------------------------------------
Other Financial Instruments
Futures Contracts -- Unrealized Appreciation $ 942 $ -- $-- $ 942
Futures Contracts -- Unrealized Depreciation (211) -- -- (211)
- ----------------------------------------------------------------------------------------------
Total Other Financial Instruments $ 731 $ -- $-- $ 731
- ----------------------------------------------------------------------------------------------
+At June 30, 2010, the foreign securities were valued with the assistance of an
independent fair value pricing service, causing securities to move from Level
1 to Level 2.
4. DERIVATIVES TRANSACTIONS
Shown below are the derivative contracts entered into by the Fund, summarized
by primary risk exposure.
Asset Derivatives June 30, 2010 Liability Derivatives June 30, 2010
-------------------------------------- -------------------------------------
Derivatives not Location in the Location in
accounted for as Statements the Statements
hedging instruments of Assets Fair of Assets Fair
under ASC 815 and Liabilities Value ($) and Liabilities Value ($)
- ------------------- ---------------------------- --------- --------------------------- ---------
Equity Contracts Receivables, Net Assets -- Liabilities, Net Assets --
Net unrealized Net unrealized
appreciation/(depreciation) appreciation/(depreciation)
on Futures 942* on Futures (211)*
- -------------------------------------------------------------------------------------------------
*Includes cumulative appreciation/depreciation of futures contracts as reported
in the Schedule of Investments and within the components of net assets section
of the Statements of Assets and Liabilities. Only the current day's variation
margin is reported within the receivables and/or payables of the Statements of
Assets and Liabilities.
Refer to the Schedule of Investments for ending notional value.
20
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Total Notional of
Derivatives not accounted Location in the Futures/Options Realized Gain or
for as hedging instruments Statements of Contracts (Loss) on Derivatives
under ASC 815 Operations Purchased/(Sold) ($) Recognized in Income ($)
- ------------------------------------------------------------------------------------------------------------
Equity Contracts Realized gain/(loss) on futures,
Increase/(decrease) in
unrealized appreciation/ 2,080,702/
(depreciation) on Futures (1,639,376) (30,642)
- ------------------------------------------------------------------------------------------------------------
Change in Unrealized
Derivatives not accounted Appreciation/(Depreciation)
for as hedging instruments on Derivatives
under ASC 815 Recognized in Income ($)
- -------------------------------------------------------
Equity Contracts
1,064
- -------------------------------------------------------
5. 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 ("State Street"). The revolving credit facility
requires the payment of a commitment fee equal to 0.15% 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. Generally, borrowings under the credit facilities would accrue interest
at the Federal Funds Rate plus 50 basis points (0.50%) 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 six-month period
ended June 30, 2010.
6. FEES AND COMPENSATION 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 Net Assets Advisory
of Fund and 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, 2011. 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.
GEAM waives a portion of the Fund's management fee in the amount equal to the
management fee earned by GEAM with respect to the Fund's Investment in the GE
Funds -- GE Money Market 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
21
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
for other funds advised by GEAM. Compensation paid to unaffiliated directors is
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.)
7. 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, 2010 were as follows:
Purchases Sales
---------------------
$3,962,859 $5,969,012
SECURITY LENDING For the six-month period ended June 30, 2010, the Fund did not
participate in securities lending.
8. SUBSEQUENT EVENTS
Subsequent events after the balance sheet date through the date that the
financial statements were issued, have been evaluated in the preparation of the
Financial Statements. There are no items to report.
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 61
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 -- 13 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; 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;
Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993 and GE Institutional Funds since 1997; 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 2003;
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 49
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 GEAM from
February 1997 to July 2007; Vice President and Associate General Counsel of
GEAM from October 1992 to February 1997; Secretary of GE Funds from 1997 to
July 2007 and Vice President from September 2003 to June 2007; Secretary of GE
Institutional Funds and the fund from 1997 to July 2007, and Vice President
from September 2003 to July 2007; Vice President of Elfun Funds and GE
Savings & Security Funds from October 2003 to July 2007; Assistant Secretary of
Elfun Funds and GE Savings & Security Funds from 1998 to July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds and General Electric Pension
Trust, since July 2007.
23
Additional Information (unaudited)
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 44
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 5 years (Vice President); 2 years (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Commercial Administrative Officer
of GEAM since April 2010; Senior Vice President and Deputy General Counsel at
GE Asset Management from October 2007 to April 2010; 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
Secretary of GE Funds and GE Institutional Funds since July 2007; Vice
President and Assistant Secretary of GE Institutional Funds and GE Investments
Funds, Inc. from September 2003 to 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
- --------------------------------------------------------------------------------
ROBERT HERLIHY
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Chief Compliance Officer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 4 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Chief Compliance Officer of GEAM,
GE Funds, GE Institutional Funds, Elfun Funds, and GE Savings and Security
Funds since July 2005; Manager of Fund Administration at GEAM from 2002-2005.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
- --------------------------------------------------------------------------------
EUNICE TSANG
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 50
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- less than one year
PRINCIPAL OCCUPATIONS(S) DURING PAST 5 YEARS Treasurer of GE Funds, GE
Institutional Funds, Elfun Funds and GE Savings and Security Funds since
January 2010; GEAM Operational Controllership and Technical Accounting Manager
since December 2007; Financial Planning & Analysis Manager -- Performance
Leader from June 2005 to December 2007; GEAM Quality Black Belt from 2001 to
June 2005; Financial Planning & Analysis Manager from 2000 to 2001; and Mutual
Fund Assistant Controller from October 1997 to 2000.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
24
Additional Information (unaudited)
- ---------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 64
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Vice President of Walden Capital Management
since 1996.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since 1997; Trustee of Fordham University from 1989 to 1995
and 2001 to 2007 and Trustee Emeritus since 2007; Trustee of Neuro Science
Research Institute since 1986; Trustee of Gregorian University Foundation from
1992 to 2007; Director of Artes medical from 2006 to 2008.
- --------------------------------------------------------------------------------
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 -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since July 2007 from
Fairfield University. From 1983 to July 2007, Vice President and Treasurer of
Fairfield University.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 74
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997. 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 1-800-493-3042.
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
Kimberley Costello
Michelle Matzelle
TREASURER
Eunice Tsang
ASSISTANT TREASURER
Leslie Spadone
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
Cheryl H.Beacock, Senior Vice President, Human Resources
Daniel O. Colao, Executive Vice President, Chief Financial Officer
Michael J. Cosgrove, President and Chief Executive Officer -- Mutual Funds &
Intermediary Business
Paul M. Colonna, President and Chief Investment Officer -- Fixed Income
Investments
Ralph R. Layman, President and Chief Investment Officer -- Public Equity
Investments
Maureen B. Mitchell, President -- Institutional Sales and Marketing
Matthew J. Simpson, Executive Vice President, General Counsel and Secretary
Judith A. Studer, Chief Market Strategist
Don W. Torey, President -- Alternative Investments
John J. Walker, Executive Vice President, Chief Operating Officer
David Wiederecht, President and Chief Investment Officer -- 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 1-800-493-3042; (ii) on the Fund's
website at http://www.geam.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.geam.com; and (ii) on the Commission's website at
http://www.sec.gov.
[LOGO] GE
GE Investments Funds, Inc.
Mid-Cap Equity Fund Letter from the Chairman
- ----------------------------------------------------------------------------
[PHOTO] 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, 2010.
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
The six-months ended June 30, 2010 presented investors with an extremely
challenging market environment after global equity markets tumbled in the
second half of the period due primarily to concerns about sovereign default
risk and slowing global growth. U.S. equities (S&P 500 Index) declined 6.7%
over the six-month period, while international stocks (MSCI EAFE Index) fell
13.2%.
At the start of 2010, equity markets experienced a selloff in January and early
February as investors reacted negatively to signs that there was a lower
probability of a V-shaped recovery. Concerns about new global financial
regulation, policy tightening in China, and high levels of U.S. and European
debt, especially Greek sovereign debt, further fueled the volatility. Stocks
reversed these losses in the second half of the first quarter, rising steadily
as optimism about corporate earnings changed the tone in the market. The S&P
500 Index advanced 5.4%, for the first quarter of 2010 and indexes tracking
smaller capitalization stocks enjoyed even greater advances. Gains were more
subdued in non-U.S. equity markets, with the MSCI EAFE Index advancing 0.9%
during the same quarter as fears of sovereign credit risk in Europe
overshadowed stronger earnings reports. Regionally, Japan took top honors in
the first quarter, rising 8.2% based on relatively attractive stock valuations.
Canada rose 6.0%, followed by the Pacific Rim (+3.1%), and Emerging Markets
(+2.4%). The U.K. fell 0.6% while Continental Europe dropped 2.4% as Greece's
budget deficit crisis raised concerns about other highly indebted Eurozone
countries, including Portugal, Italy, Ireland, Spain, and even the United
Kingdom. The U.S. bond market returned 1.8% (Barclays Capital U.S. Aggregate
Bond Index) in the first quarter helped by another solid performance by the
credit related sectors. Fixed income securities outside the U.S. performed
similarly, however the Barclays Global Aggregate Un-hedged Bond Index lost 0.3%
(in U.S. dollar terms) due primarily to the strengthening dollar versus other
major currencies.
Although the second quarter of 2010 started quietly, stocks plunged in May as
concerns about Europe's sovereign debt problems pressured equity markets and
many investors sought defensive investments such as gold and treasury bonds.
Adding to Greece's sovereign debt woes, anxieties around contagion grew as
Spain stepped further into the European debt crisis amid credit downgrades
driven by its deteriorating economy and public finances. In June, the 2010 G20
Toronto Summit confirmed that the industrialized world leaders were committed
to reducing budget deficits through austerity measures. Some investors,
however, worried that these measures could reduce global growth and slow the
economic recovery. Several other concerns fuelled greater risk aversion during
the second quarter including increased evidence of slower growth in China, a
new resource tax in Australia, an alarming May 6th "flash crash" which sent
U.S. stocks plummeting within minutes, impending U.S. financial reform
legislation, and the spreading impact of BP's massive oil spill in the Gulf of
Mexico. At quarter end, the S&P 500 Index and the MSCI EAFE Index had tumbled
11.4% and 14.0%, respectively, in the three months ended June 30. Regionally,
Emerging Markets fared best during the second quarter, down 8.4%, followed by
Japan (-10.1%), Canada (-10.5%) and the U.K. (-13.9%). The worst performing
regions were Europe (-15.8%) and the Pacific Rim (-14.3%). In this environment,
U.S. Treasuries were the "safe" investment of choice for many investors seeking
to avoid riskier asset classes. The "flight to quality" pulled treasury yields
down across all maturity periods. The Barclays Capital U.S.
[LOGO] GE
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Mid-Cap Equity Fund
- ----------------------------------------------------
Aggregate Bond Index returned 3.49% in the second quarter, while the Barclays
Capital Global Aggregate Un-hedged Bond Index lost 0.04% over the same
three-month period owing mainly to widening spreads in European peripheral
countries and the declining euro.
Against a backdrop of weakening investor sentiment, financial markets posted
disparate results for the six- and twelve-month periods ended June 30, 2010.
TOTAL RETURNS AS OF JUNE 30, 2010 6-MONTH 12-MONTH
- -----------------------------------------------------------------------------
U.S. equities (S&P 500 Index) -6.7 14.4
Global equities (MSCI World Index) -9.8 10.2
International equities (MSCI EAFE Index) -13.2 5.9
Emerging Markets equities (MSCI EM Index) -6.2 23.2
Small-cap U.S. equities (Russell 2000 Index) -2.0 21.5
Mid-cap U.S. equities (Russell Mid Cap Index) -2.1 25.1
U.S. fixed income (Barclays Capital U.S. Aggregate Bond
Index) 5.3 9.5
U.S. short-term government fixed income (Barclays Capital
1-3 Year U.S. Government Bond Index) 1.9 2.9
U.S. tax-exempt income (Barclays Capital 10-Year U.S.
Municipal Bond Index) 4.1 9.6
- -----------------------------------------------------------------------------
OUTLOOK
In the face of the fiscal concerns throughout much of Europe and signs of
slowing economic activity around the globe, the wall of worry has become
exceedingly high for investors who want to see credible government budgets that
balance fiscal austerity and economic growth. At the core of the uncertainty,
in our view, is the issue of excessive borrowing, now afflicting sovereign
markets and reminding us that the financial crisis is not yet over. Our
economic view for the second half of 2010 still favors positive, albeit slow
growth which we believe should keep interest rates at record lows for months to
come. We also believe that the policy measures implemented in Europe will
improve sentiment towards sovereign and bank debt over the balance of the year.
But many challenges remain on the horizon, including the risk of fiscal policy,
taxation and regulation missteps that could hamper the recovery. As a result,
continued market volatility appears to be the one sure thing we can predict
with certainty.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. Today's
uncertain environment is why we believe it is important for long-term investors
to maintain a disciplined, diversified investment strategy consistent with
their goals, time horizon and risk tolerance. While diversified portfolios are
not immune to market downturns, history suggests they can put investors in a
position to benefit from a 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.
AUGUST 2010
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
GE Investments Funds, Inc.
Mid-Cap Equity Fund
Semi-Annual Report
JUNE 30, 2010
[LOGO] GE
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...................................... 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, 2010 (unaudited)
- -----------------------------------------------------------------------------
Information on the following performance pages relating to the GE Investments
Mid-Cap Equity Fund (the "Fund") total returns and Schedule of Investments is
unaudited. All other information, including the portfolio manager Q&A pages, is
also 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 fees and 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
800-493-3042 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in the 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 the Fund is subject to risk, including
possible loss of principal invested.
The Russell Mid-Cap Index is an unmanaged market capitalization-weighted index
of the smallest 800 companies included in 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. They do not reflect the actual cost of investing in the instruments
that comprise the index.
The peer universe of the underlying annuity funds used for the peer group
average annual total return calculation is based on a blend of Morningstar peer
categories, as shown. Morningstar is an independent mutual fund rating service.
The 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 that of the Fund.
(C)2010 Morningstar, Inc. All Rights Reserved. The Morningstar information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not 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 of 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
Mid-Cap Equity Fund
- --------------------------------------------------------------------------------
[PHOTO] 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 HAS MANAGED THE FUND 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, 2010?
A. For the six-month period ended June 30, 2010, the Mid-Cap Equity Fund
returned -3.85% for the Class 1 shares and -4.05% for the Class 4 shares.
The Russell Mid-Cap Index, the Fund's benchmark, returned -2.07% and the
Fund's Morningstar peer group of 188 US Insurance Mid-Cap Growth funds
returned an average of -2.66% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. Much like the first half of 2009, the equity markets so far this year have
been extremely volatile. However, the investor sentiment influencing this
volatility is the mirror image of 2009. Unlike 2009 when fears of a deep
recession sent stocks into a tailspin, 2010 began with a sense of optimism
that the economy was continuing a recovery which began in the middle of last
year and resulted in a rally in midcap stocks from trough to peak (mid-April
2010) of 110%.
The stock market advance quickly reversed, when investor sentiment turned
decidedly negative over concerns about the sovereign debt crisis in Europe,
some signs of a global economic slowdown and fears of a double dip recession
in the U.S. While several macroeconomic statistics point to a slow recovery
in the U.S. economy, unemployment remains stubbornly high, the housing
market is still fragile and consumer confidence has deteriorated. The sudden
change in sentiment curtailed the rally in stocks and resulted in a decline
since mid-April of 15.7% for midcap stocks as measured by the Russell
Mid-Cap Index.
While lower quality stocks won the day early in the year, many of these
stocks were abandoned in favor of higher quality, more defensive stocks
during the second quarter. However, year-to-date, stocks of lower quality
companies have outperformed those with higher returns-on-equity and stronger
balance sheets. And while quality growth companies fared better in the
second quarter, more cyclical value stocks performed the best so far this
year. As a result, the Fund which focuses on higher quality growth companies
underperformed the Russell Midcap Index on a year-to-date basis.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund underperformed its benchmark during the six-month period, primarily
within the financials, materials, industrials, and energy sectors. Within
financials, investment management companies Invesco (-27%) and Affiliated
Managers Group (-10%) declined due to concerns about the performance of
capital markets and fund flows. Meanwhile, basic materials company Monsanto
(-43%) corrected as the company continued to see deterioration in market
pricing for its branded herbicide, Roundup due to excess generic capacity.
Within the industrial sector, Alliant Techsystems (-30%) was negatively
impacted by the ongoing concerns about its NASA contract and its exposure to
defense budgets. Also, within the industrials, the Fund was negatively
impacted by Corrections Corp. (-22%), a private prison operator that has
exposure to various states with budget deficits. Energy exploration
2
- --------------------------------------------------------------------------------
[GRAPHIC]
company Southwestern Energy (-18%) corrected due to the 17% decline in
natural gas prices and the company's reduced natural gas production guidance
for the year.
On the positive side, the Fund's performance was enhanced by solid stock
selection within information technology, consumer discretionary and
utilities. Specifically, software company Rovi (+19%) benefited as investors
continued to recognize its strong technology position. In addition, the
company signed a licensing agreement with Google. Also, within information
technology, Bidu (+65%) rose as it benefited from Google's market share loss
in the Chinese search market and with that increases in analysts' earnings
estimates for the company. Within the consumer discretionary sector,
O'Reilly Automotive (+25%) outperformed as the company continued to benefit
from the successful integration of its CSK acquisition and strong sales
across the industry. In addition, Dollar General (+23%) rose as investors
continued to appreciate its non-discretionary consumables growth and
increased earnings guidance from the company. ITC Holdings (+3%), a utility
transmissions company rose due to its relatively defensive growth
characteristics and investor interest in its developing projects in the
renewable energy space.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. During the period we increased the Fund's weighting in the financials,
healthcare and industrials sectors, and we reduced our exposure to the
information technology, consumer discretionary and utilities sectors. 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 we
believe provide prospects for above-average earnings growth. Therefore, at
the end of the first half of 2010, healthcare and information technology
companies represented 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 fees and expenses, which
include portfolio management fees, professional fees, distribution and service
fees (for shareholders of Class 4), 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,
2010.
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 $1,000 = 8.6), then multiply the result by the
number given for your class under the heading "Expenses paid during period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholders reports of other funds.
Please note that the expenses shown in the table for both "Actual" and
"Hypothetical", do not reflect any transaction costs, such as sales charges or
redemption fees. Additionally, the expenses shown do not reflect the fees or
charges associated with variable contracts through which shares of the Fund are
offered.
JANUARY 1, 2010 - JUNE 30, 2010
- --------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- --------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- --------------------------------------------------------------------------------------------
Class 1 1,000.00 961.54 3.74
Class 4 1,000.00 959.49 5.78
- --------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- --------------------------------------------------------------------------------------------
Class 1 1,000.00 1,020.76 3.86
Class 4 1,000.00 1,018.72 5.96
- --------------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.77% FOR CLASS
1 SHARES AND 1.19% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1, 2010 - JUNE
30, 2010), 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, 2010 WERE AS
FOLLOWS: -3.85% FOR CLASS 1 SHARES, AND -4.05% FOR CLASS 4 SHARES. PAST
PERFORMANCE DOES NOT REFLECT FUTURE RESULTS.
4
Mid-Cap Equity Fund (unaudited)
- ---------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[CHART]
Mid-Cap Equity Fund Russell Midcap Index
------------------- --------------------
06/00 10,000.00 10,000.00
12/00 11,316.16 10,304.50
12/01 11,353.04 9,722.98
12/02 9,790.34 8,150.29
12/03 13,015.12 11,418.18
12/04 15,100.51 13,721.18
12/05 16,873.25 15,457.03
12/06 18,290.36 17,820.36
12/07 20,595.85 18,820.91
12/08 12,807.02 11,017.29
12/09 18,115.13 15,477.54
12/10 17,418.39 15,157.68
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 5/1/97)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS+ YEAR YEAR YEAR $10,000 INVESTMENT/(A)/
---------------------------------------------------------------------------
Mid-Cap Equity Fund -3.85% 18.22% 2.26% 5.71% $17,418
---------------------------------------------------------------------------
Russell Midcap Index -2.07% 25.12% 1.23% 4.25% $15,158
---------------------------------------------------------------------------
Morningstar peer group
average* -2.66% 21.15% 1.07% -2.11%
---------------------------------------------------------------------------
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[CHART]
Mid-Cap Equity Fund Russell Midcap Index
------------------- --------------------
05/01/08 10,000.00 10,000.00
06/08 9,596.44 9,617.28
09/08 8,528.19 8,375.36
12/08 6,364.12 6,091.02
03/09 6,224.85 5,544.38
06/09 7,314.80 6,697.43
09/09 8,416.86 8,078.46
12/09 8,967.90 8,556.91
03/10 9,452.32 9,298.58
06/10 8,604.58 8,380.07
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
SIX ONE SINCE ENDING VALUE OF A
MONTHS+ YEAR INCEPTION $10,000 INVESTMENT/(A)/
-------------------------------------------------------------------------
Mid-Cap Equity Fund -4.05% 17.63% -6.70% $8,605
-------------------------------------------------------------------------
Russell Midcap Index -2.07% 25.12% -7.84% $8,380
-------------------------------------------------------------------------
Morningstar peer group*
average -2.66% 21.15%
-------------------------------------------------------------------------
INVESTMENT PROFILE [GRAPHIC]
A mutual fund designed for investors
who seek long-term growth of capital
and future income by investing at
least 80% of its net assets under
normal circumstances in common and
preferred stocks and other types of
equity securities of mid-cap
companies. 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, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $82,411 (in thousands)
[CHART]
Information Technology 19.6%
Financials 15.0%
Healthcare 14.3%
Consumer Discretionary 13.6%
Industrials 10.4%
Energy 6.3%
Utilities 5.6%
Consumer Staples 4.7%
Materials 4.2%
Telecommunication Services 3.6%
Short-Term Investments 2.7%
Other Investments 0.0%**
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Rovi Corp. 3.93%
-----------------------------------------
HCC Insurance Holdings Inc. 2.48%
-----------------------------------------
ITC Holdings Corp. 2.32%
-----------------------------------------
Thermo Fisher Scientific Inc. 1.88%
-----------------------------------------
ACE Ltd. 1.83%
-----------------------------------------
American Tower Corp. 1.83%
-----------------------------------------
O'Reilly Automotive Inc. 1.82%
-----------------------------------------
CB Richard Ellis Group Inc. 1.77%
-----------------------------------------
Corrections Corporation of America 1.75%
-----------------------------------------
Synaptics Inc. 1.68%
-----------------------------------------
(A)ENDING VALUE OF A $10,000 INVESTMENT FOR THE TEN-YEAR PERIOD OR SINCE
INCEPTION, WHICHEVER IS LESS.
* 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
U.S. INSURANCE MID-CAP GROWTH PEER GROUP CONSISTING OF 188, 188, 169 AND 110
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
**LESS THAN 0.05%.
+ TOTAL RETURNS FOR THE PERIOD ENDED JUNE 30, 2010 ARE NOT ANNUALIZED.
++THE SECURITIES INFORMATION REGARDING HOLDINGS, ALLOCATIONS AND OTHER
CHARACTERISTICS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF SECURITIES THAT THE
FUND HAS BOUGHT AND THE DIVERSITY OF AREAS IN WHICH THE FUND MAY INVEST AS OF
A PARTICULAR DATE. IT MAY NOT BE REPRESENTATIVE OF THE FUND'S CURRENT OR
FUTURE INVESTMENTS AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL A PARTICULAR SECURITY.
SEENOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE. THE PERFORMANCE SHOWN IN
THE GRAPHS AND TABLES DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES AND DO NOT
REFLECT THE FEES OR CHARGES THAT WOULD BE ASSOCIATED WITH VARIABLE CONTRACTS
THROUGH WHICH SHARES OF THE FUND ARE OFFERED.
5
MID-CAP EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
MID-CAP EQUITY FUND
NUMBER
OF SHARES VALUE
COMMON STOCK -- 97.5% +
----------------------------------------------------------------
AEROSPACE & DEFENSE -- 2.3%
Alliant Techsystems Inc............ 17,869 $ 1,108,950 (a,c)
Hexcel Corp........................ 51,476 798,393 (a)
1,907,343
AIR FREIGHT & LOGISTICS -- 0.4%
UTi Worldwide Inc.................. 25,104 310,788
BEVERAGES -- 1.3%
Coca-Cola Enterprises Inc.......... 41,822 1,081,517
BIOTECHNOLOGY -- 3.2%
Alexion Pharmaceuticals Inc........ 13,777 705,245 (a)
Human Genome Sciences Inc.......... 26,569 602,054 (a)
Incyte Corp Ltd.................... 34,442 381,273 (a)
Vertex Pharmaceuticals Inc......... 27,778 913,896 (a)
2,602,468
CAPITAL MARKETS -- 2.7%
Affiliated Managers Group Inc...... 20,804 1,264,259 (a)
Invesco Ltd........................ 55,822 939,484
2,203,743
CHEMICALS -- 2.8%
Intrepid Potash Inc................ 31,280 612,150 (a)
Monsanto Co........................ 11,157 515,677 (c)
Praxair Inc........................ 15,817 1,201,934 (c)
2,329,761
COMMERCIAL BANKS -- 1.7%
Regions Financial Corp............. 87,580 576,276
SunTrust Banks Inc................. 21,404 498,713
Zions Bancorporation............... 14,695 316,971
1,391,960
COMMERCIAL SERVICES & SUPPLIES -- 2.4%
Corrections Corporation of America. 75,503 1,440,597 (a)
Stericycle Inc..................... 8,364 548,511 (a)
1,989,108
COMMUNICATIONS EQUIPMENT -- 1.4%
Juniper Networks Inc............... 48,418 1,104,899 (a)
COMPUTERS & PERIPHERALS -- 1.7%
Synaptics Inc...................... 50,437 1,387,018 (a)
NUMBER
OF SHARES VALUE
DIVERSIFIED FINANCIAL SERVICES -- 1.7%
CBOE Holdings Inc................ 25,403 $ 826,868 (a)
MSCI Inc......................... 21,428 587,127 (a)
1,413,995
ELECTRIC UTILITIES -- 3.8%
ITC Holdings Corp................ 36,113 1,910,739 (c)
Northeast Utilities.............. 46,173 1,176,488
3,087,227
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.7%
Cogent Inc....................... 64,925 584,974 (a)
ENERGY EQUIPMENT & SERVICES -- 3.7%
Dresser-Rand Group Inc........... 32,166 1,014,837 (a)
Nabors Industries Ltd............ 29,521 520,160 (a)
Noble Corp....................... 25,093 775,625
Weatherford International Ltd.... 57,075 749,965 (a)
3,060,587
FOOD PRODUCTS -- 2.1%
McCormick & Company Inc.......... 22,483 853,455 (c)
Mead Johnson Nutrition Co........ 17,385 871,336
1,724,791
GAS UTILITIES -- 0.6%
EQT Corp......................... 14,269 515,682
HEALTHCARE EQUIPMENT & SUPPLIES -- 2.6%
Gen-Probe Inc.................... 17,191 780,815 (a)
Masimo Corp...................... 55,813 1,328,908 (c)
2,109,723
HEALTHCARE PROVIDERS & SERVICES -- 1.4%
Catalyst Health Solutions Inc.... 32,836 1,132,842 (a)
HEALTHCARE TECHNOLOGY -- 0.6%
MedAssets Inc.................... 22,633 522,370 (a)
HOTELS, RESTAURANTS & LEISURE -- 1.5%
Marriott International Inc....... 9,911 296,735
Penn National Gaming Inc......... 39,996 923,908 (a)
1,220,643
HOUSEHOLD DURABLES -- 0.5%
MDC Holdings Inc................. 15,745 424,328
INDUSTRIAL CONGLOMERATES -- 0.9%
McDermott International Inc...... 35,233 763,147 (a)
INSURANCE -- 4.3%
ACE Ltd.......................... 29,365 1,511,710
HCC Insurance Holdings Inc....... 82,554 2,044,037 (c)
3,555,747
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements on page 14.
6
MID-CAP EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
INTERNET SOFTWARE & SERVICES -- 3.6%
Baidu Inc. ADR....................... 17,860 $ 1,215,909 (a)
Equinix Inc.......................... 8,810 715,548 (a)
MercadoLibre Inc..................... 19,408 1,019,890 (a)
2,951,347
IT SERVICES -- 0.4%
Telvent GIT S.A...................... 21,104 352,437
LIFE SCIENCES TOOLS & SERVICES -- 6.6%
Covance Inc.......................... 25,580 1,312,766 (a)
Illumina Inc......................... 30,376 1,322,267 (a)
Mettler-Toledo International Inc..... 10,917 1,218,665 (a,c)
Thermo Fisher Scientific Inc......... 31,581 1,549,048 (a,c)
5,402,746
MACHINERY -- 2.2%
Cummins Inc.......................... 11,317 737,076
Harsco Corp.......................... 46,095 1,083,232
1,820,308
MEDIA -- 5.1%
DIRECTV.............................. 22,283 755,839 (a)
Discovery Communications Inc......... 1,727 61,671 (a)
Discovery Communications Inc......... 17,024 526,552 (a)
Liberty Global Inc................... 28,958 752,618 (a)
Omnicom Group Inc.................... 31,194 1,069,954
Regal Entertainment Group............ 76,500 997,560 (c)
4,164,194
METALS & MINING -- 1.3%
Allegheny Technologies Inc........... 9,840 434,830
Steel Dynamics Inc................... 50,187 661,967
1,096,797
MULTILINE RETAIL -- 1.2%
Dollar General Corp.................. 34,430 948,546 (a)
OIL, GAS & CONSUMABLE FUELS -- 2.6%
Peabody Energy Corp.................. 16,703 653,588
Petrohawk Energy Corp................ 37,401 634,695 (a)
Pioneer Natural Resources Co......... 14,761 877,541
2,165,824
PERSONAL PRODUCTS -- 1.3%
Alberto-Culver Co.................... 22,742 616,081
Avon Products Inc.................... 17,221 456,356
1,072,437
PROFESSIONAL SERVICES -- 1.5%
IHS Inc.............................. 20,457 1,195,098 (a)
NUMBER
OF SHARES VALUE
REAL ESTATE INVESTMENT TRUSTS -- 1.6%
Douglas Emmett Inc................. 49,476 $ 703,549
SL Green Realty Corp............... 10,333 568,728
1,272,277
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 1.8%
CB Richard Ellis Group Inc......... 107,026 1,456,624 (a,c)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.2%
Hittite Microwave Corp............. 28,413 1,271,198 (a)
Marvell Technology Group Ltd....... 87,680 1,381,837 (a)
2,653,035
SOFTWARE -- 8.6%
Activision Blizzard Inc............ 119,427 1,252,789
ArcSight Inc....................... 30,463 682,067 (a)
Blackboard Inc..................... 22,387 835,707 (a)
Citrix Systems Inc................. 25,701 1,085,353 (a)
Rovi Corp.......................... 85,517 3,241,949 (a,c)
7,097,865
SPECIALTY RETAIL -- 3.8%
Bed Bath & Beyond Inc.............. 28,082 1,041,281 (a)
O'Reilly Automotive Inc............ 31,494 1,497,855 (a,c)
Urban Outfitters Inc............... 17,375 597,526 (a)
3,136,662
TEXTILES, APPAREL & LUXURY GOODS -- 1.6%
Coach Inc.......................... 36,205 1,323,293
THRIFTS & MORTGAGE FINANCE -- 1.3%
People's United Financial Inc...... 81,283 1,097,320
TRADING COMPANIES & DISTRIBUTORS -- 0.7%
MSC Industrial Direct Co........... 11,317 573,319
WATER UTILITIES -- 1.2%
American Water Works Company
Inc............................... 47,605 980,663
WIRELESS TELECOMMUNICATION SERVICES -- 3.6%
American Tower Corp................ 33,933 1,510,018 (a)
NII Holdings Inc................... 17,688 575,214 (a)
Syniverse Holdings Inc............. 43,934 898,450 (a)
2,983,682
TOTAL COMMON STOCK
(COST $75,245,120)................ 80,169,135
----------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
----------------------------------------------------------------
GEI Investment Fund
(COST $26,002).................... 22,622 (d)
TOTAL INVESTMENTS IN SECURITIES
(COST $75,271,122)................ 80,191,757
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements on page 14.
7
MID-CAP EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
---------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.7%
---------------------------------------------------------------------
GE Money Market Fund Institutional
Class 0.05%
(COST $2,219,472)..................... $ 2,219,472 (b,d)
TOTAL INVESTMENTS
(COST $77,490,594).................... 82,411,229
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (0.2)%......................... (173,643)
-----------
NET ASSETS -- 100.0%................... $82,237,586
===========
---------------------------------------------------------------------
OTHER INFORMATION
---------------------------------------------------------------------
The Fund had the following long futures contracts open at June 30, 2010
(unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
-------------------------------------------------------------------
S&P Midcap 400
Emini Index
Futures September 2010 23 $1,633,000 $(151,633)
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements on page 14.
8
Notes to Schedule of Investments June 30, 2010 (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
information regarding holdings, allocations and other characteristics are
presented to illustrate examples of securities that the Fund has bought and the
diversity of areas in which the Fund may invest as of a particular date. It may
not be representative of the Fund's current or future investments and should
not be construed as a recommendation to purchase or sell a particular security.
Please see the Fund's prospectus for complete descriptions of investment
objective, policies, risks and permissible investments.
(a)Non-income producing security.
(b)Coupon amount represents effective yield.
(c)At June 30, 2010, 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)GE Asset Management, the investment adviser of the Fund, also serves as
investment adviser of the GEI Investment Fund and the GE Funds-GE Money
Market Fund
* Less than 0.05%.
+ Percentages are based on net assets as of June 30, 2010.
Abbreviations:
ADR American Depository Receipt
9
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
MID-CAP EQUITY FUND
--------------------------------------------------------------------------------- -------------
CLASS 1
--------------------------------------------------------------------------------- -------------
6/30/10+ 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05 6/30/10+
--------------------------------------------------------------------------------- --------------
INCEPTION DATE 5/1/97
Net asset value,
beginning of period...... $14.82 $10.50 $17.30 $18.19 $19.22 $18.33 $14.81
INCOME/(LOSS) FROM
INVESTMENT
OPERATIONS:
Net investment
income................. 0.10 0.09 0.10 0.08 0.23 0.05 (0.05)
Net realized and
unrealized
gains/(losses) on
investments............ (0.67) 4.26 (6.65) 2.23 1.40 2.11 (0.55)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT
OPERATIONS............... (0.57) 4.35 (6.55) 2.31 1.63 2.16 (0.60)
- ----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment
income................. -- 0.03 0.05 0.07 0.22 0.06 --
Net realized gains...... -- -- 0.20 3.13 2.44 1.21 --
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS....... -- 0.03 0.25 3.20 2.66 1.27 --
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period................... $14.25 $14.82 $10.50 $17.30 $18.19 $19.22 $14.21
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/(A)/......... (3.85)% 41.45% (37.82)% 12.60% 8.40% 11.74% (4.05)%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in
thousands)............. $82,229 $92,374 $81,791 $191,339 $199,311 $229,097 $9
Ratios to average net
assets:
Net investment
income*.............. 0.30% 0.19% 0.29% 0.35% 1.01% 0.24% (0.11)%
Net expenses*......... 0.77%/(b)/ 0.80%/(b)/ 0.73%/(b)/ 0.70%/(b)/ 0.69%/(b)/ 0.70% 1.19%/(b)/
Gross expenses*....... 0.78% 0.80%// 0.73%// 0.70%// 0.69%// 0.70% 1.19%//
Portfolio turnover
rate................. 19% 24% 49% 65% 29% 27% 19%
-----------------------------
CLASS 4
-----------------------------
12/31/09 12/31/08
----------------------------
INCEPTION DATE 5/1/08
Net asset value,
beginning of period...... $10.51 $16.85
INCOME/(LOSS) FROM
INVESTMENT
OPERATIONS:
Net investment
income................. (0.05) (0.01)**
Net realized and
unrealized
gains/(losses) on
investments............ 4.35 (6.12)
- -------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT
OPERATIONS............... 4.30 (6.13)
- -------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment
income................. -- 0.01
Net realized gains...... -- 0.20
- -------------------------------------------------------
TOTAL DISTRIBUTIONS....... -- 0.21
- -------------------------------------------------------
Net asset value, end of
period................... $14.81 $10.51
- -------------------------------------------------------
TOTAL RETURN/(A)/......... 40.91% (36.36)%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in
thousands)............. $9 $6
Ratios to average net
assets:
Net investment
income*.............. (0.22)% (0.05)%
Net expenses*......... 1.25%/(b)/ 1.18%/(b)/
Gross expenses*....... 1.25%// 1.18%//
Portfolio turnover
rate................. 24% 49%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a)Total returns are historical and assume changes in share price, reinvestment
of dividends and capital gains distributions, and do not include the effect
of insurance contract charges. Past performance does not guarantee future
results.
(b)Reflects GE Asset Management's waiver of a portion of the Fund's management
fee in an amount equal to the management fee earned by GE Asset Management
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
Statement of Assets MID-CAP
and Liabilities JUNE 30, 2010 (UNAUDITED) EQUITY
FUND
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $75,245,120)......... $ 80,169,135
Investments in affiliated securities, at market (cost $26,002).. 22,622
Short-term affiliated investments (at amortized cost)........... 2,219,472
Income receivables.............................................. 49,303
Receivable for fund shares sold................................. 123
- --------------------------------------------------------------------------------
TOTAL ASSETS.................................................. 82,460,655
- --------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed................................ 23,697
Payable to GEAM................................................. 81,453
Accrued other expenses.......................................... 110,326
Variation margin payable........................................ 7,593
- --------------------------------------------------------------------------------
TOTAL LIABILITIES............................................. 223,069
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $ 82,237,586
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in................................................. 88,941,621
Undistributed (distribution in excess of) net investment income. 141,653
Accumulated net realized gain (loss)............................ (11,614,690)
Net unrealized appreciation/ (depreciation) on:
Investments................................................... 4,920,635
Futures....................................................... (151,633)
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $ 82,237,586
- --------------------------------------------------------------------------------
CLASS 1:
NET ASSETS........................................................ $ 82,228,980
Shares outstanding ($0.01 par value; unlimited shares authorized). 5,771,212
Net asset value per share......................................... $14.25
CLASS 4:
NET ASSETS........................................................ $ 8,606
Shares outstanding ($0.01 par value; unlimited shares authorized). 606
Net asset value per share......................................... $14.21
See Notes to Financial Statements.
11
Statement of Operations MID-CAP
FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED) EQUITY
FUND
- -------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend............................................................ $ 485,732
Interest............................................................ 344
Interest from affliated investments................................. 51
- -------------------------------------------------------------------------------------
TOTAL INCOME.......................................................... 486,127
- -------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees.................................... 294,819
Distributors Fees (Note 6)
Class 4........................................................... 20
Transfer agent...................................................... 8,949
Directors's fees.................................................... 1,514
Custody and accounting expenses..................................... 20,443
Professional fees................................................... 11,968
Registration expenses............................................... 2,131
Other expenses...................................................... 11,555
- -------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT........................ 351,399
- -------------------------------------------------------------------------------------
Add: Expenses reimbursed by the adviser............................. (1,896)
- -------------------------------------------------------------------------------------
Net expenses........................................................ 349,503
- -------------------------------------------------------------------------------------
NET INVESTMENT INCOME................................................. 136,624
- -------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments....................................................... 2,796,587
Futures........................................................... 103,503
Foreign currency transactions..................................... 4
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON:
Investments....................................................... (6,048,330)
Futures........................................................... (161,740)
- -------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments.............. (3,309,976)
- -------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... $(3,173,352)
- -------------------------------------------------------------------------------------
See Notes to Financial Statements.
12
Statements of MID-CAP
Changes in Net Assets EQUITY
FUND
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2010 DECEMBER 31,
(UNAUDITED) 2009
- --------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss)......................................................... $ 136,624 $ 139,604
Net realized gain (loss) on investments, futures and foreign currency transactions.... 2,900,094 (7,860,484)
Net increase (decrease) in unrealized appreciation / (depreciation) on investments,
futures and foreign currency translation............................................ (6,210,070) 36,731,845
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations............................................... (3,173,352) 29,010,965
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1............................................................................. -- (200,960)
Class 4............................................................................. -- --
- --------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS..................................................................... -- (200,960)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions..................... (3,173,352) 28,810,005
- --------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1............................................................................. 3,359,611 1,178,747
Class 4............................................................................. -- --
Value of distributions reinvested
Class 1............................................................................. -- 200,960
Class 4............................................................................. -- --
Cost of shares redeemed
Class 1............................................................................. (10,331,391) (19,604,175)
Class 4............................................................................. -- --
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions....................................... (6,971,780) (18,224,468)
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................................................. (10,145,132) 10,585,537
NET ASSETS
Beginning of period..................................................................... 92,382,718 81,797,181
- --------------------------------------------------------------------------------------------------------------------------
End of period........................................................................... $ 82,237,586 $ 92,382,718
- --------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD............ $ 141,653 $ 5,029
- --------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold............................................................................... 219,276 100,537
Issued for distributions reinvested....................................................... -- 13,432
Shares redeemed........................................................................... (682,197) (1,671,328)
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares.................................................... (462,921) (1,557,359)
- --------------------------------------------------------------------------------------------------------------------------
CLASS 4
Shares sold............................................................................... -- --
Issued for distributions reinvested....................................................... -- --
Shares redeemed........................................................................... -- --
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares.................................................... -- --
- --------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
13
Notes to Financial Statements June 30, 2010 (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 Fund 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 the Fund.
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
References to Level 1, Level 2 and Level 3 below are the level classifications
in the fair value hierarchy and are described in the Fair Value Measurements
section.
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. Level 1 securities primarily
include publicly-traded equity securities. If no sales occurred on the exchange
or NASDAQ that day, the portfolio security generally is valued using the last
reported bid price. In those circumstances the Fund classifies the investment
securities in Level 2.
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. These securities are included in Level 2. In the absence of
a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations and would be classified in
Level 3.
Short-term investments of sufficient credit quality 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 and these are included in Level
2. 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 and these are
also included in Level 2.
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. These securities
would be classified in Level 3. 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 of
the Fund in the appropriate circumstances.
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. In those circumstances the Fund classifies the investment securities
in Level 2. 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, 2010 (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. In those circumstances the Fund
classifies the investment securities in Level 3. 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.
Portfolio securities may be valued using techniques other than market
quotations, under the circumstances described under above. The value
established for a portfolio security may be different than what would be
produced through the use of another methodology or if it had been priced using
market quotations. Portfolio securities that are valued using techniques other
than market quotations, including "fair valued" securities, may be subject to
greater fluctuation in their value from one day to the next than would be the
case if market quotations were used. In addition, there is no assurance that
the Fund could sell a portfolio security for the value established for it at
any time and it is possible that the Fund would incur a loss because a
portfolio security is sold at a discount to its established 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. 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. The Fund's income, expenses (other than distribution
fees) and realized and unrealized gains and losses are allocated proportionally
each day among each the Fund's respective share classes based upon the relative
net assets of each share class.
FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 1, 2008 for all financial instruments accounted for at fair value.
For financial assets and liabilities, fair value is the price the Fund would
receive 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 or 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 inputs are observable or whose
significant value drivers are observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
Policies and procedures are maintained to value investments using the best and
most relevant data available. In addition, GEAM performs periodic reviews of
the methodologies used by independent pricing services including price
validation of individual securities.
The following section describes the valuation methodologies the Fund uses to
measure different financial investments at fair value.
When available, the Fund uses quoted market prices to determine the 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, pricing information is obtained
from an independent pricing vendor. The pricing vendor uses various pricing
models for each asset class that are consistent with what other market
participants would use. The inputs and assumptions to the model of the pricing
vendor are derived from market observable sources including: benchmark yields,
reported trades, broker/dealer quotes, issuer spreads, benchmark securities,
bids, offers, and other market-related data. Since many fixed income securities
do not trade on a daily basis, the methodology of the pricing vendor uses
available information as applicable such as benchmark curves, benchmarking of
like securities, sector groupings, and matrix pricing. The pricing vendor
considers all available market observable inputs in determining the evaluation
for a security. Thus, certain securities may not be priced using
15
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
quoted prices, but rather determined from market observable information. These
investments are included in Level 2 and primarily comprise our portfolio of
corporate fixed income, government, mortgage and asset-backed securities. In
infrequent circumstances, pricing vendors may provide the Fund with valuations
that are based on significant unobservable inputs, and in those circumstances
the investment securities are included in Level 3.
The Fund uses non-binding broker quotes as the primary basis for valuation when
there is limited, or no, relevant market activity for a specific investment or
for other investments that share similar characteristics. The Fund has not
adjusted the prices obtained. Investment securities priced using non-binding
broker quotes are included in Level 3. As is the case with the primary pricing
vendor, third-party brokers do not provide access to their proprietary
valuation models, inputs and assumptions. Accordingly, GEAM conducts internal
reviews of pricing for all such investment securities periodically to ensure
reasonableness of valuations used in our financial statements. These reviews
are designed to identify prices that appear stale, those that have changed
significantly from prior valuations, and other anomalies that may indicate that
a price may not be accurate. Based on the information available, GEAM believes
that the fair values provided by the brokers are representative of prices that
would be received to sell the assets at the measurement date (exit prices).
Other financial investments are derivative investments 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.
The Fund uses closing prices for derivatives included in Level 1, which are
traded either on exchanges or liquid over-the counter markets. Derivative
assets and liabilities included in Level 2 primarily represent interest rate
swaps, cross-currency swaps and foreign currency and commodity forward and
option contracts. Derivative assets and liabilities included in Level 3
primarily represent interest rate products that contain embedded optionality or
prepayment features.
Transfers in and out of Level 3 are considered to occur at the beginning of the
period.
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. For example, money
market securities are valued using amortized cost, in accordance with the
Investment Company Act of 1940. Generally, amortized cost reflects the current
fair value of a security, but since the value is not obtained from a quoted
price in an active market, such securities are reflected as Level 2. Fair value
determinations are required for securities whose value is affected by a
significant event that will materially affect the value of a domestic or
foreign security and which occurs subsequent to the time of the close of the
principal market on which such domestic or foreign security trades but prior to
the calculation of the Fund's NAV.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objective 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
16
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 of foreign denominated securities from
the fluctuations arising from changes in the market prices of those 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.
DERIVATIVES 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 enter into derivative transactions for the purpose of hedging
against the effects of changes in the value of portfolio securities due to
anticipated changes in market conditions and to gain market exposure for
residual and accumulating cash positions. 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 and 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.
FUTURES CONTRACTS The Fund may invest in interest rate, financial, stock and
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 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
17
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
The Fund is subject to ASC 740, INCOME TAXES. ASC 740 provides guidance for
financial accounting and reporting for the effects of income taxes that result
from an entity's activities during the year. ASC 740 also provides guidance
regarding how certain uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements. ASC 740 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.
There are no adjustments to the Fund's net assets required under ASC 740. The
Fund's 2006, 2007, 2008 and 2009 fiscal years tax returns are still open to
examination by the Federal and applicable state tax authorities.
At June 30, 2010, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation) on
Tax Purposes Appreciation Depreciation Investments
--------------------------------------------------------------------
$80,757,756 $12,851,810 $(11,198,337) $1,653,473
As of December 31, 2009, the Fund has capital loss carryovers as indicated
below.
Amount Expires
----------------------
$2,257,504 12/31/2016
8,980,011 12/31/2017
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, 2009 as follows:
Capital Currency
-----------------
$-- $--
The tax composition of distributions paid during the years ended December 31,
2009 and December 31, 2008 were as follows:
Ordinary Long-Term
Income Capital Gains Total
---------------------------------------
2009 $200,960 $ -- $ 200,960
2008 366,920 1,548,733 1,915,653
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays any dividends from net
investment income annually. The Fund also declares and pays any 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
18
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
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.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued FASB Accounting
Standards Codification (ASC) effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The ASC is an
aggregation of previously issued authoritative U.S. generally accepted
accounting principles (GAAP) in one comprehensive set of guidance organized by
subject area. In accordance with the ASC, references to previously issued
accounting standards have been replaced by ASC references. Subsequent revisions
to GAAP will be incorporated into the ASC through Accounting StandardsUpdates
(ASU).
The Fund adopted ASC 855, SUBSEQUENT EVENTS effective October 2009. ASC 855
establishes principles and requirements for subsequent events, in particular
(a) the period after the balance sheet date during which management of a
reporting entity shall evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; (b) the
circumstances under which an entity shall recognize events or transactions
occurring after the balance sheet date in its financial statements; and (c) the
disclosures that an entity shall make about events or transactions that
occurred after the balance sheet date.
In January 2010, FASB issued ASU 2010-06, IMPROVING DISCLOSURES ABOUT FAIR
VALUE MEASUREMENTS. ASU 2010-06 requires reporting entities to make new
disclosures about the amounts and reasons for significant transfers in and out
of Level 1 and Level 2 fair value measurements and inputs and valuation
techniques used to measure fair value for both recurring and nonrecurring fair
value measurements that fall in either Level 2 or Level 3, and information on
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new disclosures were effective for interim and
annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures will
be effective for fiscal years beginning after December 15, 2010, and for
interim periods within those fiscal years. GEAM does not believe the adoption
of ASU 2010-06 will materially impact the financial statement amounts.
3. FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 2008. This guidance establishes a new framework for measuring fair
value and expands related disclosures. Broadly, the 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. It also establishes a three-level valuation
hierarchy based upon observable and non-observable inputs.
19
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
The following tables present the Fund's investments measured at fair value on a
recurring basis at June 30, 2010:
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------
Investments in Securities
Common Stock $80,169,135 $ -- $-- $80,169,135
Other Investments -- 22,622 -- 22,622
Short-Term Investments 2,219,472 -- -- 2,219,472
- --------------------------------------------------------------------------
Total Investments in Securities $82,388,607 $22,622 $-- 82,411,229
- --------------------------------------------------------------------------
Other Financial Instruments
Futures Contracts --
Unrealized Depreciation $ (151,633) $ -- $-- $ (151,633)
4. DERIVATIVES TRANSACTIONS
Shown below are the derivative contracts entered into by the Fund, summarized
by primary risk exposure.
Asset Derivatives June 30, 2010 Liability Derivatives June 30, 2010
--------------------------------------- ---------------------------------------
Location in the Location in
Derivatives not Statements the Statements
accounted for as of Assets Fair of Assets Fair
hedging instruments and Liabilities Value ($) and Liabilities Value ($)
under ASC 815 ----------------------------- --------- ---------------------------- ----------
- - -------------------------------------------------------------------------------
Equity Contracts Receivables, Net Assets -- Liabilities, Net Assets --
Net unrealized appreciation/ Net unrealized appreciation/
(depreciation) on Futures -- (depreciation) on Futures (151,633)*
- ----------------------------------------------------------------------------------------------------
*INCLUDES CUMULATIVE APPRECIATION/DEPRECIATION OF FUTURES CONTRACTS AS REPORTED
IN THE SCHEDULE OF INVESTMENTS AND WITHIN THE COMPONENTS OF NET ASSETS SECTION
OF THE STATEMENTS OF ASSETS AND LIABILITIES. ONLY THE CURRENT DAY'S VARIATION
MARGIN IS REPORTED WITHIN THE RECEIVABLES AND/OR PAYABLES OF THE STATEMENTS OF
ASSETS AND LIABILITIES.
Refer to the Schedule of Investments for ending notional value.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Total Notional of
Derivatives not accounted Location in the Futures/Options Realized Gain or
for as hedging instruments Statements of Contracts (Loss) on Derivatives
under ASC 815 Operations Purchased/(Sold) ($) Recognized in Income ($)
- -----------------------------------------------------------------------------------------------------------
Equity Contracts Realized gain/(loss) on
futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on Futures 12,857,649/(10,369,021) 103,503
- -----------------------------------------------------------------------------------------------------------
Change in Unrealized
Derivatives not accounted Appreciation/(Depreciation)
for as hedging instruments on Derivatives
under ASC 815 Recognized in Income ($)
- -------------------------------------------------------
Equity Contracts
(161,740)
- -------------------------------------------------------
5. 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 ("State Street"). The revolving credit facility
requires the payment of a commitment fee equal to 0.15% 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. Generally, borrowings under the credit facilities would accrue interest
at the Federal Funds Rate plus 50 basis points (0.50%) 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 period ended
June 30, 2010.
20
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
6. FEES AND COMPENSATION 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%.
GEAM waives a portion of the Fund's management fee in the amount equal to the
management fee earned by GEAM with respect to the Fund's investment in the GE
Funds -- GE Money Market 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.)
7. 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, 2010 were as follows:
Purchases Sales
---------------------------------------------------
$3,962,859 $5,969,012
SECURITY LENDING For the six-month period ended June 30, 2010, the Fund did not
participate in securities lending.
8. SUBSEQUENT EVENTS
Subsequent events after the balance sheet date through the date that the
financial statements were issued, have been evaluated in the preparation of the
Financial Statement. There are no items to report.
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 61
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 -- 13 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; 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;
Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993 and GE Institutional Funds since 1997; 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 2003;
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 49
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 GEAM from
February 1997 to July 2007; Vice President and Associate General Counsel of
GEAM from October 1992 to February 1997; Secretary of GE Funds from 1997 to
July 2007 and Vice President from September 2003 to June 2007; Secretary of GE
Institutional Funds and the fund from 1997 to July 2007, and Vice President
from September 2003 to July 2007; Vice President of Elfun Funds and GE
Savings & Security Funds from October 2003 to July 2007; Assistant Secretary of
Elfun Funds and GE Savings & Security Funds from 1998 to July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds and General Electric Pension
Trust, since July 2007.
22
Additional Information (unaudited)
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 44
POSITION(S) HELD WITH FUND Vice President; Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 5 years (Vice President); 2 years (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Commercial Administrative Officer
of GEAM since April 2010; Senior Vice President and Deputy General Counsel at
GE Asset Management from October 2007 to April 2010; 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
Secretary of GE Funds and GE Institutional Funds since July 2007; Vice
President and Assistant Secretary of GE Institutional Funds and GE Investments
Funds, Inc. from September 2003 to 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
- --------------------------------------------------------------------------------
ROBERT HERLIHY
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Chief Compliance Officer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 4 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Chief Compliance Officer of GEAM,
GE Funds, GE Institutional Funds, Elfun Funds, and GE Savings and Security
Funds since July 2005; Manager of Fund Administration at GEAM from 2002-2005.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
- --------------------------------------------------------------------------------
EUNICE TSANG
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 50
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- less than one year
PRINCIPAL OCCUPATIONS(S) DURING PAST 5 YEARS Treasurer of GE Funds, GE
Institutional Funds, Elfun Funds and GE Savings and Security Funds since
January 2010; GEAM Operational Controllership and Technical Accounting Manager
since December 2007; Financial Planning & Analysis Manager -- Performance
Leader from June 2005 to December 2007; GEAM Quality Black Belt from 2001 to
June 2005; Financial Planning & Analysis Manager from 2000 to 2001; and Mutual
Fund Assistant Controller from October 1997 to 2000.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
23
Additional Information (unaudited)
- ---------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 64
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Vice President of Walden Capital Management
since 1996.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since 1997; Trustee of Fordham University from 1989 to 1995
and 2001 to 2007 and Trustee Emeritus since 2007; Trustee of NeuroScience
Research Institute since 1986; Trustee of Gregorian University Foundation from
1992 to 2007; Director of Artes medical from 2006 to 2008.
- --------------------------------------------------------------------------------
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 -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since July 2007 from
Fairfield University. From 1983 to July 2007, Vice President and Treasurer of
Fairfield University.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 74
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997. 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 1-800-493-3042.
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
Kimberley Costello
Michelle Matzelle
TREASURER
Eunice Tsang
ASSISTANT TREASURER
Leslie Spadone
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
Cheryl H. Beacock, SENIOR VICE PRESIDENT, HUMAN RESOURCES
Daniel O. Colao, EXECUTIVE VICE PRESIDENT, Chief Financial Officer
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER -- MUTUAL FUNDS &
INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT AND CHIEF INVESTMENT OFFICER -- FIXED INCOME
INVESTMENTS
Ralph R. Layman, PRESIDENT AND CHIEF INVESTMENT OFFICER -- PUBLIC EQUITY
INVESTMENTS
Maureen B. Mitchell, PRESIDENT -- INSTITUTIONAL SALES AND
MARKETING
Matthew J. Simpson, EXECUTIVE VICE PRESIDENT, General Counsel and Secretary
Judith A. Studer, CHIEF MARKET STRATEGIST
Don W. Torey, PRESIDENT -- ALTERNATIVE INVESTMENTS
John J. Walker, EXECUTIVE VICE PRESIDENT, Chief Operating Officer
David Wiederecht, PRESIDENT AND CHIEF INVESTMENT OFFICER -- 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 1-800-493-3042; (ii) on the Fund's
website at http://www.geam.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.geam.com; and (ii) on the Commission's website at
http://www.sec.gov.
[LOGO] GE
GE Investments Funds, Inc.
Money Market Fund Letter from the Chairman
- ----------------------------------------------------------------------------
[PHOTO]
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, 2010. 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
The six-months ended June 30, 2010 presented investors with an extremely
challenging market environment after global equity markets tumbled in the
second half of the period due primarily to concerns about sovereign default
risk and slowing global growth. U.S. equities (S&P 500 Index) declined 6.7%
over the six-month period, while international stocks (MSCI EAFE Index) fell
13.2%.
At the start of 2010, equity markets experienced a selloff in January and early
February as investors reacted negatively to signs that there was a lower
probability of a V-shaped recovery. Concerns about new global financial
regulation, policy tightening in China, and high levels of U.S. and European
debt, especially Greek sovereign debt, further fueled the volatility. Stocks
reversed these losses in the second half of the first quarter, rising steadily
as optimism about corporate earnings changed the tone in the market. The S&P
500 Index advanced 5.4%, for the first quarter of 2010 and indexes tracking
smaller capitalization stocks enjoyed even greater advances. Gains were more
subdued in non-U.S. equity markets, with the MSCI EAFE Index advancing 0.9%
during the same quarter as fears of sovereign credit risk in Europe
overshadowed stronger earnings reports. Regionally, Japan took top honors in
the first quarter, rising 8.2% based on relatively attractive stock valuations.
Canada rose 6.0%, followed by the Pacific Rim (+3.1%), and Emerging Markets
(+2.4%). The U.K. fell 0.6% while Continental Europe dropped 2.4% as Greece's
budget deficit crisis raised concerns about other highly indebted Eurozone
countries, including Portugal, Italy, Ireland, Spain, and even the United
Kingdom. The U.S. bond market returned 1.8% (Barclays Capital U.S. Aggregate
Bond Index) in the first quarter helped by another solid performance by the
credit related sectors. Fixed income securities outside the U.S. performed
similarly, however the Barclays Global Aggregate Un-hedged Bond Index lost 0.3%
(in U.S. dollar terms) due primarily to the strengthening dollar versus other
major currencies.
Although the second quarter of 2010 started quietly, stocks plunged in May as
concerns about Europe's sovereign debt problems pressured equity markets and
many investors sought defensive investments such as gold and treasury bonds.
Adding to Greece's sovereign debt woes, anxieties around contagion grew as
Spain stepped further into the European debt crisis amid credit downgrades
driven by its deteriorating economy and public finances. In June, the 2010 G20
Toronto Summit confirmed that the industrialized world leaders were committed
to reducing budget deficits through austerity measures. Some investors,
however, worried that these measures could reduce global growth and slow the
economic recovery. Several other concerns fuelled greater risk aversion during
the second quarter including increased evidence of slower growth in China, a
new resource tax in Australia, an alarming May 6th "flash crash" which sent
U.S. stocks plummeting within minutes, impending U.S. financial reform
legislation, and the spreading impact of BP's massive oil spill in the Gulf of
Mexico. At quarter end, the S&P 500 Index and the MSCI EAFE Index had tumbled
11.4% and 14.0%, respectively, in the three months ended June 30. Regionally,
Emerging Markets fared best during the second quarter, down 8.4%, followed by
Japan (-10.1%), Canada (-10.5%) and the U.K. (-13.9%). The worst performing
regions were Europe (-15.8%) and the Pacific Rim (-14.3%). In this environment,
U.S. Treasuries were the "safe" investment of choice for many investors seeking
to avoid riskier asset classes. The "flight to quality" pulled treasury yields
down across all maturity periods. The Barclays Capital U.S.
[LOGO]
GE
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Money Market Fund
- ----------------------------------------------------
Aggregate Bond Index returned 3.49% in the second quarter, while the Barclays
Capital Global Aggregate Un-hedged Bond Index lost 0.04% over the same
three-month period owing mainly to widening spreads in European peripheral
countries and the declining euro.
Against a backdrop of weakening investor sentiment, financial markets posted
disparate results for the six- and twelve-month periods ended June 30, 2010.
TOTAL RETURNS AS OF JUNE 30, 2010 6-MONTH 12-MONTH
- -----------------------------------------------------------------------------
U.S. equities (S&P 500 Index) -6.7 14.4
Global equities (MSCI World Index) -9.8 10.2
International equities (MSCI EAFE Index) -13.2 5.9
Emerging Markets equities (MSCI EM Index) -6.2 23.2
Small-cap U.S. equities (Russell 2000 Index) -2.0 21.5
Mid-cap U.S. equities (Russell Mid Cap Index) -2.1 25.1
U.S. fixed income (Barclays Capital U.S. Aggregate Bond
Index) 5.3 9.5
U.S. short-term government fixed income (Barclays Capital
1-3 Year U.S. Government Bond Index) 1.9 2.9
U.S. tax-exempt income (Barclays Capital 10-Year U.S.
Municipal Bond Index) 4.1 9.6
- -----------------------------------------------------------------------------
OUTLOOK
In the face of the fiscal concerns throughout much of Europe and signs of
slowing economic activity around the globe, the wall of worry has become
exceedingly high for investors who want to see credible government budgets that
balance fiscal austerity and economic growth. At the core of the uncertainty,
in our view, is the issue of excessive borrowing, now afflicting sovereign
markets and reminding us that the financial crisis is not yet over. Our
economic view for the second half of 2010 still favors positive, albeit slow
growth which we believe should keep interest rates at record lows for months to
come. We also believe that the policy measures implemented in Europe will
improve sentiment towards sovereign and bank debt over the balance of the year.
But many challenges remain on the horizon, including the risk of fiscal policy,
taxation and regulation missteps that could hamper the recovery. As a result,
continued market volatility appears to be the one sure thing we can predict
with certainty.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. Today's
uncertain environment is why we believe it is important for long-term investors
to maintain a disciplined, diversified investment strategy consistent with
their goals, time horizon and risk tolerance. While diversified portfolios are
not immune to market downturns, history suggests they can put investors in a
position to benefit from a 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.
AUGUST 2010
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
GE Investments Funds, Inc.
Money Market Fund
Semi-Annual Report
JUNE 30, 2010
[LOGO]
GE
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, 2010 (unaudited)
- -----------------------------------------------------------------------------
Information on the following performance pages relating to the GE Investments
Money Market Fund (the "Fund") total returns and Schedule of Investments is
unaudited. All other information, including the portfolio manager Q&A pages, is
also 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 fees and 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
800-493-3042 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 the 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 for the our peer group
average annual total return calculation is based on a blend of Morningstar peer
categories, as shown. Morningstar is an independent mutual fund rating service.
The 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 that of the Fund.
(C)2010 Morningstar, Inc. All Rights Reserved. The Morningstar information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not 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 of 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
- --------------------------------------------------------------------------------
[PHOTO]
MICHAEL E. MARTINI
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.
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, 2010?
A. For the six-month period ended June 30, 2010, the Class 1 shares of the
Money Market Fund returned 0.00%. The 90-day Treasury Bill, the Fund's
benchmark, returned 0.06% and the Fund's Morningstar peer group of 105 U.S.
Insurance Money Market Taxable funds returned an average of -0.01% for the
same period.
Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE SIX-MONTH PERIOD
ENDING JUNE 30, 2010?
A. News in the U.S. clearly showed a slowing in economic activity beginning
with the employment data reported in May and June. While headline non-farm
payroll figures were skewed by census workers added in May and taken away in
June, private payrolls declined from an increase of 241,000 in April to an
increase of 83,000 in June. The unemployment rate fell in June from 9.7% to
9.5% due mainly to a decline in the participation rate, which was not viewed
as a favorable sign. The housing market weakened as new home sales slumped
after the $8,000 tax credit offered to first-time homebuyers ended in April.
Inflation in the U.S. remained low at just 1.2% reported in May (Personal
Consumption Expenditure Core Price Index, year-over-year).
The Federal Reserve's outlook for slow economic growth and low inflation did
not change during the first half of 2010 and therefore the fed funds target
rate remained unchanged throughout the six months. In Washington, a finance
reform bill intended to overhaul financial regulation was passed by the
House of Representatives and awaited action by the Senate, which raised
uncertainty around the banking sector.
Q. WHAT WERE THE PRIMARY DRIVERS BEHIND FUND PERFORMANCE?
A. Historically low global central bank rates continued to place pressure on
the money fund universe. With a view toward a fed funds rate being
maintained at 0 to 0.25% for an "extended period", the Fund's average days
to maturity were initially extended in an effort to increase yield. The
European
2
- --------------------------------------------------------------------------------
[GRAPHIC]
Q&A
sovereign debt crisis as well as amendments to the rules governing money
market funds which impacted liquidity and maturity guidelines caused funding
pressures and caused LIBOR rates to begin rising. Average days to maturity
were subsequently shortened early in June in anticipation of higher
short-term asset yields.
3
Money Market Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund, you incur ongoing fees and 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,
2010.
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 $1,000 = 8.6),
then multiply the result by the number given for your class under the heading
"Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholders reports of other funds.
Please note that the expenses shown in the table for both "Actual" and
"Hypothetical" do not reflect any transaction costs, such as sales charges or
redemption fees. Additionally, the expenses shown do not reflect the fees or
charges associated with variable contracts through which shares of the Fund are
offered.
JANUARY 1, 2010 - JUNE 30, 2010
- ------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,000.00 1.14
- ------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,023.38 1.15
- ------------------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.23% (FOR THE
PERIOD JANUARY 1, 2010 - JUNE 30, 2010), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE ONE-HALF YEAR
PERIOD).
**ACTUAL FUND RETURN FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2010 WAS: 0.00%.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
4
Money Market Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[CHART]
Money Market Fund 90 Day T-Bill
Date lending value lending value
- ----- ---------------- -------------
Jun 30,2000 $10,000.00 $10,000.00
Dec 1,2000 10,321.49 10,307.16
Dec 1,2001 10,732.92 10,664.00
Dec 1,2002 10,892.28 10,837.89
Dec 1,2003 10,977.33 10,949.19
Dec 1,2004 11,081.10 11,102.22
Dec 1,2005 11,390.70 11,459.35
Dec 1,2006 11,920.09 12,013.11
Dec 1,2007 12,507.08 12,549.35
Dec 1,2008 12,787.48 12,723.42
Dec 1,2009 12,822.38 12,742.34
Jun 1,2010 12,822.38 12,750.38
[GRAPHIC]
INVESTMENT PROFILE
A mutual 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.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 1 SHARES
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS++ YEAR YEAR YEAR $10,000 INVESTMENT (A)
--------------------------------------------------------------------------
Money Market 0.00% 0.02% 2.73% 2.52% 12,822
--------------------------------------------------------------------------
90 Day T-Bill 0.06% 0.12% 2.53% 2.46% 12,750
--------------------------------------------------------------------------
Morningstar peer group
average* -0.01% 0.01% 2.59% 2.35%
--------------------------------------------------------------------------
Inception date 7/1/85
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FUND YIELD AT JUNE 30, 2010
- --------------------------------------------------------------------------------
FUND MONEY FUND REPORT**
-------------------------------------------
7-day current 0.00%+ 0.09%
-------------------------------------------
7-day effective 0.00% 0.09%
-------------------------------------------
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, 2010.
++TOTAL RETURNS FOR THE PERIOD ENDED JUNE 30, 2010 IS NOT ANNUALIZED.
**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.
(A)ENDING VALUE OF A $10,000 INVESTMENT FOR THE TEN-YEAR PERIOD OR SINCE
INCEPTION, WHICHEVER IS LESS.
* 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 U.S. INSURANCE MONEY MARKET TAXABLE PEER GROUP CONSISTING OF 93, 105, 104
AND 99 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 THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES AND DO NOT REFLECT THE FEES OR
CHARGES THAT WOULD BE ASSOCIATED WITH VARIABLE CONTRACTS THROUGH WHICH SHARES
OF THE FUND ARE OFFERED.
5
MONEY MARKET FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
MONEY MARKET FUND
Portfolio Composition based on a Market Value of $315,427 (in thousands) as of
June 30, 2010
[CHART]
Commercial Paper 25.6%
Certificates of Deposit 25.1%
Agency 14.3%
Repurchase Agreements 13.9%
Corporate Notes 13.6%
U.S. Treasury 4.1%
Time Deposit 3.4%
PRINCIPAL AMORTIZED
AMOUNT COST
SHORT-TERM INVESTMENTS -- 100.2% +
------------------------------------------------------------
U.S. TREASURY -- 4.1%
U.S. Treasury Notes
0.88% 02/28/11..... $ 6,000,000 $ 6,023,173
5.75% 08/15/10..... 6,950,000 6,997,867
13,021,040
AGENCY -- 14.4%
Federal Home Loan Bank
4.70% 08/10/10..... 1,550,000 1,557,542
FHLB Disc Corp
0.14% 08/13/10..... 9,700,000 9,698,378 /(a)/
0.15% 07/30/10..... 2,900,000 2,899,650 /(a)/
FNMA Discount Note
0.16% 08/02/10..... 3,200,000 3,199,559 /(a)/
0.20% 07/14/10..... 4,100,000 4,099,704 /(a)/
0.30% 10/06/10..... 12,250,000 12,240,289 /(a)/
Freddie Discount
0.18% 07/27/10..... 6,400,000 6,399,168 /(a)/
Freddie Mac
0.19% 07/12/10..... 5,100,000 5,099,992 /(a)/
45,194,282
COMMERCIAL PAPER -- 25.7%
Allied Irish Banks NA
0.77% 07/09/10..... 8,050,000 8,048,623 /(a)/
Australia & NZ Banking Group
0.50% 09/20/10..... 6,750,000 6,742,406 /(a)/
Banco Bilbao Viz London
0.32% 07/16/10..... 6,400,000 6,399,173 /(a)/
Commonwealth Bk Australia
0.51% 08/30/10..... 9,850,000 9,841,627 /(a)/
Danske Corp.
0.39% 08/20/10..... 6,500,000 6,496,479 /(a)/
PRINCIPAL AMORTIZED
AMOUNT COST
HSBC USA Inc.
0.27% 07/13/10....... $ 6,100,000 $ 6,099,461 /(a)/
Nordea North America
0.34% 08/04/10....... 7,000,000 6,997,785 /(a)/
0.58% 11/18/10....... 2,700,000 2,693,910 /(a)/
Procter & Gamble International Fn
0.17% 07/15/10....... 9,400,000 9,399,379 /(a)/
Societe Generale N Amer
0.43% 07/06/10....... 3,800,000 3,799,773 /(a)/
0.47% 08/05/10....... 7,100,000 7,096,756 /(a)/
UBS Finance Delaware LLC
0.16% 07/02/10....... 7,250,000 7,249,968 /(a)/
80,865,340
REPURCHASE AGREEMENTS -- 14.0%
Barclays Bank US Treasury Repo
0.01% dated 06/30/10, to be
repurchased at $6,700,002 on
07/01/10 collateralized by
$6,834,082 U.S. Treasury Securities
Bonds, 5.00%, maturing 05/15/37.
07/01/10........ 6,700,000 6,700,000 /(a)/
Goldman Sachs Gov Agcy Repo
0.02% dated 06/30/10, to be
repurchased at $29,800,017 on
07/01/10 collateralized by
$30,396,485 U.S. Treasury Securities
Agency Bonds, 1.25%, maturing
05/07/12.
07/01/10......... 29,800,000 29,800,000 /(a)/
HSBC Gov Agcy Repo
0.01% dated 06/30/10, to be
repurchased at $590,000 on
07/01/10 collateralized by $604,465
U.S. Government Agency Bonds,
3.63%, maturing 08/15/19.
07/01/10......... 590,000 590,000 /(a)/
JPM Chase Gov Agcy Repo
0.00% dated 06/30/10, to be
repurchased at $6,800,000 on
07/01/10 collateralized by
$6,939,328 U.S. Government Agency
Bonds, 3.00%, maturing 02/28/17.
07/01/10......................... 6,800,000 6,800,000 /(a)/
43,890,000
CORPORATE NOTES -- 13.6%
Abbey National Treasury Services
0.42% 02/25/11....... 10,500,000 10,500,000 /(a)/
Bank of Nova Scotia Houston
0.35% 12/17/10....... 3,000,000 3,000,000 /(a)/
Barclays Bank PLC NY
0.49% 11/03/10....... 4,900,000 4,900,000 /(a)/
Goldman Sachs Group Inc FDIC
1.04% 12/03/10....... 5,750,000 5,763,533 /(a)/
Intl Bk Recon & Develop
0.39% 07/13/11....... 3,950,000 3,950,000 /(a)/
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements on page 13.
6
MONEY MARKET FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
Rabobank Nederland NY
0.29% 07/23/10.... $ 4,100,000 $ 4,099,971 /(a)/
Royal Bank of Canada NY
0.35% 02/24/11.... 3,500,000 3,500,000 /(a)/
Westpac Banking Corp NY
0.31% 10/06/10.... 7,100,000 7,099,370 /(a)/
42,812,874
TIME DEPOSIT -- 3.3%
Bank of Ireland
0.27% 07/01/10.... 10,390,000 10,390,000
State Street Corp.
0.01% 07/01/10.... 152,248 152,248 /(b)/
10,542,248
CERTIFICATES OF DEPOSIT -- 25.1%
Banco Bilbao Viz Arg NY
0.31% 07/26/10.... 4,800,000 4,799,917 /(a)/
Bank of Montreal Chicago
0.30% 07/23/10.... 8,250,000 8,250,000 /(a)/
Barclays Bank PLC NY
0.30% 07/15/10.... 5,450,000 5,450,000 /(a)/
BNP Paribas NY
0.24% 07/01/10.... 7,450,000 7,450,000 /(a)/
0.44% 08/03/10.... 3,000,000 3,000,000 /(a)/
Calyon NY
0.33% 07/07/10.... 13,000,000 13,000,000 /(a)/
Credit Suisse NY
0.30% 07/15/10.... 3,100,000 3,100,000 /(a)/
Deutsche Bank Ag NY
0.30% 07/20/10.... 6,800,000 6,800,000 /(a)/
Rabobank Nederland NY
0.52% 09/14/10.... 5,100,000 5,101,259 /(a)/
Royal Bank of Scotland CT
0.37% 07/09/10.... 6,050,000 6,050,000 /(a)/
Svenska Handelsbanken NY
0.28% 07/14/10.... 3,800,000 3,800,007 /(a)/
0.45% 08/20/10.... 5,900,000 5,900,000 /(a)/
Toronto-Dominion Bank NY
0.54% 11/19/10.... 6,400,000 6,400,000 /(a)/
79,101,183
TOTAL SHORT-TERM INVESTMENTS
(COST $315,426,967)........ 315,426,967
LIABILITIES IN EXCESS OF OTHER
ASSETS, NET -- (0.2)% (705,188)
------------
NET ASSETS -- 100.0%........ $314,721,779
============
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements on page 13.
7
Notes to Schedule of Investments June 30, 2010 (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
information regarding holdings, allocations and other characteristics are
presented to illustrate examples of securities that the Fund has bought and the
diversity of areas in which the Fund may invest as of a particular date. It may
not be representative of the Fund's current or future investments and should
not be construed as a recommendation to purchase or sell a particular security.
Please see the Fund's prospectus for complete descriptions of investment
objective, policies, risks and permissible investments.
(a)Coupon amount represents effective yield.
(b)State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
+ Percentages are based on net assets as of June 30, 2010.
8
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
MONEY MARKET FUND
-----------------------------------------------------
6/30/10+ 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05
-----------------------------------------------------
INCEPTION DATE 7/1/85
Net asset value, beginning of period....... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income.................... -- -- 0.02 0.05 0.05 0.03
Net realized and unrealized
gains (losses) on investments........... -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS..................... -- -- 0.02 0.05 0.05 0.03
- -------------------------------------------------------------------------------------------------
LESS: DISTRIBUTIONS FROM:
Net investment income.................... -- -- 0.02 0.05 0.05 0.03
Net realized gains....................... -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS........................ -- -- 0.02 0.05 0.05 0.03
- -------------------------------------------------------------------------------------------------
Net asset value, end of period............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------
TOTAL RETURN/(A) /......................... 0.00% 0.27% 2.24% 4.92% 4.65% 2.79%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands). $314,722 $326,072 $547,554 $340,690 $279,622 $250,149
Ratios to average net assets:
Net investment income*................. 0.00% 0.32% 2.15% 4.81% 4.58% 2.74%
Net expenses*.......................... 0.23% 0.43% 0.45% 0.48% 0.49% 0.49%
Gross expenses*........................ 0.51% 0.47% 0.45% 0.48% 0.49% 0.49%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a)Total returns are historical and assume changes in share price, reinvestment
of dividends and capital gains distributions 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. Past performance does not
guarantee future results.
* Annualized for periods less than one year.
+ Unaudited.
See Notes to Financial Statements.
9
Statement of Assets MONEY
and Liabilities JUNE 30, 2010 (UNAUDITED) MARKET
FUND
- --------------------------------------------------------------------------------
ASSETS
Short-term Investments at fair value (cost $315,426,967)........ 315,426,967
Income receivables.............................................. 297,066
Receivable for fund shares sold................................. 67,793
- --------------------------------------------------------------------------------
TOTAL ASSETS.................................................. 315,791,826
- --------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed................................ 936,350
Payable to GEAM................................................. 656,386
Accrued other expenses.......................................... (522,689)
- --------------------------------------------------------------------------------
TOTAL LIABILITIES............................................. 1,070,047
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $314,721,779
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in................................................. 314,907,764
Accumulated net realized gain (loss)............................ (185,985)
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $314,721,779
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $314,721,779
Shares outstanding ($0.01 par value; unlimited shares authorized). 314,899,166
Net asset value per share......................................... $1.00
See Notes to Financial Statements.
10
Statement of Operations MONEY
FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED) MARKET
FUND
-----------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Interest...................................................... $ 355,800
-----------------------------------------------------------------------------
TOTAL INCOME.................................................... 355,800
-----------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees.............................. 698,378
Transfer agent................................................ 30
Director's fees............................................... 7,631
Custody and accounting expenses............................... 25,713
Professional fees............................................. 24,778
Registration expenses......................................... 4,221
Other expenses................................................ 38,289
-----------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT.................. 799,040
-----------------------------------------------------------------------------
Less: Expenses waived or borne by the adviser................. (443,240)
-----------------------------------------------------------------------------
Net expenses.................................................. 355,800
-----------------------------------------------------------------------------
NET INVESTMENT INCOME........................................... --
-----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments................................................. 1,700
-----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments........ 1,700
-----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS. $ 1,700
-----------------------------------------------------------------------------
See Notes to Financial Statements.
11
Statements of MONEY
Changes in Net Assets MARKET
FUND
- ---------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2010 DECEMBER 31,
(UNAUDITED) 2009
- ---------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income..................................................... $ -- $ 1,361,258
Net realized gain (loss) on investments.................................... 1,700 24,246
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations.................................... 1,700 1,385,504
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (loss)............................................... -- (1,362,973)
- ---------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS.......................................................... -- (1,362,973)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions.......... 1,700 22,531
- ---------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares............................................... 72,797,062 97,640,479
Value of distributions reinvested.......................................... -- 1,362,974
Cost of shares redeemed.................................................... (84,149,350) (320,507,263)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions............................ (11,352,288) (221,503,810)
- ---------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS...................................... (11,350,588) (221,481,279)
NET ASSETS
Beginning of period.......................................................... 326,072,367 547,553,646
- ---------------------------------------------------------------------------------------------------------------
End of period................................................................ $314,721,779 $ 326,072,367
- ---------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD. $ -- $ --
- ---------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold.................................................................... 72,797,062 97,640,479
Issued for distributions reinvested............................................ -- 1,362,974
Shares redeemed................................................................ (84,149,350) (320,507,263)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares......................................... (11,352,288) (221,503,810)
- ---------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
12
Notes to Financial Statements June 30, 2010 (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 Fund 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 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
References to Level 1, Level 2 and Level 3 below are the level classifications
in the fair value hierarchy and are described in the Fair Value Measurements
section.
All portfolio securities of the Money Market Fund of sufficient quality rating
are valued on the basis of amortized cost, which approximates value and these
are included in Level 2.
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. These
securities would be classified in Level 3. 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.
The Fund's income, expenses and realized and unrealized gains and losses are
allocated proportionally each day among each the Fund's respective share
classes based upon the relative net assets of each share class.
FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 1, 2008 for all financial instruments accounted for at fair value.
For financial assets and liabilities, fair value is the price the Fund would
receive 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 or 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 inputs are observable or whose
significant value drivers are observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
Policies and procedures are maintained to value investments using the best and
most relevant data available. In addition, GEAM performs periodic reviews of
the methodologies used by independent pricing services including price
validation of individual securities.
The following section describes the valuation methodologies the Fund uses to
measure different financial investments at fair value.
13
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
When available, the Fund uses quoted market prices to determine the 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, pricing information is obtained
from an independent pricing vendor. The pricing vendor uses various pricing
models for each asset class that are consistent with what other market
participants would use. The inputs and assumptions to the model of the pricing
vendor are derived from market observable sources including: benchmark yields,
reported trades, broker/dealer quotes, issuer spreads, benchmark securities,
bids, offers, and other market-related data. Since many fixed income securities
do not trade on a daily basis, the methodology of the pricing vendor uses
available information as applicable such as benchmark curves, benchmarking of
like securities, sector groupings, and matrix pricing. The pricing vendor
considers all available market observable inputs in determining the evaluation
for a security. Thus, certain securities may not be priced using quoted prices,
but rather determined from market observable information. These investments are
included in Level 2 and primarily comprise our portfolio of corporate fixed
income, and government, mortgage and asset-backed securities. In infrequent
circumstances, pricing vendors may provide the Fund with valuations that are
based on significant unobservable inputs, and in those circumstances the
investment securities are included in Level 3.
The Fund uses non-binding broker quotes as the primary basis for valuation when
there is limited, or no, relevant market activity for a specific investment or
for other investments that share similar characteristics. The Fund has not
adjusted the prices obtained. Investment securities priced using non-binding
broker quotes are included in Level 3. As is the case with the primary pricing
vendor, third-party brokers do not provide access to their proprietary
valuation models, inputs and assumptions. Accordingly, GEAM conducts internal
reviews of pricing for all such investment securities periodically to ensure
reasonableness of valuations used in our financial statements. These reviews
are designed to identify prices that appear stale, those that have changed
significantly from prior valuations, and other anomalies that may indicate that
a price may not be accurate. Based on the information available, GEAM believes
that the fair values provided by the brokers are representative of prices that
would be received to sell the assets at the measurement date (exit prices).
Other financial investments are derivative investments 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.
The Fund uses closing prices for derivatives included in Level 1, which are
traded either on exchanges or liquid over-the counter markets. Derivative
assets and liabilities included in Level 2 primarily represent interest rate
swaps, cross-currency swaps and foreign currency and commodity forward and
option contracts. Derivative assets and liabilities included in Level 3
primarily represent interest rate products that contain embedded optionality or
prepayment features.
Transfers in and out of Level 3 are considered to occur at the beginning of the
period.
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. For example, money
market securities are valued using amortized cost, in accordance with the
Investment Company Act of 1940. Generally, amortized cost reflects the current
fair value of a security, but since the value is not obtained from a quoted
price in an active market, such securities are reflected as Level 2. Fair value
determinations are required for securities whose value is affected by a
significant event that will materially affect the value of a domestic or
foreign security and which occurs subsequent to the time of the close of the
principal market on which such domestic or foreign security trades but prior to
the calculation of the Fund's NAV.
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
14
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 of foreign denominated securities from
the fluctuations arising from changes in the market prices of those 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.
The Fund is subject to ASC 740, INCOME TAXES. ASC 740 provides guidance for
financial accounting and reporting for the effects of income taxes that result
from an entity's activities during the year. ASC 740 also provides guidance
regarding how certain uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements. ASC 740 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.
There are no adjustments to the Fund's net assets required under ASC 740. The
Fund's 2006, 2007, 2008 and 2009 fiscal years tax returns are still open to
examination by the Federal and applicable state tax authorities.
At June 30, 2010, information on the tax cost of investments is as follows:
Net Tax
Appreciation/
Cost of Gross Tax Gross Tax (Depreciation)
Investments for Unrealized Unrealized on
Tax Purposes Appreciation Depreciation Investments
---------------------------------------------------------------
$315,426,967 $-- $-- $--
As of December 31, 2009, 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.
During the year ended December 31, 2009, the Fund utilized $24,246 of prior
year capital loss carryovers.
Amount Expires
-------------------
$ 39,623 12/31/2010
148,062 12/31/2016
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, 2009.
15
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
The tax composition of distributions paid during the years ended December 31,
2009 and December 31, 2008 were as follows:
Ordinary Long-Term
Income Capital Gains Total
-----------------------------------------
2009 $1,362,973 $-- $1,362,973
2008 9,576,393 -- 9,576,393
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.
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.
FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 2008. This guidance establishes a new framework for measuring fair
value and expands related disclosures. Broadly, the 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. It also establishes a three-level valuation
hierarchy based upon observable and non-observable inputs.
The following tables present the Fund's investments measured at fair value on a
recurring basis at June 30, 2010:
Level 1 Level 2 Level 3 Total
-----------------------------------------------------------------------
Short-Term Investments
U.S. Treasury $-- $ 13,021,040 $-- $ 13,021,040
Agency -- 45,194,282 -- 45,194,282
Commercial Paper -- 80,865,340 -- 80,865,340
Repurchase Agreements -- 43,890,000 -- 43,890,000
Corporate Notes -- 42,812,874 -- 42,812,874
Time Deposit -- 10,542,248 -- 10,542,248
Certificates of Deposit -- 79,101,183 -- 79,101,183
-----------------------------------------------------------------------
Total Short-Term Investments $-- $315,426,967 $-- $315,426,967
-----------------------------------------------------------------------
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued FASB Accounting
Standards Codification (ASC) effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The ASC is an
aggregation of previously issued authoritative U.S. generally accepted
accounting principles (GAAP) in one comprehensive set of guidance organized by
subject area. In accordance with the ASC, references to previously issued
accounting standards have been replaced by ASC references. Subsequent revisions
to GAAP will be incorporated into the ASC through Accounting Standards Updates
(ASU).
The Fund adopted ASC 855, SUBSEQUENT EVENTS effective October 2009. ASC 855
establishes principles and requirements for subsequent events, in particular
(a) the period after the balance sheet date during which management of a
reporting entity shall evaluate events
16
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
or transactions that may occur for potential recognition or disclosure in the
financial statements; (b) the circumstances under which an entity shall
recognize events or transactions occurring after the balance sheet date in its
financial statements; and (c) the disclosures that an entity shall make about
events or transactions that occurred after the balance sheet date.
In January 2010, FASB issued ASU 2010-06, IMPROVING DISCLOSURES ABOUT FAIR
VALUE MEASUREMENTS. ASU 2010-06 requires reporting entities to make new
disclosures about the amounts and reasons for significant transfers in and out
of Level 1 and Level 2 fair value measurements and inputs and valuation
techniques used to measure fair value for both recurring and nonrecurring fair
value measurements that fall in either Level 2 or Level 3, and information on
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new disclosures are effective for interim and
annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures are
effect for fiscal years beginning after December 15, 2010, and for interim
periods within those fiscal years. GEAM does not believe the adoption of ASU
2010-06 will materially impact the financial statement amounts.
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 ("State Street"). The revolving credit facility
requires the payment of a commitment fee equal to 0.15% 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. Generally, borrowings under the credit facilities would accrue interest
at the Federal Funds Rate plus 50 basis points (0.50%) 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 six-month period
ended June 30, 2010.
4. FEES AND COMPENSATION 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%
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 is 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. SUBSEQUENT EVENTS
Subsequent events after the balance sheet date through the date that the
financial statements were issued, have been evaluated in the preparation of the
Financial Statements. There are no items to report.
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 61
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 -- 13 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; 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;
Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993 and GE Institutional Funds since 1997; 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 2003;
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 49
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 GEAM from
February 1997 to July 2007; Vice President and Associate General Counsel of
GEAM from October 1992 to February 1997; Secretary of GE Funds from 1997 to
July 2007 and Vice President from September 2003 to June 2007; Secretary of GE
Institutional Funds and the Fund from 1997 to July 2007, and Vice President
from September 2003 to July 2007; Vice President of Elfun Funds and GE
Savings & Security Funds from October 2003 to July 2007; Assistant Secretary of
Elfun Funds and GE Savings & Security Funds from 1998 to July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds and General Electric Pension
Trust, since July 2007.
18
Additional Information (unaudited)
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 44
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 5 years (Vice President); 2 years (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Commercial Administrative Officer
of GEAM since April 2010; Senior Vice President and Deputy General Counsel at
GE Asset Management from October 2007 to April 2010; 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
Secretary of GE Funds and GE Institutional Funds since July 2007; Vice
President and Assistant Secretary of GE Institutional Funds and GE Investments
Funds, Inc. from September 2003 to 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
- --------------------------------------------------------------------------------
ROBERT HERLIHY
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Senior Vice President and Chief Compliance Officer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 4 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Chief Compliance Officer of GEAM,
GE Funds, GE Institutional Funds, Elfun Funds, and GE Savings and Security
Funds since July 2005; Manager of Fund Administration at GEAM from 2002-2005.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
- --------------------------------------------------------------------------------
EUNICE TSANG
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 50
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- less than one year
PRINCIPAL OCCUPATIONS(S) DURING PAST 5 YEARS Treasurer of GE Funds, GE
Institutional Funds, Elfun Funds and GE Savings and Security Funds since
January 2010; GEAM Operational Controllership and Technical Accounting Manager
since December 2007; Financial Planning & Analysis Manager -- Performance
Leader from June 2005 to December 2007; GEAM Quality Black Belt from 2001 to
June 2005; Financial Planning & Analysis Manager from 2000 to 2001; and Mutual
Fund Assistant Controller from October 1997 to 2000.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
19
Additional Information (unaudited)
- ---------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 64
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Vice President of Walden Capital Management
since 1996.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since 1997; Trustee of Fordham University from 1989 to 1995
and 2001 to 2007 and Trustee Emeritus since 2007; Trustee of NeuroScience
Research Institute since 1986; Trustee of Gregorian University Foundation from
1992 to 2007; Director of Artes medical from 2006 to 2008.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since July 2007 from
Fairfield University. From 1983 to July 2007, Vice President and Treasurer of
Fairfield University.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 74
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997. 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 1-800-493-3042.
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
Kimberley Costello
Michelle Matzelle
TREASURER
Eunice Tsang
ASSISTANT TREASURER
Leslie Spadone
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
Cheryl H. Beacock, SENIOR VICE PRESIDENT, HUMAN RESOURCES
Daniel O. Colao, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER -- MUTUAL FUNDS &
INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT AND CHIEF INVESTMENT OFFICER -- FIXED INCOME
INVESTMENTS
Ralph R. Layman, PRESIDENT AND CHIEF INVESTMENT OFFICER -- PUBLIC EQUITY
INVESTMENTS
Maureen B. Mitchell, PRESIDENT -- INSTITUTIONAL SALES AND MARKETING
Matthew J. Simpson, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST
Don W. Torey, PRESIDENT -- ALTERNATIVE INVESTMENTS
John J. Walker, EXECUTIVE VICE PRESIDENT, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT AND CHIEF INVESTMENT OFFICER -- 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 1-800-493-3042; (ii) on the Fund's
website at http://www.geam.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.geam.com; and (ii) on the Commission's website at
http://www.sec.gov.
[LOGO]
GE
GE Investments Funds, Inc.
Premier Growth Equity Fund Letter from the Chairman
- ----------------------------------------------------------------------------
[PHOTO] 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,
2010. 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
The six-months ended June 30, 2010 presented investors with an extremely
challenging market environment after global equity markets tumbled in the
second half of the period due primarily to concerns about sovereign default
risk and slowing global growth. U.S. equities (S&P 500 Index) declined 6.7%
over the six-month period, while international stocks (MSCI EAFE Index) fell
13.2%.
At the start of 2010, equity markets experienced a selloff in January and early
February as investors reacted negatively to signs that there was a lower
probability of a V-shaped recovery. Concerns about new global financial
regulation, policy tightening in China, and high levels of U.S. and European
debt, especially Greek sovereign debt, further fueled the volatility. Stocks
reversed these losses in the second half of the first quarter, rising steadily
as optimism about corporate earnings changed the tone in the market. The S&P
500 Index advanced 5.4%, for the first quarter of 2010 and indexes tracking
smaller capitalization stocks enjoyed even greater advances. Gains were more
subdued in non-U.S. equity markets, with the MSCI EAFE Index advancing 0.9%
during the same quarter as fears of sovereign credit risk in Europe
overshadowed stronger earnings reports. Regionally, Japan took top honors in
the first quarter, rising 8.2% based on relatively attractive stock valuations.
Canada rose 6.0%, followed by the Pacific Rim (+3.1%), and Emerging Markets
(+2.4%). The U.K. fell 0.6% while Continental Europe dropped 2.4% as Greece's
budget deficit crisis raised concerns about other highly indebted Eurozone
countries, including Portugal, Italy, Ireland, Spain, and even the United
Kingdom. The U.S. bond market returned 1.8% (Barclays Capital U.S. Aggregate
Bond Index) in the first quarter helped by another solid performance by the
credit related sectors. Fixed income securities outside the U.S. performed
similarly, however the Barclays Global Aggregate Un-hedged Bond Index lost 0.3%
(in U.S. dollar terms) due primarily to the strengthening dollar versus other
major currencies.
Although the second quarter of 2010 started quietly, stocks plunged in May as
concerns about Europe's sovereign debt problems pressured equity markets and
many investors sought defensive investments such as gold and treasury bonds.
Adding to Greece's sovereign debt woes, anxieties around contagion grew as
Spain stepped further into the European debt crisis amid credit downgrades
driven by its deteriorating economy and public finances. In June, the 2010 G20
Toronto Summit confirmed that the industrialized world leaders were committed
to reducing budget deficits through austerity measures. Some investors,
however, worried that these measures could reduce global growth and slow the
economic recovery. Several other concerns fuelled greater risk aversion during
the second quarter including increased evidence of slower growth in China, a
new resource tax in Australia, an alarming May 6th "flash crash" which sent
U.S. stocks plummeting within minutes, impending U.S. financial reform
legislation, and the spreading impact of BP's massive oil spill in the Gulf of
Mexico. At quarter end, the S&P 500 Index and the MSCI EAFE Index had tumbled
11.4% and 14.0%, respectively, in the three months ended June 30. Regionally,
Emerging Markets fared best during the second quarter, down 8.4%, followed by
Japan (-10.1%), Canada (-10.5%) and the U.K. (-13.9%). The worst performing
regions were Europe (-15.8%) and the Pacific Rim (-14.3%). In this environment,
U.S. Treasuries were the "safe" investment of choice for many investors seeking
to avoid riskier asset classes. The "flight to quality" pulled treasury yields
down across all maturity periods. The Barclays Capital U.S.
[LOGO] GE
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Premier Growth Equity Fund
- ----------------------------------------------------
Aggregate Bond Index returned 3.49% in the second quarter, while the Barclays
Capital Global Aggregate Un-hedged Bond Index lost 0.04% over the same
three-month period owing mainly to widening spreads in European peripheral
countries and the declining euro.
Against a backdrop of weakening investor sentiment, financial markets posted
disparate results for the six- and twelve-month periods ended June 30, 2010.
TOTAL RETURNS AS OF JUNE 30, 2010 6-MONTH 12-MONTH
- -----------------------------------------------------------------------------
U.S. equities (S&P 500 Index) -6.7 14.4
Global equities (MSCI World Index) -9.8 10.2
International equities (MSCI EAFE Index) -13.2 5.9
Emerging Markets equities (MSCI EM Index) -6.2 23.2
Small-cap U.S. equities (Russell 2000 Index) -2.0 21.5
Mid-cap U.S. equities (Russell Mid Cap Index) -2.1 25.1
U.S. fixed income (Barclays Capital U.S. Aggregate Bond
Index) 5.3 9.5
U.S. short-term government fixed income (Barclays Capital
1-3 Year U.S. Government Bond Index) 1.9 2.9
U.S. tax-exempt income (Barclays Capital 10-Year U.S.
Municipal Bond Index) 4.1 9.6
- -----------------------------------------------------------------------------
OUTLOOK
In the face of the fiscal concerns throughout much of Europe and signs of
slowing economic activity around the globe, the wall of worry has become
exceedingly high for investors who want to see credible government budgets that
balance fiscal austerity and economic growth. At the core of the uncertainty,
in our view, is the issue of excessive borrowing, now afflicting sovereign
markets and reminding us that the financial crisis is not yet over. Our
economic view for the second half of 2010 still favors positive, albeit slow
growth which we believe should keep interest rates at record lows for months to
come. We also believe that the policy measures implemented in Europe will
improve sentiment towards sovereign and bank debt over the balance of the year.
But many challenges remain on the horizon, including the risk of fiscal policy,
taxation and regulation missteps that could hamper the recovery. As a result,
continued market volatility appears to be the one sure thing we can predict
with certainty.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. Today's
uncertain environment is why we believe it is important for long-term investors
to maintain a disciplined, diversified investment strategy consistent with
their goals, time horizon and risk tolerance. While diversified portfolios are
not immune to market downturns, history suggests they can put investors in a
position to benefit from a 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.
AUGUST 2010
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
GE Investments Funds, Inc.
Premier Growth Equity Fund
Semi-Annual Report
JUNE 30, 2010
[LOGO] GE
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...................................... 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, 2010 (unaudited)
- -----------------------------------------------------------------------------
Information on the following performance pages relating to the GE Investments
Premier Growth Equity Fund (the "Fund") total returns and Schedule of
Investments is unaudited. All other information, including the portfolio
manager Q&A pages, also 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 fees and 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
800-493-3042 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in the 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 the Fund is subject to risk, including
possible loss of principal invested.
The S&P 500(R) 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 Russell* 1000 Growth(R) Index is also
an unmanaged index that measures the performance of the large-cap growth
segment of the U.S. equity universe. It includes those Russell 1000 companies
with higher price-to-book ratios and higher forecasted growth values. The
results shown for the foregoing indices assume the reinvestment of net
dividends or interest. They do not reflect the actual cost of investing in the
instruments that comprise each index.
The peer universe of the underlying annuity funds used for the peer group
average total annual return calculation is based on a blend of Morningstar peer
categories, as shown. Morningstar is an independent mutual fund rating service.
The 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 that of the fund.
(C)2010 Morningstar, Inc. All Rights Reserved. The Morningstar information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not 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 of 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 GEAM 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 GEAM'S PRESENTATION THEREOF.
1
Premier Growth Equity Fund
- --------------------------------------------------------------------------------
DAVID B. CARLSON
THE PREMIER GROWTH EQUITY FUND IS MANAGED BY DAVID B. CARLSON. MR. CARLSON IS
CHIEF INVESTMENT OFFICER -- U.S. EQUITIES AT GE ASSET MANAGEMENT. HE CO-MANAGES
THE OVERALL U.S. EQUITY INVESTMENTS FOR GE ASSET MANAGEMENT AND HAS MANAGED THE
FUND SINCE ITS 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, AND AN
EXECUTIVE VICE PRESIDENT IN 2003.
Q. HOW DID THE PREMIER GROWTH EQUITY FUND PERFORM COMPARED TO ITS BENCHMARKS
AND MORNINGSTAR PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2010?
A. For the six month period ended June 30, 2010, the Premier Growth Equity Fund
returned -8.71% for Class 1 shares and -8.91% for Class 4 shares. The S&P
500 Index and the Russell 1000 Growth Index, the Fund's benchmarks, returned
-6.65% and -7.64% respectively, and the Fund's Morningstar peer group of 432
US Insurance Large Growth funds returned an average of -8.12% for the same
period.
Q. WHAT MARKET CONDITIONS IMPACTED THE FUND PERFORMANCE?
A. The six-months ended June 30, 2010 presented U.S. equity investors with an
extremely challenging market environment, as the investment climate changed
strikingly in the middle of the period. In the first three months, the U.S.
and global economies continued their gradual recovery, which was, for the
most part, reflected by further gains in U.S. stock prices. In this
environment, the S&P 500 advanced over 5%. However, beginning in April
concerns grew that Europe's debt crisis would halt the recovery, and the
markets witnessed a rise in risk aversion. Stocks tumbled after reaching a
peak in mid April, and defensively positioned sectors performed best. From
April through June the S&P 500 declined over 11%.
In the six-month period, telecommunication and utilities stocks went from
being the worst performers, to the best performing sectors in the S&P 500.
Similarly, the performance of financials stocks flip-flopped as the mood
turned from euphoria to fear: financials made double-digit gains (+11%) in
the first three months of the period, and double digit losses (-13%) from
April 1 through June 30. Concerns surrounding financial sector reform and
the Goldman Sachs civil fraud suit also pressured the sector. All the while,
U.S. central bank reassurances that interest rates would remain low and
improving corporate earnings worked to pare U.S. equity losses in the second
half of the period.
In the end, every single S&P 500 sector declined during the half-year
period, with the worst returns among the materials (-12%), energy (-12%) and
technology (-11%) sectors. Materials and energy were affected by growth
concerns, a strengthening dollar which weighed on commodities and the
catastrophic BP oil well explosion in the Gulf of Mexico. The industrials
(-1%), consumer discretionary (-2%) and consumer staples (-3%) sectors held
up the best in the schizophrenic market environment. In general, small cap
companies outperformed large caps, with S&P 500 stocks below $3 billion in
market cap returning -0.6% versus returns of -8% for stocks over $10 billion
in market cap. Our large-cap focus detracted from returns in this
environment.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. In the first half of the period, the Fund --positioned for economic recovery
--outperformed the market. However it gave back those excess returns in the
volatile trading environment and risk aversion in the last three months. The
Fund's overweight in the lagging tech sector weighed on returns, although we
continued to find interesting values there, with many innovative companies
trading at or below market-multiples. Underweighting industrials and
consumer staples also negatively impacted returns.
2
- --------------------------------------------------------------------------------
[GRAPHIC]
In terms of positive drivers, the Fund's consumer discretionary, health
care, telecommunications and utilities holdings added to performance
returns. Within consumer discretionary, the media stocks contributed the
most, driven by gains in Liberty Global (+19% on the successful sale of its
Jupiter Telecom stake) and DirecTV (+2%). The Fund successfully navigated
regulatory developments in the health care sector, as home oxygen provider
Lincare (+31%) and Express Scripts (+9%) proved insulated from regulatory
concerns -- Lincare benefiting from favorable demographic trends and Express
Scripts enjoying enhanced profitability as generic-drug use proliferates.
American Tower (+3% on strong secular growth trends for wireless data
transmission) drove the Fund's telecom sector gains, and Baidu (+66% amid
potential share gains as Google exited China) was a standout among our tech
holdings.
In an extremely volatile investing environment for financials, the Fund's
holdings in that sector were a key driver of underperformance versus the S&P
500. State Street and Goldman Sachs declined the most --both down 22%. State
Street had rallied approximately 11% through April 12/th/ this year, before
suffering a significant decline on weak first quarter earnings and guidance.
Also in mid-April, the SEC's civil fraud case hit Goldman Sachs -- the
company that weathered the U.S. financial crisis on the excellence of its
risk management and balance sheet protection, only to get caught in the
crosshairs of the regulators on the eve of financial re-regulation. We
maintained our Goldman position, believing its next catalyst could be a
settlement, which might help the company regain its premium to book value as
a capital markets leader/share gainer.
The technology and materials sectors also weighed on Fund returns driven by
declines in Monsanto (-43%), Qualcomm (-28%), Western Union (-20%), Research
in Motion (-27%) and Visa (-19%). Weakness in Monsanto's chemicals business
(i.e., Round-Up herbicide price declines driven by a flood of cheap Chinese
generics), was the main driver of the stock's pullback. We continued to own
Monsanto on our belief that expectations have been reset and for its
higher-growth genetically modified seeds and traits business which has
historically been a more significant earnings diver. Double-dip recession
fears pressured the tech holdings, with Qualcomm and Western Union providing
disappointing earnings outlooks. Blackberry maker, Research in Motion was
overshadowed by Apple's splashy iPhone 4 launch, although we continued to
believe there was room for more than one leadership company in the
rapid-growth wireless communications market. Finally, Visa lagged amid
slowdown fears and financial reform uncertainties. We added to these core
tech holdings on weakness during the period.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. Despite the wall of worry that emerged, we were not ready to fall into the
double-dip recession camp at the end of the period. In fact we believed that
much of the late-period selling was overdone, as fundamentals seemed fairly
intact among the companies we owned and followed. Therefore we remained
positioned for a slow-economic growth environment by consistently employing
our bottom-up process of seeking high quality stocks that we believe can
generate double-digit earnings growth.
We ended the period with 36 stocks in the Fund, consistent with our history.
The largest sector weighting remained technology at approximately 32% of the
Fund -- as we continued to like tech company financial conditions, global
business models and valuations. There were few changes in the portfolio
during the period, although we initiated a switch within technology,
beginning a position in Apple and eliminating Molex. We eliminated our
position in deepwater driller, Transocean (-13%), after the tragic Deepwater
Horizon accident in the Gulf of Mexico, selling before absorbing the full
extent of its fall. Although we do not believe Transocean was responsible
for the disaster, they leased the rig to BP and provided services. We
replaced Transocean with Southwestern Energy -- a natural gas and oil
developer and producer with a strong production growth outlook. On the
margin, we modestly decreased our exposure within financials and consumer
discretionary, and added to our holdings within healthcare (e.g., Express
Scripts, Medtronic and Gilead).
3
Premier Growth Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund, you incur ongoing fees and expenses, which
include portfolio management fees, professional fees, distribution and service
fees (for shareholders of Class 4) 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,
2010.
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 $1,000 = 8.6),
then multiply the result by the number given for your class under the heading
"Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholders reports of other funds.
Please note that the expenses shown in the table for both "Actual" and
"Hypothetical" do not reflect any transaction costs, such as sales charges or
redemption fees. Additionally, the expenses shown do not reflect the fees or
charges associated with variable contracts through which shares of the Fund are
offered.
JANUARY 1, 2010 - JUNE 30, 2010
- ----------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ----------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ----------------------------------------------------------------------------------------
Class 1 1,000.00 912.91 4.03
Class 4 1,000.00 910.89 6.11
- ----------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ----------------------------------------------------------------------------------------
Class 1 1,000.00 1,020.37 4.26
Class 4 1,000.00 1,018.23 6.46
- ----------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.85% FOR CLASS
1 SHARES AND 1.29% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1, 2010 - JUNE
30, 2010), 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, 2010 WERE AS
FOLLOWS: -8.71% FOR CLASS 1 SHARES, AND -8.91% FOR CLASS 4 SHARES. PAST
PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
4
Premier Growth Equity Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[CHART]
Premier Growth Equity Fund S&P 500 Index Russell 1000 Growth
-------------------------- -------------- -------------------
06/00 10,000.00 10,000.00 10,000.00
12/00 9,527.58 9,123.06 7,434.53
12/01 8,656.89 8,036.32 5,917.28
12/02 6,837.63 6,260.14 4,268.36
12/03 8,814.67 8,058.57 5,538.81
12/04 9,434.47 8,935.45 5,887.40
12/05 9,556.39 9,374.94 6,197.37
12/06 10,423.04 10,855.47 6,760.82
12/07 10,979.24 11,452.03 7,560.40
12/08 6,954.51 7,215.03 4,654.12
12/09 9,648.80 9,124.45 6,385.50
06/10 8,808.47 8,517.29 5,897.36
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 12/12/97)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS+ YEAR YEAR YEAR $10,000 INVESTMENT (A)
- -------------------------------------------------------------------------------
Premier Growth Equity Fund -8.71% 7.71% -0.78% -1.26% 8,808
- -------------------------------------------------------------------------------
S&P 500 Index -6.65% 14.43% -0.79% -1.59% 8,517
- -------------------------------------------------------------------------------
Russell 1000 Growth -7.64% 13.62% 0.38% -5.14% 5,897
- -------------------------------------------------------------------------------
Morningstar peer group
average* -8.12% 13.17% -0.42% -3.67%
- -------------------------------------------------------------------------------
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[GRAPHIC]
Premier Growth Equity Fund S&P 500 Index Russell 1000 Growth
------------------------- ------------- -------------------
05/01/08 10,000.00 10,000.00 10,000.00
06/08 9,351.76 9,275.57 9,619.62
09/08 8,800.31 8,499.21 8,433.61
12/08 6,350.73 6,634.20 6,511.85
03/09 6,203.38 5,903.65 6,243.51
06/09 7,451.70 6,844.05 7,262.46
09/09 8,406.70 7,912.13 8,277.02
12/09 8,772.32 8,389.91 8,934.32
03/10 9,292.11 8,841.83 9,349.09
06/10 7,990.59 7,831.63 8,251.32
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
SIX ONE SINCE ENDING VALUE OF A
MONTHS+ YEAR INCEPTION $10,000 INVESTMENT (A)
- --------------------------------------------------------------------------------
Premier Growth Equity Fund -8.91% 7.23% -9.83% 7,991
- --------------------------------------------------------------------------------
S&P 500 Index -6.65% 14.43% -10.68% 7,832
- --------------------------------------------------------------------------------
Russell 1000 Growth -7.64% 13.62% -8.50% 8,251
- --------------------------------------------------------------------------------
Morningstar peer group average* -8.12% 13.17%
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
[GRAPHIC]
A mutual 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 under normal
circumstances in common and preferred stocks and other types of
equity securities. The Fund invests primarily in a limited
number of large-and medium-sized companies (meaning companies
with a market capitalization of $1 billion or more) that the
portfolio manager believes have above-average growth histories
and/or growth potential.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $40,868 (in thousands)
[CHART]
Information Technology 32.1%
Consumer Discretionary 16.3%
Healthcare 15.4%
Financials 12.7%
Industrials 5.4%
Energy 4.9%
Consumer Staples 4.4%
Telecommunication Services 3.8%
Short-Term 3.0%
Materials 2.0%
Other Investments 0.0%**
TOP TEN LARGEST HOLDINGS++
AS OF JUNE 30, 2010
as a % of Market Value
- --------------------------------------------------------------------------------
PepsiCo Inc. 4.39%
----------------------------
Amgen Inc. 4.01%
----------------------------
Liberty Global Inc. 3.96%
----------------------------
The Western Union Co. 3.92%
----------------------------
DIRECTV 3.82%
----------------------------
American Tower Corp. 3.76%
----------------------------
CME Group Inc. 3.74%
----------------------------
QUALCOMM Inc. 3.68%
----------------------------
Schlumberger Ltd. 3.60%
----------------------------
Visa Inc. 3.25%
----------------------------
(A)ENDING VALUE OF A $10,000 INVESTMENT FOR THE TEN-YEAR PERIOD OR SINCE
INCEPTION, WHICHEVER IS LESS.
* 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, 430, 372 AND 273 UNDERLYING
ANNUITY FUNDS, RESPECTIVELY.
**LESS THAN 0.1%.
+ TOTAL RETURNS FOR THE PERIOD ENDED JUNE 30, 2010 ARE NOT ANNUALIZED.
++THE SECURITIES INFORMATION REGARDING HOLDINGS, ALLOCATIONS AND OTHER
CHARACTERISTICS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF SECURITIES THAT THE
FUND HAS BOUGHT AND THE DIVERSITY OF AREAS IN WHICH THE FUND MAY INVEST AS OF
A PARTICULAR DATE. IT MAY NOT BE REPRESENTATIVE OF THE FUND'S CURRENT OR
FUTURE INVESTMENTS AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL A PARTICULAR SECURITY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE. THE PERFORMANCE SHOWN IN
THE GRAPHS AND TABLES DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES AND DO NOT
REFLECT THE FEES OR CHARGES THAT WOULD BE ASSOCIATED WITH VARIABLE CONTRACTS
THROUGH WHICH SHARES OF THE FUND ARE OFFERED.
5
PREMIER GROWTH EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PREMIER GROWTH EQUITY FUND
NUMBER
OF SHARES VALUE
COMMON STOCK -- 97.3% +
-----------------------------------------------------------------------
BEVERAGES -- 4.4%
PepsiCo Inc......................... 29,421 $ 1,793,210
BIOTECHNOLOGY -- 5.7%
Amgen Inc........................... 31,119 1,636,859 /(a)/
Gilead Sciences Inc................. 20,368 698,215 /(a)/
2,335,074
CAPITAL MARKETS -- 6.0%
State Street Corp................... 33,947 1,148,088 /(c)/
The Goldman Sachs Group Inc......... 9,845 1,292,353
2,440,441
CHEMICALS -- 2.1%
Monsanto Co......................... 18,105 836,813
COMMERCIAL SERVICES & SUPPLIES -- 2.7%
Iron Mountain Inc................... 48,092 1,080,146
COMMUNICATIONS EQUIPMENT -- 8.7%
Cisco Systems Inc................... 60,540 1,290,107 /(a,d)/
QUALCOMM Inc........................ 45,829 1,505,024
Research In Motion Ltd.............. 15,276 752,496 /(a)/
3,547,627
COMPUTERS & PERIPHERALS -- 2.9%
Apple Inc........................... 4,635 1,165,842 /(a)/
DIVERSIFIED FINANCIAL SERVICES -- 3.7%
CME Group Inc....................... 5,432 1,529,380
ELECTRONIC EQUIPMENT, INSTRUMENTS &
COMPONENTS -- 1.7%
Corning Inc......................... 43,566 703,591
ENERGY EQUIPMENT & SERVICES -- 3.6%
Schlumberger Ltd.................... 26,592 1,471,601
HEALTHCARE EQUIPMENT & SUPPLIES -- 2.9%
Medtronic Inc....................... 32,251 1,169,744
HEALTHCARE PROVIDERS & SERVICES -- 6.8%
Express Scripts Inc................. 26,026 1,223,743 /(a)/
Lincare Holdings Inc................ 28,289 919,675 /(a)/
VCA Antech Inc...................... 26,026 644,404 /(a)/
2,787,822
NUMBER
OF SHARES VALUE
HOTELS, RESTAURANTS & LEISURE -- 1.3%
Carnival Corp......................... 18,105 $ 547,495
INSURANCE -- 1.3%
Aflac Inc............................. 12,221 521,470
INTERNET SOFTWARE & SERVICES -- 4.3%
Baidu Inc. ADR........................ 13,390 911,591 /(a)/
eBay Inc.............................. 43,000 843,230 /(a)/
1,754,821
IT SERVICES -- 9.1%
Paychex Inc........................... 29,987 778,762
The Western Union Co.................. 107,500 1,602,825
Visa Inc.............................. 18,784 1,328,968
3,710,555
MACHINERY--2.8%
Dover Corp............................ 27,158 1,134,933
MEDIA -- 9.2%
Comcast Corp.......................... 33,382 548,466
DIRECTV............................... 46,056 1,562,220 /(a)/
Liberty Global Inc.................... 62,237 1,617,540 /(a)/
3,728,226
OIL, GAS & CONSUMABLE FUELS -- 1.3%
Southwestern Energy Co................ 13,579 524,693 /(a)/
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 1.7%
CB Richard Ellis Group Inc............ 51,713 703,814 /(a)/
SOFTWARE -- 5.5%
Intuit Inc............................ 32,816 1,141,012 /(a,d)/
Microsoft Corp........................ 48,092 1,106,597 /(d)/
2,247,609
SPECIALTY RETAIL -- 5.8%
Bed Bath & Beyond Inc................. 33,947 1,258,755 /(a)/
Lowe's Companies Inc.................. 54,316 1,109,133
2,367,888
WIRELESS TELECOMMUNICATION SERVICES -- 3.8%
American Tower Corp................... 34,513 1,535,828 /(a)/
TOTAL COMMON STOCK
(COST $41,483,331)................... 39,638,623
-------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
-------------------------------------------------------------------------
GEI Investment Fund
(COST $3,491)........................ 3,037 /(e)/
TOTAL INVESTMENTS IN SECURITIES
(COST $41,486,822)................... 39,641,660
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements on page 13.
6
PREMIER GROWTH EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.0%
------------------------------------------------------------------------
GE Money Market Fund Institutional
Class 0.05%
(COST $1,226,449)..................... $ 1,226,449 /(b,e)/
TOTAL INVESTMENTS
(COST $42,713,271).................... 40,868,109
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (0.3)%......................... (122,692)
------------
NET ASSETS -- 100.0%................... $ 40,745,417
============
------------------------------------------------------------------------
OTHER INFORMATION
------------------------------------------------------------------------
The Fund had the following long futures contracts open at June 30, 2010
(unaudited):
NUMBER CURRENT
OF NOTIONAL UNREALIZED
DESCRIPTION EXPIRATION DATE CONTRACTS VALUE (DEPRECIATION)
-----------------------------------------------------------------
S&P 500 Emini
Index Futures September 2010 2 $102,660 $(8,269)
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements on page 13.
7
Notes to Schedule of Investments June 30, 2010 (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
information regarding holdings, allocations and other characteristics are
presented to illustrate examples of securities that the Fund has bought and the
diversity of areas in which the Fund may invest as of a particular date. It may
not be representative of the Fund's current or future investments and should
not be construed as a recommendation to purchase or sell a particular security.
Please see the Fund's prospectus for complete descriptions of investment
objective, 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, 2010, 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)GE Asset Management, the investment adviser of the Fund, also serves as
investment adviser of the GEI Investment Fund and the GE Funds-GE Money
Market Fund.
* Less than 0.05%.
+ Percentages are based on net assets as of June 30, 2010.
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
--------------------------------------------------------------------- ------------
6/30/10+ 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05 6/30/10+
--------------------------------------------------------------------- -------------
INCEPTION DATE 12/12/97
Net asset value, beginning
of period....................... $64.30 $46.49 $78.95 $82.17 $75.65 $74.95 $64.30
INCOME/(LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)........................ 0.01 0.20 0.30 0.23 0.35 0.24 (0.29)
Net realized and unrealized
gains/(losses) on
investments................... (5.61) 17.81 (29.32) 4.19 6.51 0.73 (5.44)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS........... (5.60) 18.01 (29.02) 4.42 6.86 0.97 (5.73)
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.......... -- 0.20 0.26 0.23 0.34 0.27 --
Return of capital.............. -- -- 0.01 -- -- -- --
Net realized gains............. -- 0.00 3.17 7.41 -- -- --
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS.............. -- 0.20 3.44 7.64 0.34 0.27 --
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period... $58.70 $64.30 $46.49 $78.95 $82.17 $75.65 $58.57
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/(A)/................ (8.71)% 38.74% (36.66)% 5.34% 9.07% 1.29% (8.91)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)................ $40,737 $48,620 $43,308 $94,720 $110,538 $126,682 $8
Ratios to average net assets:
Net investment income *...... 0.03% 0.33% 0.36% 0.24% 0.41% 0.30% -0.41%
Net expenses *............... 0.85%/(b)/ 0.90%/(b)/ 0.76%/(b)/ 0.72% 0.71% 0.71% 1.29%/(b)/
Gross expenses *............. 0.86% 0.90%// 0.76%// 0.72% 0.71% 0.71% 1.30%
Portfolio turnover rate...... 10% 18% 23% 29% 27% 34% 10%
---------------------------
CLASS 4
---------------------------
12/31/09 12/31/08
--------------------------
INCEPTION DATE 5/1/08
Net asset value, beginning
of period....................... $46.55 $78.52
INCOME/(LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)........................ (0.16) 0.02**
Net realized and unrealized
gains/(losses) on
investments................... 17.91 (28.75)
- ------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS........... 17.75 (28.73)
- ------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.......... 0.00 0.06
Return of capital.............. -- 0.01
Net realized gains............. 0.00 3.17
- ------------------------------------------------------------
TOTAL DISTRIBUTIONS.............. 0.00 3.24
- ------------------------------------------------------------
Net asset value, end of period... $64.30 $46.55
- ------------------------------------------------------------
TOTAL RETURN/(A)/................ 38.13% (36.49)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)................ $9 $6
Ratios to average net assets:
Net investment income *...... -0.12% 0.05%
Net expenses *............... 1.35%/(b)/ 1.21%/(b)/
Gross expenses *............. 1.35%/(b)/ 1.21%
Portfolio turnover rate...... 18% 23%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a)Total returns are historical and assume changes in share price, reinvestment
of dividends and capital gains distributions and do not include the effect
of insurance contract charges. Past performance does not guarantee future
results.
(b)Reflects GE Asset Management's waiver of a portion of the Fund's management
fee in an amount equal to the management fee earned by GE Asset Management
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
Statement of Assets PREMIER
and Liabilities JUNE 30, 2010 (UNAUDITED) GROWTH
EQUITY FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $41,483,331)......... $39,638,623
Investments in affiliated securities, at market (cost $3,491)... 3,037
Short-term affiliated investments (at amortized cost)........... 1,226,449
Income receivables.............................................. 8,981
Receivable for fund shares sold................................. 3,554
- -------------------------------------------------------------------------------
TOTAL ASSETS.................................................. 40,880,644
- -------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed................................ 1,353
Payable to GEAM................................................. 23,173
Accrued other expenses.......................................... 109,831
Variation margin payable........................................ 870
- -------------------------------------------------------------------------------
TOTAL LIABILITIES............................................. 135,227
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $40,745,417
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF :
Capital paid in................................................. 49,723,788
Undistributed (distribution in excess of) net investment income. 6,691
Accumulated net realized gain (loss)............................ (7,131,631)
Net unrealized appreciation/ (depreciation) on:
Investments................................................... (1,845,162)
Futures....................................................... (8,269)
- -------------------------------------------------------------------------------
NET ASSETS........................................................ $40,745,417
- -------------------------------------------------------------------------------
CLASS 1:
NET ASSETS........................................................ $40,737,426
Shares outstanding ($0.01 par value; unlimited shares authorized). 694,018
Net asset value per share......................................... $58.70
CLASS 4:
NET ASSETS........................................................ $ 7,991
Shares outstanding ($0.01 par value; unlimited shares authorized). 136
Net asset value per share......................................... $58.57
See Notes to Financial Statements.
10
Statement of Operations PREMIER
FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED) GROWTH
EQUITY FUND
- --------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend............................................................. $ 206,066
Interest............................................................. 166
Interest from affiliated investments................................. 64
- --------------------------------------------------------------------------------------
TOTAL INCOME........................................................... 206,296
- --------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees..................................... 153,095
Distributors Fees (Note 6)
Class 4............................................................ 20
Transfer agent....................................................... 8,970
Director's fees...................................................... 826
Custody and accounting expenses...................................... 18,971
Professional fees.................................................... 10,404
Registration expenses................................................ 1,405
Other expenses....................................................... 7,284
- --------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT......................... 200,975
- --------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser............................. (1,370)
- --------------------------------------------------------------------------------------
Net expenses......................................................... 199,605
- --------------------------------------------------------------------------------------
NET INVESTMENT INCOME.................................................. 6,691
- --------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments........................................................ (584,851)
Futures............................................................ 67,152
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON:
Investments........................................................ (3,305,068)
Futures............................................................ 527
- --------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments............... (3,822,240)
- --------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........ $(3,815,549)
- --------------------------------------------------------------------------------------
See Notes to Financial Statements.
11
Statements of PREMIER
Changes in Net Assets GROWTH
EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2010 DECEMBER 31,
(UNAUDITED) 2009
- -----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss)........................................................ $ 6,691 $ 149,572
Net realized gain (loss) on investments and futures.................................. (517,699) (4,666,781)
Net increase (decrease) in unrealized appreciation / (depreciation) on investments
and futures........................................................................ (3,304,541) 19,092,472
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations.............................................. (3,815,549) 14,575,263
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM :
Net investment income
Class 1............................................................................ -- (153,151)
Class 4............................................................................ -- --
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS.................................................................... -- (153,151)
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions.................... (3,815,549) 14,422,112
- -----------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS :
Proceeds from sale of shares
Class 1............................................................................ 222,609 713,200
Class 4............................................................................ -- --
Value of distributions reinvested
Class 1............................................................................ -- 153,151
Class 4............................................................................ -- --
Cost of shares redeemed
Class 1............................................................................ (4,290,384) (9,973,949)
Class 4............................................................................ -- --
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions...................................... (4,067,775) (9,107,598)
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................................................ (7,883,324) 5,314,514
NET ASSETS
Beginning of period.................................................................... 48,628,741 43,314,227
- -----------------------------------------------------------------------------------------------------------------------
End of period.......................................................................... $40,745,417 $48,628,741
- -----------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD........... $ 6,691 $ --
- -----------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold.............................................................................. 3,456 13,169
Issued for distributions reinvested...................................................... -- 2,361
Shares redeemed.......................................................................... (65,598) (190,965)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................... (62,142) (175,435)
- -----------------------------------------------------------------------------------------------------------------------
CLASS 4
Shares sold.............................................................................. -- --
Issued for distributions reinvested...................................................... -- --
Shares redeemed.......................................................................... -- --
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................... -- --
- -----------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
12
Notes to Financial Statements June 30, 2010 (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 Fund 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 the Fund.
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
References to Level 1, Level 2 and Level 3 below are the level classifications
in the fair value hierarchy and are described in the Fair Value Measurements
section.
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 the NASDAQ are valued using the NASDAQ Official Closing Price, which
may not necessarily represent the last sale price. Level 1 securities primarily
include publicly-traded equity securities. If no sales occurred on the exchange
or NASDAQ that day, the portfolio security generally is valued using the last
reported bid price. In these circumstances the Fund classifies the investment
securities in Level 2.
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, securities characteristics and
other market data. These securities are included in Level 2. In the absence of
a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations and would be classified in
Level 3.
Short-term investments of sufficient credit quality 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 and these are included in Level
2.
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 and these are
also included in Level 2.
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. These securities
would be classified in Level 3. 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 of
the Fund in the appropriate circumstances.
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. In these
13
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
circumstances the Fund classifies the investment securities in Level 2. 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. In these circumstances the Fund
classifies the investment securities in Level 3. 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.
Portfolio securities may be valued using techniques other than market
quotations, under the circumstances described under above. The value
established for a portfolio security may be different than what would be
produced through the use of another methodology or if it had been priced using
market quotations. Portfolio securities that are valued using techniques other
than market quotations, including "fair valued" securities, may be subject to
greater fluctuation in their value from one day to the next than would be the
case if market quotations were used. In addition, there is no assurance that
the Fund could sell a portfolio security for the value established for it at
any time and it is possible that the Fund would incur a loss because a
portfolio security is sold at a discount to its established 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. 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. The Fund's income, expenses (other than distribution
fees) and realized and unrealized gains and losses are allocated proportionally
each day among each the Fund's respective share classes based upon the relative
net assets of each share class.
FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 1, 2008 for all financial instruments accounted for at fair value.
For financial assets and liabilities, fair value is the price the Fund would
receive 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 or 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 inputs are observable or whose
significant value drivers are observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
Policies and procedures are maintained to value investments using the best and
most relevant data available. In addition, GEAM performs periodic reviews of
the methodologies used by independent pricing services including price
validation of individual securities.
The following section describes the valuation methodologies the Fund uses to
measure different financial investments at fair value.
When available, the Fund uses quoted market prices to determine the 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, pricing information is obtained
from an independent pricing vendor. The pricing vendor uses various pricing
models for each asset class that are consistent with what other market
participants would use. The inputs and assumptions to the model of the pricing
vendor are derived from market
14
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
observable sources including: benchmark yields, reported trades, broker/dealer
quotes, issuer spreads, benchmark securities, bids, offers, and other
market-related data. Since many fixed income securities do not trade on a daily
basis, the methodology of the pricing vendor uses available information as
applicable such as benchmark curves, benchmarking of like securities, sector
groupings, and matrix pricing. The pricing vendor considers all available
market observable inputs in determining the evaluation for a security. Thus,
certain securities may not be priced using quoted prices, but rather determined
from market observable information. These investments are included in Level 2
and primarily comprise our portfolio of corporate fixed income, government,
mortgage and asset-backed securities. In infrequent circumstances, pricing
vendors may provide the Fund with valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
included in Level 3.
The Fund uses non-binding broker quotes as the primary basis for valuation when
there is limited, or no, relevant market activity for a specific investment or
for other investments that share similar characteristics. The Fund has not
adjusted the prices obtained. Investment securities priced using non-binding
broker quotes are included in Level 3. As is the case with the primary pricing
vendor, third-party brokers do not provide access to their proprietary
valuation models, inputs and assumptions. Accordingly, GEAM conducts internal
reviews of pricing for all such investment securities periodically to ensure
reasonableness of valuations used in our financial statements. These reviews
are designed to identify prices that appear stale, those that have changed
significantly from prior valuations, and other anomalies that may indicate that
a price may not be accurate. Based on the information available, GEAM believes
that the fair values provided by the brokers are representative of prices that
would be received to sell the assets at the measurement date (exit prices).
Other financial investments are derivative investments 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.
The Fund uses closing prices for derivatives included in Level 1, which are
traded either on exchanges or liquid over-the counter markets. Derivative
assets and liabilities included in Level 2 primarily represent interest rate
swaps, cross-currency swaps and foreign currency and commodity forward and
option contracts. Derivative assets and liabilities included in Level 3
primarily represent interest rate products that contain embedded optionality or
prepayment features.
Transfers in and out of Level 3 are considered to occur at the beginning of the
period.
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. For example, money
market securities are valued using amortized cost, in accordance with the
Investment Company Act of 1940. Generally, amortized cost reflects the current
fair value of a security, but since the value is not obtained from a quoted
price in an active market, such securities are reflected as Level 2. Fair value
determinations are required for securities whose value is affected by a
significant event that will materially affect the value of a domestic or
foreign security and which occurs subsequent to the time of the close of the
principal market on which such domestic or foreign security trades but prior to
the calculation of the Fund's NAV.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objective 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.
15
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 of foreign denominated securities from
the fluctuations arising from changes in the market prices of those 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.
DERIVATIVES The Fund is subject to equity price risk, and foreign currency
exchange rate risk in the normal course of pursuing its investment objective.
The Fund may enter into derivative transactions for the purpose of hedging
against the effects of changes in the value of portfolio securities due to
anticipated changes in market conditions and to gain market exposure for
residual and accumulating cash positions. 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 and 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.
FUTURES CONTRACTS The Fund may invest in interest rate, financial, stock and
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 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
16
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
The Fund is subject to ASC 740, INCOME TAXES. ASC 740 provides guidance for
financial accounting and reporting for the effects of income taxes that result
from an entity's activities during the year. ASC 740 also provides guidance
regarding how certain uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements. ASC 740 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.
There are no adjustments to the Fund's net assets required under ASC 740. The
Fund's 2006, 2007, 2008 and 2009 fiscal years tax returns are still open to
examination by the Federal and applicable state tax authorities.
At June 30, 2010, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation) on
Tax Purposes Appreciation Depreciation Investments
-------------------------------------------------------------------
$44,432,006 $3,318,676 $(6,882,574) $(3,563,898)
As of December 31, 2009, the Fund has capital loss carryovers as indicated
below.
Amount Expires
---------------------
$3,967,588 12/31/2017
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 after October 31, 2009 as follows:
Capital Currency
-----------------
$358,984 $--
17
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
The tax composition of distributions paid during the years ended December 31,
2009 and December 31, 2008 were as follows:
Ordinary Long-Term Return of
Income Capital Gains Capital Total
-------------------------------------------------
2009 $153,151 $ -- $ -- $ 153,151
2008 323,003 2,651,304 11,153 2,985,460
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays any dividends from net
investment income annually. The Fund also declares and pays any 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.
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.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued FASB Accounting
Standards Codification (ASC) effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The ASC is an
aggregation of previously issued authoritative U.S. generally accepted
accounting principles (GAAP) in one comprehensive set of guidance organized by
subject area. In accordance with the ASC, references to previously issued
accounting standards have been replaced by ASC references. Subsequent revisions
to GAAP will be incorporated into the ASC through Accounting StandardsUpdates
(ASU).
The Fund adopted ASC 855, SUBSEQUENT EVENTS effective October 2009. ASC 855
establishes principles and requirements for subsequent events, in particular
(a) the period after the balance sheet date during which management of a
reporting entity shall evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; (b) the
circumstances under which an entity shall recognize events or transactions
occurring after the balance sheet date in its financial statements; and (c) the
disclosures that an entity shall make about events or transactions that
occurred after the balance sheet date.
In January 2010, FASB issued ASU 2010-06, IMPROVING DISCLOSURES ABOUT FAIR
VALUE MEASUREMENTS. ASU 2010-06 requires reporting entities to make new
disclosures about the amounts and reasons for significant transfers in and out
of Level 1 and Level 2 fair value measurements and inputs and valuation
techniques used to measure fair value for both recurring and nonrecurring fair
value measurements that fall in either Level 2 or Level 3, and information on
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new disclosures were effective for interim and
annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures will
be effective for fiscal years beginning after December 15, 2010, and for
interim periods within those fiscal years. GEAM does not believe the adoption
of ASU 2010-06 will materially impact the financial statement amounts.
3. FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 2008. This guidance establishes a new framework for measuring fair
value and expands related disclosures. Broadly, the 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
18
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
most advantageous market for the asset or liability in an orderly transaction
between market participants. It also establishes a three-level valuation
hierarchy based upon observable and non-observable inputs.
The following tables present the Fund's investments measured at fair value on a
recurring basis at June 30, 2010:
Level 1 Level 2 Level 3 Total
-----------------------------------------------------------------------------
Investments in Securities
Common Stock $39,638,623 $ -- $-- $39,638,623
Other Investments -- 3,037 -- 3,037
Short-Term Investments 1,226,449 -- -- 1,226,449
-----------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES $40,865,072 $3,037 $-- $40,868,109
-----------------------------------------------------------------------------
OTHER FINANCIAL INSTRUMENTS
Futures Contracts -- Unrealized
Depreciation $ (8,269) $ -- $-- $ (8,269)
4. DERIVATIVES TRANSACTIONS
Shown below are the derivative contracts entered into by the Fund, summarized
by primary risk exposure.
Asset Derivatives June 30, 2010 Liability Derivatives June 30, 2010
--------------------------------------- --------------------------------------
Location in the Location in
Derivatives not Statements the Statements
accounted for as of Assets Fair of Assets Fair
hedging instruments and Liabilities Value ($) and Liabilities Value ($)
under ASC 815 ----------------------------- --------- ---------------------------- ---------
- - ------------------------------------------------------------------------------
Equity Contracts Receivables, Net Assets -- Liabilities, Net Assets --
Net Unrealized appreciation/ Net unrealized appreciation/
(depreciation) on Futures -- (depreciation) on Futures (8,269)*
- ---------------------------------------------------------------------------------------------------
*INCLUDES CUMULATIVE APPRECIATION/DEPRECIATION OF FUTURES CONTRACTS AS REPORTED
IN THE SCHEDULE OF INVESTMENTS AND WITHIN THE COMPONENTS OF NET ASSETS SECTION
OF THE STATEMENTS OF ASSETS AND LIABILITIES. ONLY THE CURRENT DAY'S VARIATION
MARGIN IS REPORTED WITHIN THE RECEIVABLES AND/OR PAYABLES OF THE STATEMENTS OF
ASSETS AND LIABILITIES.
Refer to the Schedule of Investments for ending notional value.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Total Notional of
Derivatives not accounted Location in the Futures/Options Realized Gain or
for as hedging instruments Statements of Contracts (Loss) on Derivatives
under ASC 815 Operations Purchased/(Sold) ($) Recognized in Income ($)
- ---------------------------------------------------------------------------------------------------------
Equity Contracts Realized gain/(loss) on
futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on Futures 4,298,088/(4,985,061) 67,152
- ---------------------------------------------------------------------------------------------------------
Change in Unrealized
Derivatives not accounted Appreciation/(Depreciation)
for as hedging instruments on Derivatives
under ASC 815 Recognized in Income ($)
- -------------------------------------------------------
Equity Contracts
527
- -------------------------------------------------------
5. 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 ("State Street"). The revolving credit facility
requires the payment of a commitment fee equal to 0.15% 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. Generally, borrowings under the credit facilities would accrue interest
at the Federal Funds Rate plus 50 basis points (0.50%) 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%
19
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
of its net assets. The credit facilities were not utilized by the Fund during
the period ended June 30, 2010.
6. FEES AND COMPENSATION 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%.
GEAM waives a portion of the Fund's Management Fee in the amount equal to the
management fee earned by GEAM with respect to the Funds Investment in the GE
Funds-GE Money Market Fund.
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.
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 is 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.)
7. 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, 2010 were as follows:
Purchases Sales
---------------------------------------------------
$4,341,627 $7,459,257
SECURITY LENDING For the six-month period ended June 30, 2010, the Fund did not
participate in securities lending.
8. SUBSEQUENT EVENTS
Subsequent events after the balance sheet date through the date that the
financial statements were issued have been evaluated in the preparation of the
Financial Statements. There are no items to report.
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 61
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 -- 13 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; 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;
Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993 and GE Institutional Funds since 1997; 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 2003;
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 49
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 GEAM from
February 1997 to July 2007; Vice President and Associate General Counsel of
GEAM from October 1992 to February 1997; Secretary of GE Funds from 1997 to
July 2007 and Vice President from September 2003 to June 2007; Secretary of GE
Institutional Funds and the fund from 1997 to July 2007, and Vice President
from September 2003 to July 2007; Vice President of Elfun Funds and GE
Savings & Security Funds from October 2003 to July 2007; Assistant Secretary of
Elfun Funds and GE Savings & Security Funds from 1998 to July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds and General Electric Pension
Trust, since July 2007.
21
Additional Information (unaudited)
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 44
POSITION(S) HELD WITH FUND Vice President; Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 5 years (Vice President); 2 years (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Commercial Administrative Officer
of GEAM since April 2010; Senior Vice President and Deputy General Counsel at
GE Asset Management from October 2007 to April 2010; 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
Secretary of GE Funds and GE Institutional Funds since July 2007; Vice
President and Assistant Secretary of GE Institutional Funds and GE Investments
Funds, Inc. from September 2003 to 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
- --------------------------------------------------------------------------------
ROBERT HERLIHY
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Chief Compliance Officer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 4 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Chief Compliance Officer of GEAM,
GE Funds, GE Institutional Funds, Elfun Funds, and GE Savings and Security
Funds since July 2005; Manager of Fund Administration at GEAM from 2002-2005.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
- --------------------------------------------------------------------------------
EUNICE TSANG
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 50
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- less than one year
PRINCIPAL OCCUPATIONS(S) DURING PAST 5 YEARS Treasurer of GE Funds, GE
Institutional Funds, Elfun Funds and GE Savings and Security Funds since
January 2010; GEAM Operational Controllership and Technical Accounting Manager
since December 2007; Financial Planning & Analysis Manager -- Performance
Leader from June 2005 to December 2007; GEAM Quality Black Belt from 2001 to
June 2005; Financial Planning & Analysis Manager from 2000 to 2001; and Mutual
Fund Assistant Controller from October 1997 to 2000.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
22
Additional Information (unaudited)
- ---------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 64
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Vice President of Walden Capital Management
since 1996.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since 1997; Trustee of Fordham University from 1989 to 1995
and 2001 to 2007 and Trustee Emeritus since 2007; Trustee of Neuro Science
Research Institute since 1986; Trustee of Gregorian University Foundation from
1992 to 2007; Director of Artes Medical from 2006 to 2008.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since July 2007 from
Fairfield University. From 1983 to July 2007, Vice President and Treasurer of
Fairfield University.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 74
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997.
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 1-800-493-3042.
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
Kimberley Costello
Michelle Matzelle
TREASURER
Eunice Tsang
ASSISTANT TREASURER
Leslie Spadone
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
Cheryl H. Beacock, SENIOR VICE PRESIDENT, HUMAN RESOURCES
Daniel O. Colao, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER -- MUTUAL FUNDS &
INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT AND CHIEF INVESTMENT OFFICER -- FIXED INCOME
INVESTMENTS
Ralph R. Layman, PRESIDENT AND CHIEF INVESTMENT OFFICER -- PUBLIC EQUITY
INVESTMENTS
Maureen B. Mitchell, PRESIDENT -- INSTITUTIONAL SALES AND MARKETING
Matthew J. Simpson, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST
Don W. Torey, PRESIDENT -- ALTERNATIVE INVESTMENTS
John J. Walker, EXECUTIVE VICE PRESIDENT, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT AND CHIEF INVESTMENT OFFICER -- 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 1-800-493-3042; (ii) on the Fund's
website at http://www.geam.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.geam.com; and (ii) on the Commission's website at
http://www.sec.gov.
[LOGO] GE
GE Investments Funds, Inc.
Real Estate Securities Fund Letter from the Chairman
- ----------------------------------------------------------------------------
[PHOTO] 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,
2010. 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
The six-months ended June 30, 2010 presented investors with an extremely
challenging market environment after global equity markets tumbled in the
second half of the period due primarily to concerns about sovereign default
risk and slowing global growth. U.S. equities (S&P 500 Index) declined 6.7%
over the six-month period, while international stocks (MSCI EAFE Index) fell
13.2%.
At the start of 2010, equity markets experienced a selloff in January and early
February as investors reacted negatively to signs that there was a lower
probability of a V-shaped recovery. Concerns about new global financial
regulation, policy tightening in China, and high levels of U.S. and European
debt, especially Greek sovereign debt, further fueled the volatility. Stocks
reversed these losses in the second half of the first quarter, rising steadily
as optimism about corporate earnings changed the tone in the market. The S&P
500 Index advanced 5.4%, for the first quarter of 2010 and indexes tracking
smaller capitalization stocks enjoyed even greater advances. Gains were more
subdued in non-U.S. equity markets, with the MSCI EAFE Index advancing 0.9%
during the same quarter as fears of sovereign credit risk in Europe
overshadowed stronger earnings reports. Regionally, Japan took top honors in
the first quarter, rising 8.2% based on relatively attractive stock valuations.
Canada rose 6.0%, followed by the Pacific Rim (+3.1%), and Emerging Markets
(+2.4%). The U.K. fell 0.6% while Continental Europe dropped 2.4% as Greece's
budget deficit crisis raised concerns about other highly indebted Eurozone
countries, including Portugal, Italy, Ireland, Spain, and even the United
Kingdom. The U.S. bond market returned 1.8% (Barclays Capital U.S. Aggregate
Bond Index) in the first quarter helped by another solid performance by the
credit related sectors. Fixed income securities outside the U.S. performed
similarly, however the Barclays Global Aggregate Un-hedged Bond Index lost 0.3%
(in U.S. dollar terms) due primarily to the strengthening dollar versus other
major currencies.
Although the second quarter of 2010 started quietly, stocks plunged in May as
concerns about Europe's sovereign debt problems pressured equity markets and
many investors sought defensive investments such as gold and treasury bonds.
Adding to Greece's sovereign debt woes, anxieties around contagion grew as
Spain stepped further into the European debt crisis amid credit downgrades
driven by its deteriorating economy and public finances. In June, the 2010 G20
Toronto Summit confirmed that the industrialized world leaders were committed
to reducing budget deficits through austerity measures. Some investors,
however, worried that these measures could reduce global growth and slow the
economic recovery. Several other concerns fuelled greater risk aversion during
the second quarter including increased evidence of slower growth in China, a
new resource tax in Australia, an alarming May 6th "flash crash" which sent
U.S. stocks plummeting within minutes, impending U.S. financial reform
legislation, and the spreading impact of BP's massive oil spill in the Gulf of
Mexico. At quarter end, the S&P 500 Index and the MSCI EAFE Index had tumbled
11.4% and 14.0%, respectively, in the three months ended June 30. Regionally,
Emerging Markets fared best during the second quarter, down 8.4%, followed by
Japan (-10.1%), Canada (-10.5%) and the U.K. (-13.9%). The worst performing
regions were Europe (-15.8%) and the Pacific Rim (-14.3%). In this environment,
U.S. Treasuries were the "safe" investment of choice for many investors seeking
to avoid riskier asset classes. The "flight to quality" pulled treasury yields
down across all maturity periods. The Barclays Capital U.S.
[LOGO] GE
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Real Estate Securities Fund
- ----------------------------------------------------
Aggregate Bond Index returned 3.49% in the second quarter, while the Barclays
Capital Global Aggregate Un-hedged Bond Index lost 0.04% over the same
three-month period owing mainly to widening spreads in European peripheral
countries and the declining euro.
Against a backdrop of weakening investor sentiment, financial markets posted
disparate results for the six- and twelve-month periods ended June 30, 2010.
TOTAL RETURNS AS OF JUNE 30, 2010 6-MONTH 12-MONTH
- -----------------------------------------------------------------------------
U.S. equities (S&P 500 Index) -6.7 14.4
Global equities (MSCI World Index) -9.8 10.2
International equities (MSCI EAFE Index) -13.2 5.9
Emerging Markets equities (MSCI EM Index) -6.2 23.2
Small-cap U.S. equities (Russell 2000 Index) -2.0 21.5
Mid-cap U.S. equities (Russell Mid Cap Index) -2.1 25.1
U.S. fixed income (Barclays Capital U.S. Aggregate Bond
Index) 5.3 9.5
U.S. short-term government fixed income (Barclays Capital
1-3 Year U.S. Government Bond Index) 1.9 2.9
U.S. tax-exempt income (Barclays Capital 10-Year U.S.
Municipal Bond Index) 4.1 9.6
- -----------------------------------------------------------------------------
OUTLOOK
In the face of the fiscal concerns throughout much of Europe and signs of
slowing economic activity around the globe, the wall of worry has become
exceedingly high for investors who want to see credible government budgets that
balance fiscal austerity and economic growth. At the core of the uncertainty,
in our view, is the issue of excessive borrowing, now afflicting sovereign
markets and reminding us that the financial crisis is not yet over. Our
economic view for the second half of 2010 still favors positive, albeit slow
growth which we believe should keep interest rates at record lows for months to
come. We also believe that the policy measures implemented in Europe will
improve sentiment towards sovereign and bank debt over the balance of the year.
But many challenges remain on the horizon, including the risk of fiscal policy,
taxation and regulation missteps that could hamper the recovery. As a result,
continued market volatility appears to be the one sure thing we can predict
with certainty.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. Today's
uncertain environment is why we believe it is important for long-term investors
to maintain a disciplined, diversified investment strategy consistent with
their goals, time horizon and risk tolerance. While diversified portfolios are
not immune to market downturns, history suggests they can put investors in a
position to benefit from a 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.
AUGUST 2010
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
GE Investments Funds, Inc.
Real Estate Securities Fund
Semi-Annual Report
JUNE 30, 2010
[LOGO] GE
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............................ 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, 2010 (unaudited)
- -----------------------------------------------------------------------------
Information on the following performance pages relating to the GE Investments
Real Estate Fund (the "Fund") total returns and Schedule of Investments is
unaudited. All other information, including the portfolio manager Q&A pages, is
also 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 fees and 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
800-493-3042 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in the 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 the 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. They do not reflect the actual cost
of investing in the instruments that comprise each index.
The peer universe of the underlying annuity funds used for the peer group
average annual return calculation is based on a blend of Morningstar peer
categories, as shown. Morningstar is an independent mutual fund rating service.
The 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 that of the Fund.
(C)2010 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 not 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 of 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
- --------------------------------------------------------------------------------
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, AT URDANG. 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 HELPS DIRECT
URDANG'S U.S. REAL ESTATE SECURITIES STRATEGY. AS PORTFOLIO MANAGER,
MR. ROTHMAN IS RESPONSIBLE FOR 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 1997 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, 2010?
A. For the six-month period ended June 30, 2010, the Real Estate Securities
Fund returned 5.11% for Class 1 shares and 4.88% for Class 4 shares. The
FTSE NAREIT Equity Index, the Fund's benchmark, returned 5.56% and the
Fund's Morningstar peer group of 52 US Insurance Real Estate funds returned
an average of 3.75% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED THE FUND PERFORMANCE?
A. Early in the year the performance of the FTSE NAREIT Equity Index was
disproportionately shifted in favor of a handful of small, "deep value,"
high risk REITs. These small, highly levered REITs hurt relative performance
of the Fund disproportionately. In fact, ten REITs which collectively
represented just 1.1% of the index at year-end 2009, negatively impacted
performance of the Fund by 43bps during the first quarter alone. This trend
reversed in the second quarter and relative performance was correspondingly
stronger in the second quarter than in the first.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund underperformed its benchmark by 45 basis points (net of fees and
expenses) for the six-month period for the Class 1 shares. Sector selection
contributed 51bps to the Fund's returns while stock selection generated a
9bps drag on performance. The effect of cash drag reduced relative
performance by 19bps, while fees and other items such as intra-day trading,
rounding, and the effect of cash flows, reduced relative performance by a
further 68bps. The contribution to relative performance from sector
selection was the primary the result of an overweight to the specialty and
apartment sectors and an underweight to the healthcare, timber and shopping
center sectors, partially offset by negative relative performance from an
overweight to the industrial sector. Stock selection was particularly strong
among picks within the office, healthcare, and regional mall sectors.
However, this was more than offset by negative performance from stock
selection within the hotel, industrial, specialty and shopping center
sectors which contained stocks that most benefited from the above-described
favoring of the "deep value" REITs that occurred early in the year.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. While we did not deviate from our investment process or philosophy during
the period, we did make a number of tactical changes to positioning to take
advantage of changing market conditions. Following
significant outperformance from the healthcare and
2
- --------------------------------------------------------------------------------
[GRAPHIC]
net lease sectors in 2009, and in light of an improving economic outlook we
chose to underweight both of these highly defensive sectors which we
expected would least benefit from an improvement in the macro economy. As
such, we shifted both sectors from overweight to underweight early in the
year. Conversely the apartment and hotel sectors (both of which had sold off
disproportionately during 2009 on fears of a prolonged recession) appeared
to represent good value. Given the short lease duration of both, we expected
they would be the first real estate sectors to benefit from an improving
economy. We increased exposure to both groups, shifting hotels from an
underweight to a meaningful overweight and raising the apartment exposure
before bringing it back down late in the second quarter following
significant positive relative performance of both sectors.
3
Real Estate Securities Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund, you incur ongoing fees and expenses, which
include portfolio management fees, distribution and service fees (for
shareholders of Class 1) 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,
2010.
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 $1,000 = 8.6), then multiply the result by the
number given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholders reports of other funds.
Please note that the expenses shown in the table for both "Actual" and
"Hypothetical" do not reflect any transaction costs, such as sales charges or
redemption fees. Additionally, the expenses shown do not reflect the fees or
charges associated with variable contracts through which shares of the Fund are
offered.
JANUARY 1, 2010 - JUNE 30, 2010
- --------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- --------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- --------------------------------------------------------------------------------------------
Class 1 1,000.00 1,051.13 5.09
Class 4 1,000.00 1,048.75 7.26
- --------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- --------------------------------------------------------------------------------------------
Class 1 1,000.00 1,019.64 5.01
Class 4 1,000.00 1,017.55 7.15
- --------------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.00% FOR CLASS
1 SHARES AND 1.43% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1, 2010 - JUNE
30, 2010), 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, 2010 WERE AS
FOLLOWS: 5.11% FOR CLASS 1 SHARES, AND 4.88% FOR CLASS 4 SHARES. PAST
PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
4
Real Estate Securities Fund
- -------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[CHART]
Real Estate Securities Fund NAREIT Equity Index
--------------------------- -------------------
Jun 1, 2000 $10,000.00 $10,000.00
Dec 1, 2000 11,398.12 11,165.07
Dec 1, 2001 12,747.37 12,720.69
Dec 1, 2002 12,575.81 13,206.72
Dec 1, 2003 17,286.41 18,110.87
Dec 1, 2004 22,868.17 23,829.83
Dec 1, 2005 25,562.31 26,728.21
Dec 1, 2006 34,004.83 36,099.30
Dec 1, 2007 28,951.96 30,434.69
Dec 1, 2008 18,519.85 18,952.40
Dec 1, 2009 25,144.55 24,257.22
Jun 1, 2010 26,430.18 25,605.07
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 5/1/95)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS+ YEAR YEAR YEAR $10,000 INVESTMENT (A)
- --------------------------------------------------------------------------------
Real Estate Securities Fund 5.11% 55.73% 1.98% 10.21% 26,430
- --------------------------------------------------------------------------------
NAREIT Equity Index 5.56% 53.90% 0.20% 9.86% 25,605
- --------------------------------------------------------------------------------
Morningstar peer group
average* 3.75% 45.86% -0.03% 9.24%
- --------------------------------------------------------------------------------
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[CHART]
Real Estate Securities Fund NAREIT Equity Index
--------------------------- -------------------
5/1/2008 $10,000.00 $10,000.00
Jun 1, 2008 8,765.43 8,981.15
Sep 1, 2008 9,176.95 9,479.83
Dec 1, 2008 5,701.39 5,801.31
Mar 1, 2009 4,027.10 3,952.51
Jun 1, 2009 5,207.91 5,092.81
Sep 1, 2009 6,996.76 6,787.47
Dec 1, 2009 7,704.68 7,425.11
Mar 1, 2010 8,419.27 8,169.03
Jun 1, 2010 8,080.30 7,837.68
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
SIX ONE SINCE ENDING VALUE OF A
MONTHS+ YEAR INCEPTION $10,000 INVESTMENT (A)
----------------------------------------------------------------------------
Real Estate Securities Fund 4.88% 55.15% -9.37% 8,080
----------------------------------------------------------------------------
NAREIT Equity Index 5.56% 53.90% -10.65% 7,838
----------------------------------------------------------------------------
Morningstar peer group
average* 3.75% 45.86%
----------------------------------------------------------------------------
INVESTMENT PROFILE [GRAPHIC]
A mutual fund designed for investors
who seek maximum total return through
current income and capital
appreciation by investing at least
80% of its net assets under normal
circumstances in common and preferred
stocks and other types of 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.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $54,833 (in thousands)
[CHART]
Multifamily 16.5%
Office 12.9%
Regional Malls 12.7%
Healthcare 10.6%
Shopping Centers 8.6%
Hotel 7.9%
Self Storage 7.5%
Specialty 7.2%
Diversified 6.0%
Industrial 5.2%
Short-Term 2.5%
Office/Industrial 1.1%
Freestanding 0.8%
Mortgage 0.5%
Other Investments 0.0%**
TOP TEN LARGEST EQUITY HOLDINGS
AS OF JUNE 30, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Simon Property Group Inc. 7.38%
--------------------------------
Public Storage 7.02%
--------------------------------
Equity Residential 6.11%
--------------------------------
Vornado Realty Trust 6.05%
--------------------------------
Boston Properties Inc. 4.23%
--------------------------------
Kimco Realty Corp. 3.98%
--------------------------------
ProLogis 3.65%
--------------------------------
The Macerich Co. 3.12%
--------------------------------
Camden Property Trust 2.92%
--------------------------------
HCP Inc. 2.76%
--------------------------------
(A)ENDING VALUE OF A $10,000 INVESTMENT FOR THE TEN-YEAR PERIOD OR SINCE
INCEPTION, WHICHEVER IS LESS.
* 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 U.S. INSURANCE REAL ESTATE PEER GROUP CONSISTING OF 52, 52,
48 AND 35 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
**LESS THAN 0.01%.
+ TOTAL RETURNS FOR THE PERIOD ENDED JUNE 30, 2010 ARE NOT ANNUALIZED.
++THE SECURITIES INFORMATION REGARDING HOLDINGS, ALLOCATIONS AND OTHER
CHARACTERISTICS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF SECURITIES THAT THE
FUND HAS BOUGHT AND THE DIVERSITY OF AREAS IN WHICH THE FUND MAY INVEST AS OF
A PARTICULAR DATE. IT MAY NOT BE REPRESENTATIVE OF THE FUND'S CURRENT OR
FUTURE INVESTMENTS AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL A PARTICULAR SECURITY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE. THE PERFORMANCE SHOWN IN
THE GRAPHS AND TABLES DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES AND DO NOT
REFLECT THE FEES OR CHARGES THAT WOULD BE ASSOCIATED WITH VARIABLE CONTRACTS
THROUGH WHICH SHARES OF THE FUND ARE OFFERED.
5
REAL ESTATE SECURITIES FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
NUMBER
OF SHARES VALUE
COMMON STOCK (REIT'S) -- 92.6% +
-----------------------------------------------------------------
DIVERSIFIED -- 6.1%
Vornado Realty Trust................. 45,470 $ 3,317,037
FREESTANDING -- 0.8%
National Retail Properties Inc....... 19,360 415,078
HEALTHCARE -- 10.7%
Cogdell Spencer Inc.................. 35,320 238,763
HCP Inc.............................. 46,900 1,512,525
Healthcare Inc....................... 29,250 1,232,010
Medical Properties Trust Inc......... 18,540 175,018
Nationwide Health Properties Inc..... 21,090 754,389
Senior Housing Properties Trust...... 39,730 798,970
Ventas Inc........................... 23,450 1,100,978
5,812,653
HOTEL -- 5.5%
Chesapeake Lodging Trust............. 11,290 178,608 (a)
DiamondRock Hospitality Co........... 33,770 277,589 (a)
Host Hotels & Resorts Inc............ 87,460 1,178,961
LaSalle Hotel Properties............. 25,740 529,472
Pebblebrook Hotel Trust.............. 22,880 431,288 (a)
Strategic Hotels & Resorts Inc....... 21,010 92,234 (a)
Sunstone Hotel Investors Inc......... 29,020 288,169 (a)
2,976,321
INDUSTRIAL -- 5.2%
AMB Property Corp.................... 36,070 855,220
ProLogis............................. 197,540 2,001,080
2,856,300
MORTGAGE -- 0.5%
Starwood Property Trust Inc.......... 16,260 275,607
MULTIFAMILY -- 16.6%
Apartment Investment & Management
Co.................................. 35,230 682,405
Camden Property Trust................ 39,170 1,600,094
Colonial Properties Trust............ 28,890 419,772
Equity Residential................... 80,490 3,351,604
Essex Property Trust Inc............. 15,450 1,506,993
UDR Inc.............................. 77,130 1,475,497
9,036,365
OFFICE -- 13.0%
Alexandria Real Estate Equities Inc.. 8 ,200 519,634
Boston Properties Inc................ 32,520 2,319,977
Brandywine Realty Trust.............. 80,140 861,505
Douglas Emmett Inc................... 24,290 345,404
HRPT Properties Trust................ 98,380 610,940
NUMBER
OF SHARES VALUE
Hudson Pacific Properties Inc............ 25,810 $ 445,222 (a)
Kilroy Realty Corp....................... 29,120 865,738 (c)
Parkway Properties Inc................... 19,246 280,414
SL Green Realty Corp..................... 14,910 820,646
7,069,480
OFFICE/INDUSTRIAL -- 1.1%
Duke Realty Corp......................... 52,010 590,313
REGIONAL MALLS -- 12.9%
CBL & Associates Properties Inc.......... 13,700 170,428
Simon Property Group Inc................. 50, 082 4,044,122
Taubman Centers Inc...................... 28,200 1,061,166
The Macerich Co.......................... 45,870 1,711,868
6,987,584
SELF STORAGE -- 7.6%
Public Storage........................... 43,760 3,846,942
U-Store-It Trust......................... 35,940 268,112
4,115,054
SHOPPING CENTERS -- 8.7%
Acadia Realty Trust...................... 14,450 243,049
Federal Realty Investment Trust.......... 13,130 922,645
Kimco Realty Corp........................ 162,570 2,184,941
Tanger Factory Outlet Centers............ 14,410 596,286
Weingarten Realty Investors.............. 40,140 764,667
4,711,588
SPECIALTY -- 3.9%
Digital Realty Trust Inc................. 23,820 1,373,938
Plum Creek Timber Company Inc............ 21,080 727,892
2,101,830
TOTAL COMMON STOCK (REIT)
(COST $43,362,849)...................... 50,265,210
--------------------------------------------------------------------
COMMON STOCK -- 5.9%
--------------------------------------------------------------------
HOTEL -- 2.5%
Orient-Express Hotels Ltd................ 16,710 123,654 (a)
Starwood Hotels & Resorts Worldwide Inc.. 29,110 1,206,027
1,329,681
SPECIALTY -- 3.4%
American Tower Corp...................... 22,960 1,021,720 (a)
Crown Castle International Corp.......... 22,740 847,292 (a)
1,869,012
TOTAL COMMON STOCK
(COST $3,026,402)....................... 3,198,693
--------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
--------------------------------------------------------------------
GEI Investment Fund
(COST $3,361)........................... 2,924 (d)
TOTAL INVESTMENTS IN SECURITIES
(COST $46,392,612)...................... 53,466,827
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements on page 13.
6
REAL ESTATE SECURITIES FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
---------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.5%
---------------------------------------------------------------------
GE MONEY MARKET FUND INSTITUTIONAL
CLASS 0.05%
(COST $1,366,523)..................... $ 1,366,523 (b,d)
TOTAL INVESTMENTS
(COST $47,759,135).................... 54,833,350
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (1.0)%......................... (524,085)
-----------
NET ASSETS -- 100.0%................... $54,309,265
===========
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements on page 13.
7
Notes to Schedule of Investments June 30, 2010 (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
information regarding holdings, allocations and other characteristics are
presented to illustrate examples of securities that the Fund has bought and the
diversity of areas in which the Fund may invest as of a particular date. It may
not be representative of the Fund's current or future investments and should
not be construed as a recommendation to purchase or sell a particular security.
Please see the Fund's prospectus for complete descriptions of investment
objective, policies, risks and permissible investments.
(a)Non-income producing security.
(b)Coupon amount represents effective yield.
(c)At June 30, 2010, 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)GE Asset Management, the investment adviser of the Fund, also serves as
investment adviser of the GEI Investment Fund and the GE Funds-GE Money
Market Fund.
* Less than 0.01%.
+ Percentages are based on net assets as of June 30, 2010.
Abbreviations:
REIT Real Estate Investment Trust
TBA To be announced
8
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
----------------------------------------------------------------------------------------------
CLASS 1 CLASS 4
----------------------------------------------------------------------------------------------
6/30/10+ 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05 6/30/10+ 12/31/09
------------------------------------------------------------------- -------------------------
INCEPTION DATE 5/1/95
Net asset value, beginning of
period.......................... $8.41 $6.46 $10.87 $21.49 $19.20 $19.54 $8.41 $6.47
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income.......... 0.93 1.03 1.11 0.72 0.65 0.70 0.05 0.29
Net realized and unrealized
gains/(losses) on
investments................... (0.50) 1.29 (5.05) (3.87) 5.68 1.62 0.36 1.99
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS........... 0.43 2.32 (3.94) (3.15) 6.33 2.32 0.41 2.28
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.......... -- 0.22 0.28 0.73 0.48 0.75 -- 0.19
Return of Capital.............. -- 0.15 0.19 0.02 -- -- -- 0.15
Net realized gains............. -- 0.00 0.00 6.72 3.56 1.91 -- 0.00
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS.............. -- 0.37 0.47 7.47 4.04 2.66 -- 0.34
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period.......................... $8.84 $8.41 $ 6.46 $10.87 $21.49 $19.20 $8.82 $8.41
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/(A)/................ 5.11% 35.77% (36.03)% (14.86)% 33.03% 11.78% 4.88% 35.14%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of period (in
thousands).................... $54,301 $70,574 $59,969 $96,650 $178,317 $143,801 $8 $8
Ratios to average net
assets:
Net investment
income*..................... 2.52% 4.75% 4.67% 2.59% 3.08% 3.21% 2.10% 4.26%
Net expenses*................ 1.00%/(b)/ 1.04%/(b)/ 0.95%/(b)/ 0.90% 0.88% 0.89% 1.43%/(b)/ 1.49%/(b)/
Gross expenses*.............. 1.01% 1.04% 0.95% 0.90% 0.88% 0.89% 1.44% 1.49%
Portfolio turnover rate...... 50% 105% 121% 106% 92% 52% 50% 105%
-------------
-------------
12/31/08
-------------
INCEPTION DATE 5/1/08
Net asset value, beginning of
period.......................... $12.15
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income.......... 0.39**
Net realized and unrealized
gains/(losses) on
investments................... (5.63)
- -----------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS........... (5.24)
- -----------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.......... 0.25
Return of Capital.............. 0.19
Net realized gains............. 0.00
- -----------------------------------------------
TOTAL DISTRIBUTIONS.............. 0.44
- -----------------------------------------------
Net asset value, end of
period.......................... $ 6.47
- -----------------------------------------------
TOTAL RETURN/(A)/................ (42.99)%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of period (in
thousands).................... $6
Ratios to average net
assets:
Net investment
income*..................... 4.67%
Net expenses*................ 1.40%/(b)/
Gross expenses*.............. 1.40%
Portfolio turnover rate...... 121%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a)Total returns are historical and assume changes in share price, reinvestment
of dividends and capital gains distributions 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. Past performance does not
guarantee future results.
(b)Reflects GE Asset Management's waiver of a portion of the Fund's management
fee in an amount equal to the management fee earned by GE Asset Management
with respect to the Fund's investment in the GE Funds -- GE Money Market.
* 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
Statement of Assets REAL ESTATE
and Liabilities JUNE 30, 2010 (UNAUDITED) SECURITIES
FUND
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $46,389,251)......... $ 53,463,903
Investments in affiliated securities, at market (cost $3,361)... 2,924
Short-term affiliated investments (at amortized cost)........... 1,366,523
Receivable for investments sold................................. 648,089
Income receivables.............................................. 143,223
Receivable for fund shares sold................................. 256
- --------------------------------------------------------------------------------
TOTAL ASSETS.................................................. 55,624,918
- --------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased............................... 1,141,101
Payable for fund shares redeemed................................ 26,627
Payable to GEAM................................................. 16,247
Accrued other expenses.......................................... 131,678
- --------------------------------------------------------------------------------
TOTAL LIABILITIES............................................. 1,315,653
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $ 54,309,265
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in................................................. 78,908,266
Undistributed (distribution in excess of) net investment income. 901,930
Accumulated net realized gain (loss)............................ (32,575,146)
Net unrealized appreciation/ (depreciation) on:
Investments................................................... 7,074,215
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $ 54,309,265
- --------------------------------------------------------------------------------
CLASS 1:
NET ASSETS........................................................ $ 54,301,184
Shares outstanding ($0.01 par value; unlimited shares authorized). 6,143,597
Net asset value per share......................................... $8.84
CLASS 4:
NET ASSETS........................................................ $ 8,081
Shares outstanding ($0.01 par value; unlimited shares authorized). 916
Net asset value per share......................................... $8.82
See Notes to Financial Statements.
10
Statement of Operations REAL ESTATE
FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED) SECURITIES
FUND
- --------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend............................................................. $ 1,045,771
Interest............................................................. 12,570
Interest from affiliated investments................................. 25
- --------------------------------------------------------------------------------------
TOTAL INCOME........................................................... 1,058,366
- --------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees..................................... 256,575
Distributors Fees (Note 6)
Class 4............................................................ 18
Transfer agent....................................................... 8,940
Director's fees...................................................... 952
Custody and accounting expenses...................................... 16,833
Professional fees.................................................... 10,642
Registration expenses................................................ 1,484
Other expenses....................................................... 8,068
- --------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT......................... 303,512
- --------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser............................. (1,499)
- --------------------------------------------------------------------------------------
Net expenses......................................................... 302,013
- --------------------------------------------------------------------------------------
NET INVESTMENT INCOME.................................................. 756,353
- --------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments........................................................ 8,196,078
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON:
Investments........................................................ (7,170,629)
- --------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments............... 1,025,449
- --------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........ $ 1,781,802
- --------------------------------------------------------------------------------------
See Notes to Financial Statements.
11
Statements of REAL ESTATE
Changes in Net Assets SECURITIES
FUND
- ---------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, YEAR ENDED
2010 DECEMBER 31,
(UNAUDITED) 2009
- ---------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss)............................................... $ 756,353 $ 2,241,130
Net realized gain (loss) on investments..................................... 8,196,078 (17,741,885)
Net increase (decrease) in unrealized appreciation / (depreciation) on
investments............................................................... (7,170,629) 35,228,868
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations..................................... 1,781,802 19,728,113
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1................................................................... -- (2,058,561)
Class 4................................................................... -- (208)
Return of Capital
Class 1................................................................... -- (895,120)
Class 4................................................................... -- (91)
- ---------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS........................................................... -- (2,953,980)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions........... 1,781,802 16,774,133
- ---------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1................................................................... 2,135,053 4,568,082
Class 4................................................................... -- --
Value of distributions reinvested
Class 1................................................................... -- 2,953,681
Class 4................................................................... -- 299
Cost of shares redeemed
Class 1................................................................... (20,189,686) (13,688,696)
Class 4................................................................... -- --
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions............................. (18,054,633) (6,166,634)
- ---------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS....................................... (16,272,831) 10,607,499
NET ASSETS
Beginning of period........................................................... 70,582,096 59,974,597
- ---------------------------------------------------------------------------------------------------------------
End of period................................................................. $ 54,309,265 $ 70,582,096
- ---------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD.. $ 901,930 $ 145,577
- ---------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold..................................................................... 236,011 847,735
Issued for distributions reinvested............................................. -- 345,053
Shares redeemed................................................................. (2,480,788) (2,086,754)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares.......................................... (2,244,777) (893,966)
- ---------------------------------------------------------------------------------------------------------------
CLASS 4
Shares sold..................................................................... -- --
Issued for distributions reinvested............................................. -- 35
Shares redeemed................................................................. -- --
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares.......................................... -- 35
- ---------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
12
Notes to Financial Statements June 30, 2010 (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 Fund 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
References to Level 1, Level 2 and Level 3 below are the classifications in the
fair value hierarchy and are described in the fair value measurement section.
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 the NASDAQ are valued using the NASDAQ Official Closing Price, which
may not necessarily represent the last sale price. Level 1 securities primarily
includes publicly-traded equity securities. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price. In these circumstances the Fund classifies the
investment securities in Level 2.
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. These securities are included in Level 2. In the absence of
a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations and would be classified in
Level 3.
Short-term investments of sufficient credit quality 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 and these would be classified
in Level 2. 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
and these are also included in Level 2.
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. These securities
would be classified in Level 3. 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
13
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
close of regular trading on the NYSE. In these circumstances the Fund
classifies the investment securities in Level 1. 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. In these circumstances the Fund
classifies the investment securities in Level 3. 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.
Portfolio securities may be valued using techniques other than market
quotations, under the circumstances described under above. The value
established for a portfolio security may be different than what would be
produced through the use of another methodology or if it had been priced using
market quotations. Portfolio securities that are valued using techniques other
than market quotations, including "fair valued" securities, may be subject to
greater fluctuation in their value from one day to the next than would be the
case if market quotations were used. In addition, there is no assurance that
the Fund could sell a portfolio security for the value established for it at
any time and it is possible that the Fund would incur a loss because a
portfolio security is sold at a discount to its established 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. 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. The Fund's income, expenses (other than distribution
fees) and realized and unrealized gains and losses are allocated proportionally
each day among each the Fund's respective share classes based upon the relative
net assets of each share class.
FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 1, 2008 for all financial instruments accounted for at fair value.
For financial assets and liabilities, fair value is the price the Fund would
receive 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 or 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 inputs are observable or whose
significant value drivers are observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
Policies and procedures are maintained to value investments using the best and
most relevant data available. In addition, GEAM performs periodic reviews of
the methodologies used by independent pricing services including price
validation of individual securities.
The following section describes the valuation methodologies the Fund uses to
measure different financial investments at fair value.
When available, the Fund uses quoted market prices to determine the 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, pricing information is obtained
from an independent pricing vendor. The pricing vendor uses various pricing
models for each asset class that are consistent with what other market
participants would use. The inputs and
14
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
assumptions to the model of the pricing vendor are derived from market
observable sources including: benchmark yields, reported trades, broker/dealer
quotes, issuer spreads, benchmark securities, bids, offers, and other
market-related data. Since many fixed income securities do not trade on a daily
basis, the methodology of the pricing vendor uses available information as
applicable such as benchmark curves, benchmarking of like securities, sector
groupings, and matrix pricing. The pricing vendor considers all available
market observable inputs in determining the evaluation for a security. Thus,
certain securities may not be priced using quoted prices, but rather determined
from market observable information. These investments are included in Level 2
and primarily comprise our portfolio of corporate fixed income, government,
mortgage and asset-backed securities. In infrequent circumstances, pricing
vendors may provide the Fund with valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
included in Level 3.
The Fund uses non-binding broker quotes as the primary basis for valuation when
there is limited, or no, relevant market activity for a specific investment or
for other investments that share similar characteristics. The Fund has not
adjusted the prices obtained. Investment securities priced using non-binding
broker quotes are included in Level 3. As is the case with the primary pricing
vendor, third-party brokers do not provide access to their proprietary
valuation models, inputs and assumptions. Accordingly, GEAM conducts internal
reviews of pricing for all such investment securities periodically to ensure
reasonableness of valuations used in our financial statements. These reviews
are designed to identify prices that appear stale, those that have changed
significantly from prior valuations, and other anomalies that may indicate that
a price may not be accurate. Based on the information available, GEAM believes
that the fair values provided by the brokers are representative of prices that
would be received to sell the assets at the measurement date (exit prices).
Other financial investments are derivative investments 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.
The Fund uses closing prices for derivatives included in Level 1, which are
traded either on exchanges or liquid over-the counter markets. Derivative
assets and liabilities included in Level 2 primarily represent interest rate
swaps, cross-currency swaps and foreign currency and commodity forward and
option contracts. Derivative assets and liabilities included in Level 3
primarily represent interest rate products that contain embedded optionality or
prepayment features.
Transfers in and out of Level 3 are considered to occur at the beginning of the
period.
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objective 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.
15
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates of foreign denominated securities from
the fluctuations arising from changes in the market prices of those 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, stock and
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 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.
16
Notes to Financial Statements June 30, 2010 (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.
The Fund is subject to ASC 740, INCOME TAXES. ASC 740 provides guidance for
financial accounting and reporting for the effects of income taxes that result
from an entity's activities during the year. ASC 740 also provides guidance
regarding how certain uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements. ASC 740 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.
There are no adjustments to the Fund's net assets required under ASC 740. The
Fund's 2006, 2007, 2008 and 2009 fiscal years tax returns are still open to
examination by the Federal and applicable state tax authorities.
At June 30, 2010, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation) on
Tax Purposes Appreciation Depreciation Investments
-------------------------------------------------------------------
$56,160,470 $8,184,945 $(9,512,065) $(1,327,120)
As of December 31, 2009, the Fund has capital loss carryovers, as indicated
below.
Amount Expires
----------------------
$ 7,213,699 12/31/2016
25,496,308 12/31/2017
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, 2009 as follows:
Capital Currency
----------------
$65,618 $--
The tax composition of distributions paid during the years ended December 31,
2009 and December 31, 2008 were as follows:
Ordinary Long-Term Return of
Income Capital Gains Capital Total
----------------------------------------------------
2009 $2,058,769 $-- $ 895,211 $2,953,980
2008 2,536,901 -- 1,496,701 4,033,602
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays any dividends from net
investment income annually. The Fund also declares and pays any 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.
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.
17
Notes to Financial Statements June 30, 2010 (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.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued FASB Accounting
Standards Codification (ASC) effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The ASC is an
aggregation of previously issued authoritative U.S. generally accepted
accounting principles (GAAP) in one comprehensive set of guidance organized by
subject area. In accordance with the ASC, references to previously issued
accounting standards have been replaced by ASC references. Subsequent revisions
to GAAP will be incorporated into the ASC through Accounting StandardsUpdates
(ASU).
The Fund adopted ASC 855, SUBSEQUENT EVENTS effective October 2009. ASC 855
establishes principles and requirements for subsequent events, in particular
(a) the period after the balance sheet date during which management of a
reporting entity shall evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; (b) the
circumstances under which an entity shall recognize events or transactions
occurring after the balance sheet date in its financial statements; and (c) the
disclosures that an entity shall make about events or transactions that
occurred after the balance sheet date.
In January 2010, FASB issued ASU 2010-06, IMPROVING DISCLOSURES ABOUT FAIR
VALUE MEASUREMENTS. ASU 2010-06 requires reporting entities to make new
disclosures about the amounts and reasons for significant transfers in and out
of Level 1 and Level 2 fair value measurements and inputs and valuation
techniques used to measure fair value for both recurring and nonrecurring fair
value measurements that fall in either Level 2 or Level 3, and information on
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new disclosures are effective for interim and
annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures will
be effective for fiscal years beginning after December 15, 2010, and for
interim periods within those fiscal years. GEAM does not believe the adoption
of ASU 2010-06 will materially impact the financial statement amounts.
3. FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 2008. This guidance establishes a new framework for measuring fair
value and expands related disclosures. Broadly, the 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. It also establishes a three-level valuation
hierarchy based upon observable and non-observable inputs.
The following tables present the Fund's investments measured at fair value on a
recurring basis at June 30, 2010:
Level 1 Level 2 Level 3 Total
------------------------------------------------------------------------
Investments in Securities
Common Stock (REIT's) $50,265,210 $ -- $-- $50,265,210
Common Stock 3,198,693 -- -- 3,198,693
Other Investments -- 2,924 -- 2,924
Short-Term Investments 1,366,523 -- -- 1,366,523
------------------------------------------------------------------------
Total Investments in Securities $54,830,426 $2,924 $-- $54,833,350
------------------------------------------------------------------------
4. 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 ("State Street"). The revolving credit facility
requires the payment of a commitment fee equal to 0.15% 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,
18
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
unsecured line of credit with State Street. Generally, borrowings under the
credit facilities would accrue interest at the Federal Funds Rate plus 50 basis
points (0.50%) 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 six-month period ended June 30, 2010.
5. FEES AND COMPENSATION 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 of Fund Administration Fees
-----------------------------------------------------
First $100 million 0.85%
Next $100 million 0.80%
Over $200 million 0.75%
GEAM waives a portion of the Fund's management fee in the amount equal to the
management fee earned by GEAM with respect to the Funds investment in the GE
Funds -- GE Money Market 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 is 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.)
6. 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.
7. 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, 2010 were as follows:
Purchases Sales
-----------------------
$29,583,778 $45,986,750
SECURITY LENDING For the six-month period ended June 30, 2010, the Fund did not
participate in securities lending.
8. SUBSEQUENT EVENTS
Subsequent events after the balance sheet date through the date that the
financial statements were issued have been evaluated in the preparation of the
Financial Statements. There are no items to report.
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 61
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 -- 13 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; 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;
Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993 and GE Institutional Funds since 1997; 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 2003;
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 49
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 GEAM from
February 1997 to July 2007; Vice President and Associate General Counsel of
GEAM from October 1992 to February 1997; Secretary of GE Funds from 1997 to
July 2007 and Vice President from September 2003 to June 2007; Secretary of GE
Institutional Funds and the Fund from 1997 to July 2007, and Vice President
from September 2003 to July 2007; Vice President of Elfun Funds and GE
Savings & Security Funds from October 2003 to July 2007; Assistant Secretary of
Elfun Funds and GE Savings & Security Funds from 1998 to July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds and General Electric Pension
Trust, since July 2007.
20
Additional Information (unaudited)
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 44
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 5 years (Vice President); 2 years (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Commercial Administrative Officer
of GEAM since April 2010; Senior Vice President and Deputy General Counsel at
GE Asset Management from October 2007 to April 2010; 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
Secretary of GE Funds and GE Institutional Funds since July 2007; Vice
President and Assistant Secretary of GE Institutional Funds and GE Investments
Funds, Inc. from September 2003 to 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
- --------------------------------------------------------------------------------
ROBERT HERLIHY
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Chief Compliance Officer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 4 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Chief Compliance Officer of GEAM,
GE Funds, GE Institutional Funds, Elfun Funds, and GE Savings and Security
Funds since July 2005; Manager of Fund Administration at GEAM from 2002-2005.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
- --------------------------------------------------------------------------------
EUNICE TSANG
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 50
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- less than one year
PRINCIPAL OCCUPATIONS(S) DURING PAST 5 YEARS Treasurer of GE Funds, GE
Institutional Funds, Elfun Funds and GE Savings and Security Funds since
January 2010; GEAM Operational Controllership and Technical Accounting Manager
since December 2007; Financial Planning & Analysis Manager -- Performance
Leader from June 2005 to December 2007; GEAM Quality Black Belt from 2001 to
June 2005; Financial Planning & Analysis Manager from 2000 to 2001; and Mutual
Fund Assistant Controller from October 1997 to 2000.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
21
Additional Information (unaudited)
- ---------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 64
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Vice President of Walden Capital Management
since 1996.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since 1997; Trustee of Fordham University from 1989 to 1995
and 2001 to 2007 and Trustee Emeritus since 2007; Trustee of Neuro Science
Research Institute since 1986; Trustee of Gregorian University Foundation from
1992 to 2007; Director of Artes Medical from 2006 to 2008.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since July 2007 from
Fairfield University. From 1983 to July 2007, Vice President and Treasurer of
Fairfield University.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 74
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997. 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 1-800-493-3042.
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
Kimberley Costello
Michelle Matzelle
TREASURER
Eunice Tsang
ASSISTANT TREASURER
Leslie Spadone
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
Cheryl H. Beacock, SENIOR VICE PRESIDENT, HUMAN RESOURCES
Daniel O. Colao, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER -- MUTUAL FUNDS &
INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT AND CHIEF INVESTMENT OFFICER -- FIXED INCOME
INVESTMENTS
Ralph R. Layman, PRESIDENT AND CHIEF INVESTMENT OFFICER -- PUBLIC EQUITY
INVESTMENTS
Maureen B. Mitchell, PRESIDENT -- INSTITUTIONAL SALES AND MARKETING
Matthew J. Simpson, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST
Don W. Torey, PRESIDENT -- ALTERNATIVE INVESTMENTS
John J. Walker, EXECUTIVE VICE PRESIDENT, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT AND CHIEF INVESTMENT OFFICER -- 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 1-800-493-3042; (ii) on the Fund's
website at http://www.geam.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.geam.com; and (ii) on the Commission's website at
http://www.sec.gov.
[LOGO] GE
GE Investments Funds, Inc.
Small-Cap Equity Fund Letter from the Chairman
- ----------------------------------------------------------------------------
[PHOTO] 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,
2010. 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
The six-months ended June 30, 2010 presented investors with an extremely
challenging market environment after global equity markets tumbled in the
second half of the period due primarily to concerns about sovereign default
risk and slowing global growth. U.S. equities (S&P 500 Index) declined 6.7%
over the six-month period, while international stocks (MSCI EAFE Index) fell
13.2%.
At the start of 2010, equity markets experienced a selloff in January and early
February as investors reacted negatively to signs that there was a lower
probability of a V-shaped recovery. Concerns about new global financial
regulation, policy tightening in China, and high levels of U.S. and European
debt, especially Greek sovereign debt, further fueled the volatility. Stocks
reversed these losses in the second half of the first quarter, rising steadily
as optimism about corporate earnings changed the tone in the market. The S&P
500 Index advanced 5.4%, for the first quarter of 2010 and indexes tracking
smaller capitalization stocks enjoyed even greater advances. Gains were more
subdued in non-U.S. equity markets, with the MSCI EAFE Index advancing 0.9%
during the same quarter as fears of sovereign credit risk in Europe
overshadowed stronger earnings reports. Regionally, Japan took top honors in
the first quarter, rising 8.2% based on relatively attractive stock valuations.
Canada rose 6.0%, followed by the Pacific Rim (+3.1%), and Emerging Markets
(+2.4%). The U.K. fell 0.6% while Continental Europe dropped 2.4% as Greece's
budget deficit crisis raised concerns about other highly indebted Eurozone
countries, including Portugal, Italy, Ireland, Spain, and even the United
Kingdom. The U.S. bond market returned 1.8% (Barclays Capital U.S. Aggregate
Bond Index) in the first quarter helped by another solid performance by the
credit related sectors. Fixed income securities outside the U.S. performed
similarly, however the Barclays Global Aggregate Un-hedged Bond Index lost 0.3%
(in U.S. dollar terms) due primarily to the strengthening dollar versus other
major currencies.
Although the second quarter of 2010 started quietly, stocks plunged in May as
concerns about Europe's sovereign debt problems pressured equity markets and
many investors sought defensive investments such as gold and treasury bonds.
Adding to Greece's sovereign debt woes, anxieties around contagion grew as
Spain stepped further into the European debt crisis amid credit downgrades
driven by its deteriorating economy and public finances. In June, the 2010 G20
Toronto Summit confirmed that the industrialized world leaders were committed
to reducing budget deficits through austerity measures. Some investors,
however, worried that these measures could reduce global growth and slow the
economic recovery. Several other concerns fuelled greater risk aversion during
the second quarter including increased evidence of slower growth in China, a
new resource tax in Australia, an alarming May 6th "flash crash" which sent
U.S. stocks plummeting within minutes, impending U.S. financial reform
legislation, and the spreading impact of BP's massive oil spill in the Gulf of
Mexico. At quarter end, the S&P 500 Index and the MSCI EAFE Index had tumbled
11.4% and 14.0%, respectively, in the three months ended June 30. Regionally,
Emerging Markets fared best during the second quarter, down 8.4%, followed by
Japan (-10.1%), Canada (-10.5%) and the U.K. (-13.9%). The worst performing
regions were Europe (-15.8%) and the Pacific Rim (-14.3%). In this environment,
U.S. Treasuries were the "safe" investment of choice for many investors seeking
to avoid riskier asset classes. The "flight to quality" pulled treasury yields
down across all maturity periods. The Barclays Capital U.S.
[LOGO] GE
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Small-Cap Equity Fund
- ----------------------------------------------------
Aggregate Bond Index returned 3.49% in the second quarter, while the Barclays
Capital Global Aggregate Un-hedged Bond Index lost 0.04% over the same
three-month period owing mainly to widening spreads in European peripheral
countries and the declining euro.
Against a backdrop of weakening investor sentiment, financial markets posted
disparate results for the six- and twelve-month periods ended June 30, 2010.
TOTAL RETURNS AS OF JUNE 30, 2010 6-MONTH 12-MONTH
- -----------------------------------------------------------------------------
U.S. equities (S&P 500 Index) -6.7 14.4
Global equities (MSCI World Index) -9.8 10.2
International equities (MSCI EAFE Index) -13.2 5.9
Emerging Markets equities (MSCI EM Index) -6.2 23.2
Small-cap U.S. equities (Russell 2000 Index) -2.0 21.5
Mid-cap U.S. equities (Russell Mid Cap Index) -2.1 25.1
U.S. fixed income (Barclays Capital U.S. Aggregate Bond
Index) 5.3 9.5
U.S. short-term government fixed income (Barclays Capital
1-3 Year U.S. Government Bond Index) 1.9 2.9
U.S. tax-exempt income (Barclays Capital 10-Year U.S.
Municipal Bond Index) 4.1 9.6
- -----------------------------------------------------------------------------
OUTLOOK
In the face of the fiscal concerns throughout much of Europe and signs of
slowing economic activity around the globe, the wall of worry has become
exceedingly high for investors who want to see credible government budgets that
balance fiscal austerity and economic growth. At the core of the uncertainty,
in our view, is the issue of excessive borrowing, now afflicting sovereign
markets and reminding us that the financial crisis is not yet over. Our
economic view for the second half of 2010 still favors positive, albeit slow
growth which we believe should keep interest rates at record lows for months to
come. We also believe that the policy measures implemented in Europe will
improve sentiment towards sovereign and bank debt over the balance of the year.
But many challenges remain on the horizon, including the risk of fiscal policy,
taxation and regulation missteps that could hamper the recovery. As a result,
continued market volatility appears to be the one sure thing we can predict
with certainty.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. Today's
uncertain environment is why we believe it is important for long-term investors
to maintain a disciplined, diversified investment strategy consistent with
their goals, time horizon and risk tolerance. While diversified portfolios are
not immune to market downturns, history suggests they can put investors in a
position to benefit from a 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.
August 2010
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
GE Investments Funds, Inc.
Small-Cap Equity Fund
Semi-Annual Report
JUNE 30, 2010
[LOGO] GE
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............................ 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...................................... 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, 2010 (unaudited)
- -----------------------------------------------------------------------------
Information on the following performance pages relating
to the GE Investments Small-Cap Equity Fund (the "Fund") total returns and
Schedule of Investments is unaudited. All other information, including the
portfolio manager Q&A pages, is also 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 fees and 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
800-493-3042 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in the 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 the 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. They do
not reflect the actual cost of investing in the instruments that comprise each
index.
The peer universe of the underlying annuity funds used for the peer group
average annual total return calculation is based on a blend of Morningstar peer
categories, as shown. Morningstar is an independent mutual fund rating service.
The 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 that of the Fund.
(C)2010 Morningstar, Inc. All Rights Reserved. The Morningstar information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not 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 of 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
- --------------------------------------------------------------------------------
[GRAPHIC]
[PHOTO] Judith A. Studer
Judith A. Studer
The Small-Cap Equity Fund utilizes 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 Judith A. Studer, who is vested with oversight authority
over the Fund's sub-advisers that provide day-to-day management of the assets
of the Fund allocated to them. Ms. Studer 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.; 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.
JUDITH A. STUDER is the Chief Market Strategist and a Director at GE Asset
Management. She has led the team of portfolio managers for the SMALL-CAP EQUITY
FUND since October 2009. Ms. Studer joined GE Asset Management in August 1984
and has held various positions at GE Asset Management including Senior Vice
President -- U.S. Equities from 1991 to 1995, Senior Vice President --
International Equities from 1995 to 2006, President -- Investment Strategies
from July 2006 to June 2007, and President -- U.S. Equities from June 2007 to
July 2009.
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, 2010?
A. For the six month period ending June 30, 2010, the Small-Cap Equity Fund
returned -1.02% for Class 1 shares and -1.23% for Class 4 shares. The
Russell 2000 Index, the Fund's benchmark, returned -1.95% and the Fund's
Morningstar peer group of 155 US Insurance Small Blend funds returned an
average of -2.60% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. In the first three months of 2010, U.S. equities finished one of their best
first quarters in a decade. However, stocks plunged in the second quarter as
double-dip fears emerged and investors sought defensive investments such as
gold and treasury bonds. As volatility spiked, an 11.4% pullback in the S&P
500 Index broke a four-quarter winning streak that drove the benchmark for
U.S. stocks up approximately 50 percent since April 1, 2009.
Over the last six-month period ended June 30, 2010, the Russell 2000
returned -1.95%, with the consumer discretionary, consumer staples, and
financials sectors providing the highest returns.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund's outperformance versus the benchmark was spread across eight
sectors, most pronounced in healthcare and consumer discretionary, where
strong stock selection drove the majority of the outperformance. Within
healthcare, the Fund had an overweight position returning 0.44%, while
healthcare stocks in the Russell 2000 Index returned -3.08%. Within consumer
discretionary, the Fund had a slight overweight position returning 5.5%,
while this sector in the Russell 2000 returned 1.77%. Although the Fund
exhibited strong stock selection in the financials sector, the large
underweight position resulted in a small drag on the performance versus the
benchmark.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. There have been minor sector changes in the Fund over the last six months
relative to the Russell 2000 benchmark. The largest portfolio underweight
continued to be in financials, with the largest overweight position in
healthcare. The Fund also exhibited modest underweight positions in energy
and utilities, and overweight positions in consumer staples and materials
sectors. We continue to believe the Fund's multi-sub-adviser approach can
enhance the Fund's performance over the long-term by providing a compliment
of active managers with diversification in style.
2
Small-Cap Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund, you incur ongoing fees and expenses, which
include portfolio management fees, distribution and service fees (for
shareholders of Class 1), 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,
2010.
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 $1,000 = 8.6), then multiply the result by the
number given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholders reports of other funds.
Please note that the expenses shown in the table for both "Actual" and
"Hypothetical" do not reflect any transaction costs, such as sales charges or
redemption fees. Additionally, the expenses shown do not reflect the fees or
charges associated with variable contracts through which shares of the Fund are
offered.
JANUARY 1, 2010 - JUNE 30, 2010
- ------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ------------------------------------------------------------------------------------------
Class 1 1,000.00 989.79 5.97
Class 4 1,000.00 987.70 8.08
- ------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ------------------------------------------------------------------------------------------
Class 1 1,000.00 1,018.62 6.06
Class 4 1,000.00 1,016.52 8.20
- ------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 1.21% for Class
1 shares and 1.64% for Class 4 shares (for the period January 1, 2010 - June
30, 2010), 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, 2010 were as
follows: -1.02% for Class 1 shares, and -1.23% for Class 4 shares. Past
performance does not guarantee future results.
3
Small-Cap Equity Fund (unaudited)
- ---------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[CHART]
Date Small-Cap Equity Fund Russell 2000 Index
- ----------- ------------------ ------------------
Jun 1, 2000 $10,000.00 $10,000.00
Dec 1, 2000 11,451.87 9,423.08
Dec 1, 2001 12,593.76 9,663.72
Dec 1, 2002 10,848.86 7,691.20
Dec 1, 2003 13,465.06 11,328.61
Dec 1, 2004 15,504.72 13,405.08
Dec 1, 2005 16,982.39 14,010.78
Dec 1, 2006 19,235.45 16,583.65
Dec 1, 2007 19,695.11 16,319.20
Dec 1, 2008 12,291.33 10,804.91
Dec 1, 2009 16,087.18 13,740.34
Jun 1, 2010 15,922.86 13,472.08
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 4/28/00)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS+ YEAR YEAR YEAR $10,000 INVESTMENT/(A)/
- ------------------------------------------------------------------------------------
Small-Cap Equity Fund -1.02% 19.33% -0.23% 4.76% $15,923
- ------------------------------------------------------------------------------------
Russell 2000 Index -1.95% 21.48% 0.35% 3.03% $13,472
- ------------------------------------------------------------------------------------
Morningstar peer group average* -2.60% 21.68% -0.30% 3.61%
- ------------------------------------------------------------------------------------
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[CHART]
Date Small-Cap Equity Fund Russell 2000 Index
- ----------- ---------------------- ------------------
May 1, 2008 $10,000.00 $10,000.00
Jun 1, 2008 9,535.65 9,654.09
Sep 1, 2008 8,756.22 9,546.67
Dec 1, 2008 6,280.21 7,053.10
Mar 1, 2009 5,617.81 5,998.43
Jun 1, 2009 6,808.46 7,239.42
Sep 1, 2009 7,856.56 8,635.07
Dec 1, 2009 8,183.56 8,969.26
Mar 1, 2010 8,778.88 9,763.03
Jun 1, 2010 8,082.94 8,794.14
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
SIX ONE SINCE ENDING VALUE OF A
MONTHS+ YEAR INCEPTION $10,000 INVESTMENT/(A)/
- ---------------------------------------------------------------------------------
Small-Cap Equity Fund -1.23% 18.72% -9.35% $8,083
- ---------------------------------------------------------------------------------
Russell 2000 Index -1.95% 21.48% -5.76% $8,794
- ---------------------------------------------------------------------------------
Morningstar peer group average* -2.60% 21.68%
- ---------------------------------------------------------------------------------
INVESTMENT PROFILE
[CHART]
A mutual fund designed for investors
who seek long-term growth of capital
by investing at least 80% of its net
assets under normal circumstances in
common and preferred stocks and other
types of equity securities of
small-cap companies. The Fund uses a
multi-sub-adviser investment strategy
that combines growth, value and core
investment management styles.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $46,877 (in thousands)
[CHART]
Healthcare 17.6%
Information Technology 17.3%
Industrials 16.1%
Consumer Discretionary 14.2%
Financials 12.4%
Consumer Staples 6.1%
Materials 5.8%
Energy 4.8%
Short-Term 4.4%
Utilities 1.2%
Telecommunication Services 0.1%
Other Investments 0.0%**
TOP TEN LARGEST EQUITY HOLDINGS
AS OF JUNE 30, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Sensient Technologies Corp. 1.18%
--------------------------------------------
Mednax Inc. 1.12%
--------------------------------------------
Del Monte Foods Co. 1.05%
--------------------------------------------
Waste Connections Inc. 0.98%
--------------------------------------------
HCC Insurance Holdings Inc. 0.95%
--------------------------------------------
LKQ Corp. 0.92%
--------------------------------------------
John Wiley & Sons Inc. 0.91%
--------------------------------------------
HMS Holdings Corp. 0.89%
--------------------------------------------
Cracker Barrel Old Country Store Inc. 0.88%
--------------------------------------------
Jarden Corp. 0.88%
--------------------------------------------
(a)Ending value of a $10,000 investment for the ten-year period or since
inception, whichever is less.
* 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
U.S. Insurance Small Blend peer group consisting of 155, 153, 130 and 95
underlying annuity funds, respectively.
**Less than 0.01%.
+ Total returns for the period ended June 30, 2010 are not annualized.
++The securities information regarding holdings, allocations and other
characteristics are presented to illustrate examples of securities that the
Fund has bought and the diversity of areas in which the Fund may invest as of
a particular date. It may not be representative of the Fund's current or
future investments and should not be construed as a recommendation to
purchase or sell a particular security.
See Notes to Performance on page 1 for further information, including an
explanation of Morningstar peer categories.
Past performance does not predict future performance. The performance shown in
the graphs and tables do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions on the redemption of Fund shares and do not
reflect the fees or charges that would be associated with variable contracts
through which shares of the Fund are offered.
4
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
SMALL-CAP EQUITY FUND
NUMBER
OF SHARES VALUE
COMMON STOCK -- 96.0% +
-----------------------------------------------------------
AEROSPACE & DEFENSE -- 1.1%
Esterline Technologies Corp.... 2,183 $ 103,583 /(a)/
GenCorp Inc.................... 6,800 29,784 /(a)/
Teledyne Technologies Inc...... 9,240 356,479 /(a)/
489,846
AIR FREIGHT & LOGISTICS -- 0.2%
Dynamex Inc.................... 2,200 26,840 /(a)/
UTi Worldwide Inc.............. 6,050 74,899
101,739
AIRLINES -- 0.1%
Alaska Air Group Inc........... 1,000 44,950 /(a)/
AUTO COMPONENTS -- 0.3%
China Automotive Systems Inc... 2,400 42,240 /(a)/
Federal-Mogul Corp............. 2,800 36,456 /(a)/
Wonder Auto Technology Inc..... 9,330 68,296 /(a)/
146,992
AUTOMOBILES -- 0.1%
Thor Industries Inc............ 1,900 45,125
BIOTECHNOLOGY -- 1.2%
Cubist Pharmaceuticals Inc..... 5,500 113,300 /(a)/
Genomic Health Inc............. 6,000 77,580 /(a)/
Martek Biosciences Corp........ 7,027 166,610 /(a)/
Myriad Genetics Inc............ 10,500 156,975 /(a)/
PDL BioPharma Inc.............. 8,440 47,433
561,898
CAPITAL MARKETS -- 1.6%
Affiliated Managers Group Inc.. 3,365 204,491 /(a)/
GFI Group Inc.................. 31,070 173,371
Raymond James Financial Inc.... 14,980 369,856
747,718
CHEMICALS -- 2.5%
Arch Chemicals Inc............. 7,010 215,487
Koppers Holdings Inc........... 8,600 193,328
NewMarket Corp................. 1,221 106,618
Omnova Solutions Inc........... 7,000 54,670 /(a)/
Sensient Technologies Corp..... 21,340 553,346
Stepan Co...................... 500 34,215
1,157,664
COMMERCIAL BANKS -- 3.2%
Cullen Bankers Inc............. 5,740 295,036
First Midwest Bancorp Inc...... 5,900 71,744
NUMBER
OF SHARES VALUE
Fulton Financial Corp.............. 10,400 $ 100,360
Prosperity Bancshares Inc.......... 7,880 273,830
SVB Financial Group................ 6,320 260,574 /(a)/
UMB Financial Corp................. 7,000 248,920
Westamerica Bancorporation......... 4,180 219,534
1,469,998
COMMERCIAL SERVICES & SUPPLIES -- 3.0%
ABM Industries Inc................. 14,900 312,155
Copart Inc......................... 5,000 179,050 /(a)/
Healthcare Services Group Inc...... 10,740 203,523
Herman Miller Inc.................. 3,780 71,329
Multi-Color Corp................... 3,800 38,912
Ritchie Bros Auctioneers Inc....... 8,100 147,582
Waste Connections Inc.............. 13,100 457,059 /(a)/
1,409,610
COMMUNICATIONS EQUIPMENT -- 1.2%
Acme Packet Inc.................... 1,700 45,696 /(a)/
Cogo Group Inc..................... 7,062 44,067 /(a)/
CommScope Inc...................... 9,350 222,249 /(a)/
Comtech Telecommunications Corp.... 1,398 41,842 /(a)/
Loral Space & Communications Inc... 1,600 68,352 /(a)/
Netgear Inc........................ 2,100 37,464 /(a)/
Oplink Communications Inc.......... 1,900 27,227 /(a)/
PC-Tel Inc......................... 7,100 35,784 /(a)/
Plantronics Inc.................... 1,800 51,480
574,161
COMPUTERS & PERIPHERALS -- 0.1%
Super Micro Computer Inc........... 2,700 36,450 /(a)/
CONSTRUCTION & ENGINEERING -- 1.3%
Chicago Bridge & Iron Company N.V.. 14,000 263,340 /(a)/
Great Lakes Dredge & Dock Corp..... 9,500 57,000
Quanta Services Inc................ 3,500 72,275 /(a)/
URS Corp........................... 5,550 218,393 /(a)/
611,008
CONSUMER FINANCE -- 0.3%
Ezcorp Inc......................... 2,200 40,810 /(a)/
First Cash Financial Services Inc.. 2,200 47,960 /(a)/
Nelnet Inc......................... 2,200 42,416
131,186
CONTAINERS & PACKAGING -- 2.1%
Aptargroup Inc..................... 9,100 344,162
Packaging Corporation of America... 15,570 342,851
Rock-Tenn Co....................... 1,200 59,604
Silgan Holdings Inc................ 8,000 227,040
973,657
DISTRIBUTORS -- 0.9%
LKQ Corp........................... 22,461 433,048 /(a)/
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements on page 15.
5
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
DIVERSIFIED CONSUMER SERVICES -- 1.6%
American Public Education Inc...... 4,000 $ 174,800 /(a)/
Bridgepoint Education Inc.......... 900 14,229 /(a)/
K12 Inc............................ 10,570 234,443 /(a)/
Lincoln Educational Services Corp.. 5,500 113,245 /(a)/
Matthews International Corp........ 7,500 219,600
756,317
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.1%
tw telecom inc..................... 2,900 48,372 /(a)/
ELECTRIC UTILITIES -- 0.8%
IDACORP Inc........................ 10,600 352,662
ELECTRICAL EQUIPMENT -- 1.4%
Baldor Electric Co................. 7,030 253,642
Brady Corp......................... 10,100 251,692
GT Solar International Inc......... 4,900 27,440 /(a)/
Woodward Governor Co............... 3,700 94,461
627,235
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.8%
Benchmark Electronics Inc.......... 5,885 93,277 /(a)/
Checkpoint Systems Inc............. 2,600 45,136 /(a)/
CTS Corp........................... 3,400 31,416
DDi Corp........................... 4,600 34,638
FARO Technologies Inc.............. 4,000 74,840 /(a)/
ICx Technologies Inc............... 5,000 36,500 /(a)/
Methode Electronics Inc............ 4,800 46,752
National Instruments Corp.......... 8,100 257,418
Newport Corp....................... 11,700 106,002 /(a)/
Park Electrochemical Corp.......... 2,400 58,584
Plexus Corp........................ 1,200 32,088 /(a)/
Vishay Intertechnology Inc......... 5,000 38,700 /(a)/
855,351
ENERGY EQUIPMENT & SERVICES -- 2.3%
Dril-Quip Inc...................... 7,780 342,476 /(a)/
Gulf Island Fabrication Inc........ 1,000 15,520
Lufkin Industries Inc.............. 1,400 54,586
Oil States International Inc....... 8,200 324,556 /(a)/
Pioneer Drilling Co................ 11,115 63,022 /(a)/
Superior Energy Services Inc....... 10,100 188,567 /(a)/
Tetra Technologies Inc............. 8,100 73,548 /(a)/
1,062,275
FOOD & STAPLES RETAILING -- 0.7%
Ruddick Corp....................... 8,900 275,811
Spartan Stores Inc................. 4,960 68,051
343,862
FOOD PRODUCTS -- 4.1%
Darling International Inc.......... 29,650 222,672 /(a)/
Del Monte Foods Co................. 34,300 493,577
Flowers Foods Inc.................. 13,100 320,033
NUMBER
OF SHARES VALUE
Lancaster Colony Corp............... 2,400 $ 128,064
Lance Inc........................... 9,000 148,410
Smart Balance Inc................... 18,200 74,438 /(a)/
Smithfield Foods Inc................ 18,855 280,939 /(a)/
The Hain Celestial Group Inc........ 12,100 244,057 /(a)/
1,912,190
HEALTHCARE EQUIPMENT & SUPPLIES -- 5.7%
Accuray Inc......................... 7,100 47,073 /(a)/
Align Technology Inc................ 2,900 43,123 /(a)/
American Medical Systems
Holdings Inc....................... 12,100 267,652 /(a)/
Analogic Corp....................... 1,000 45,510
Cantel Medical Corp................. 2,100 35,070
ev3 Inc............................. 7,100 159,111 /(a)/
Gen-Probe Inc....................... 5,000 227,100 /(a)/
Haemonetics Corp.................... 1,200 64,224 /(a)/
Immucor Inc......................... 6,075 115,729 /(a)/
Integra LifeSciences Holdings Corp.. 6,700 247,900 /(a)/
Masimo Corp......................... 6,400 152,384
Medical Action Industries Inc....... 20,830 249,752 /(a)/
Meridian Bioscience Inc............. 6,000 102,000
Natus Medical Inc................... 3,100 50,499 /(a)/
NuVasive Inc........................ 4,985 176,768 /(a)/
Sirona Dental Systems Inc........... 1,400 48,776 /(a)/
SonoSite Inc........................ 4,000 108,440 /(a)/
SurModics Inc....................... 3,000 49,230 /(a)/
Teleflex Inc........................ 3,030 164,468
TomoTherapy Inc..................... 11,100 35,298 /(a)/
West Pharmaceutical Services Inc.... 7,000 255,430
Zoll Medical Corp................... 1,000 27,100 /(a)/
2,672,637
HEALTHCARE PROVIDERS & SERVICES -- 6.5%
Almost Family Inc................... 1,200 41,916 /(a)/
Amedisys Inc........................ 1,963 86,313 /(a)/
AMERIGROUP Corp..................... 1,800 58,464 /(a)/
Bio-Reference Laboratories Inc...... 18,380 407,485 /(a)/
Centene Corp........................ 6,160 132,440 /(a)/
Continucare Corp.................... 12,900 43,215 /(a)/
Corvel Corp......................... 305 10,306 /(a)/
Emergency Medical Services Corp..... 1,000 49,030 /(a)/
Genoptix Inc........................ 1,400 24,080 /(a)/
Gentiva Health Services Inc......... 2,000 54,020 /(a)/
Healthways Inc...................... 3,780 45,058 /(a)/
HMS Holdings Corp................... 7,670 415,867 /(a)/
IPC The Hospitalist Company Inc..... 2,300 57,730 /(a)/
Mednax Inc.......................... 9,400 522,734 /(a)/
Molina Healthcare Inc............... 11,470 330,336 /(a)/
National Healthcare Corp............ 500 17,230
Owens & Minor Inc................... 13,300 377,454
RehabCare Group Inc................. 1,200 26,136 /(a)/
Sun Healthcare Group Inc............ 13,963 112,821 /(a)/
The Ensign Group Inc................ 2,000 33,040
US Physical Therapy Inc............. 2,700 45,576 /(a)/
VCA Antech Inc...................... 6,000 148,560 /(a)/
3,039,811
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements on page 15.
6
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
HEALTHCARE TECHNOLOGY -- 0.9%
athenahealth Inc....................... 6,500 $ 169,845 /(a)/
Computer Programs & Systems Inc........ 1,000 40,920
Eclipsys Corp.......................... 2,385 42,548 /(a)/
MedAssets Inc.......................... 8,100 186,948 /(a)/
440,261
HOTELS, RESTAURANTS & LEISURE -- 1.6%
Cracker Barrel Old Country Store Inc... 8,900 414,384
Denny's Corp........................... 32,880 85,488 /(a)/
Domino's Pizza Inc..................... 3,000 33,900 /(a)/
Einstein Noah Restaurant Group Inc..... 4,000 43,160 /(a)/
Panera Bread Co........................ 1,000 75,290 /(a)/
Wendy's Group Inc...................... 21,300 85,200
737,422
HOUSEHOLD DURABLES -- 1.1%
Jarden Corp............................ 15,310 411,380
Tupperware Brands Corp................. 2,600 103,610
514,990
HOUSEHOLD PRODUCTS -- 0.3%
WD-40 Co............................... 4,000 133,600
INSURANCE -- 4.3%
Alleghany Corp......................... 600 175,980 /(a)/
Allied World Assurance Company
Holdings Ltd.......................... 6,000 272,280
Argo Group International Holdings Ltd.. 6,600 201,894
Arthur J Gallagher & Co................ 6,000 146,280
Brown & Brown Inc...................... 10,100 193,314
First Mercury Financial Corp........... 10,730 113,523
Hallmark Financial Services............ 2,900 28,855 /(a)/
HCC Insurance Holdings Inc............. 18,060 447,166
National Interstate Corp............... 3,900 77,298
Navigators Group Inc................... 6,000 246,780 /(a)/
Symetra Financial Corp................. 8,950 107,400
Tower Group Inc........................ 900 19,377
2,030,147
INTERNET SOFTWARE & SERVICES -- 1.0%
Art Technology Group Inc............... 36,820 125,924 /(a)/
comScore Inc........................... 7,400 121,878 /(a)/
Constant Contact Inc................... 7,100 151,443 /(a)/
NIC Inc................................ 10,100 64,741
463,986
IT SERVICES -- 2.7%
CACI International Inc................. 1,000 42,480 /(a)/
CSG Systems International Inc.......... 1,800 32,994 /(a)/
ExlService Holdings Inc................ 1,400 24,038 /(a)/
Global Cash Access Holdings Inc........ 25,770 185,802 /(a)/
iGate Corp............................. 10,137 129,956
NeuStar Inc............................ 7,058 145,536 /(a)/
RightNow Technologies Inc.............. 3,500 54,915 /(a)/
Sapient Corp........................... 5,300 53,742
NUMBER
OF SHARES VALUE
SRA International Inc............... 4,670 $ 91,859 /(a)/
TeleTech Holdings Inc............... 3,400 43,826 /(a)/
VeriFone Holdings Inc............... 14,440 273,349 /(a)/
Virtusa Corp........................ 4,985 46,510 /(a)/
Wright Express Corp................. 5,300 157,410 /(a)/
1,282,417
LEISURE EQUIPMENT & PRODUCTS -- 0.5%
Polaris Industries Inc.............. 3,975 217,115
LIFE SCIENCES TOOLS & SERVICES -- 2.8%
Bio-Rad Laboratories Inc............ 2,600 224,874 /(a)/
Bruker Corp......................... 28,560 347,289 /(a)/
Dionex Corp......................... 800 59,568 /(a)/
ICON PLC ADR........................ 12,740 368,059 /(a)/
Luminex Corp........................ 10,128 164,276 /(a)/
Techne Corp......................... 2,600 149,370
1,313,436
MACHINERY -- 6.0%
AGCO Corp........................... 7,675 206,995 /(a)/
Ampco-Pittsburgh Corp............... 2,100 43,743
Cascade Corp........................ 5,340 190,157
Chart Industries Inc................ 2,352 36,644 /(a)/
CLARCOR Inc......................... 9,100 323,232
Flow International Corp............. 18,100 42,716 /(a)/
Flowserve Corp...................... 1,600 135,680
Force Protection Inc................ 6,000 24,600 /(a)/
Gardner Denver Inc.................. 3,000 133,770
Harsco Corp......................... 4,950 116,325
IDEX Corp........................... 12,100 345,697
Middleby Corp....................... 3,750 199,463 /(a)/
Mueller Industries Inc.............. 4,570 112,422
Nordson Corp........................ 3,875 217,310
Tennant Co.......................... 1,600 54,112
Timken Co........................... 6,050 157,239
Trinity Industries Inc.............. 12,150 215,298
WABCO Holdings Inc.................. 1,900 59,812 /(a)/
Wabtec Corp......................... 4,700 187,483
2,802,698
MEDIA -- 2.3%
Arbitron Inc........................ 14,210 364,202
John Wiley & Sons Inc............... 11,000 425,370
Morningstar Inc..................... 5,800 246,616 /(a)/
National CineMedia Inc.............. 2,400 39,984
1,076,172
METALS & MINING -- 1.2%
Commercial Metals Co................ 20,730 274,051
Compass Minerals International Inc.. 3,790 266,361
Worthington Industries Inc.......... 2,900 37,294
577,706
MULTI-UTILITIES -- 0.5%
OGE Energy Corp..................... 5,850 213,876
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements on page 15.
7
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
OFFICE ELECTRONICS -- 0.3%
Zebra Technologies Corp............. 4,750 $ 120,508 /(a)/
OIL, GAS & CONSUMABLE FUELS -- 2.5%
Arena Resources Inc................. 3,000 95,700 /(a)/
Brigham Exploration Co.............. 2,000 30,760 /(a)/
GMX Resources Inc................... 11,550 74,959 /(a)/
Gulfport Energy Corp................ 6,000 71,160 /(a)/
James River Coal Co................. 11,725 186,662 /(a)/
Penn Virginia Corp.................. 2,000 40,220
Resolute Energy Corp................ 9,100 111,384 /(a)/
Rosetta Resources Inc............... 4,000 79,240 /(a)/
SandRidge Energy Inc................ 14,100 82,203 /(a)/
SM Energy Co........................ 10,080 404,813
1,177,101
PERSONAL PRODUCTS -- 1.0%
Alberto-Culver Co................... 14,100 381,969
Revlon Inc.......................... 3,600 40,176 /(a)/
Schiff Nutrition International Inc.. 5,400 38,448
460,593
PHARMACEUTICALS -- 0.5%
Impax Laboratories Inc.............. 3,500 66,710 /(a)/
Questcor Pharmaceuticals Inc........ 7,200 73,512 /(a)/
Viropharma Inc...................... 7,300 81,833 /(a)/
222,055
PROFESSIONAL SERVICES -- 0.5%
CoStar Group Inc.................... 5,600 217,280 /(a)/
Diamond Management & Technology
Consultants Inc.................... 2,100 21,651
Resources Connection Inc............ 550 7,480 /(a)/
246,411
REAL ESTATE INVESTMENT TRUSTS -- 3.1%
BioMed Realty Trust Inc............. 24,760 398,388
Digital Realty Trust Inc............ 6,030 347,810
Healthcare Realty Trust Inc......... 14,100 309,777
Omega Healthcare Investors Inc...... 20,600 410,558
1,466,533
ROAD & RAIL -- 2.1%
Genesee & Wyoming Inc............... 10,860 405,187 /(a)/
Landstar System Inc................. 6,000 233,940
Old Dominion Freight Line Inc....... 9,800 344,372 /(a)/
983,499
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.5%
Applied Micro Circuits Corp......... 3,600 37,728 /(a)/
Cabot Microelectronics Corp......... 1,300 44,967 /(a)/
Ceva Inc............................ 3,607 45,448 /(a)/
Diodes Inc.......................... 2,700 42,849 /(a)/
Integrated Device Technology Inc.... 4,900 24,255 /(a)/
IXYS Corp........................... 5,466 48,319 /(a)/
NUMBER
OF SHARES VALUE
Lattice Semiconductor Corp............ 11,200 $ 48,608 /(a)/
Microsemi Corp........................ 16,800 245,784 /(a)/
Rudolph Technologies Inc.............. 25,900 195,545 /(a)/
Semtech Corp.......................... 13,030 213,301 /(a)/
Standard Microsystems Corp............ 2,100 48,888 /(a)/
Tessera Technologies Inc.............. 1,900 30,495 /(a)/
TriQuint Semiconductor Inc............ 4,000 24,440 /(a)/
Varian Semiconductor Equipment
Associates Inc....................... 4,350 124,671 /(a)/
1,175,298
SOFTWARE -- 7.7%
ACI Worldwide Inc..................... 3,800 73,986 /(a)/
ArcSight Inc.......................... 2,700 60,453 /(a)/
Ariba Inc............................. 16,100 256,473 /(a)/
AsiaInfo Holdings Inc................. 2,600 56,836 /(a)/
Blackbaud Inc......................... 17,110 372,485
Blackboard Inc........................ 6,000 223,980 /(a)/
Bottomline Technologies Inc........... 8,100 105,543 /(a)/
Concur Technologies Inc............... 3,000 128,040 /(a)/
Ebix Inc.............................. 8,100 127,008 /(a)/
Informatica Corp...................... 7,000 167,160 /(a)/
Interactive Intelligence Inc.......... 5,000 82,150 /(a)/
Jack Henry & Associates Inc........... 6,000 143,280
MICROS Systems Inc.................... 12,180 388,177 /(a)/
MicroStrategy Inc..................... 1,600 120,144 /(a)/
Parametric Technology Corp............ 21,490 336,748 /(a)/
Pegasystems Inc....................... 4,000 128,440
Progress Software Corp................ 4,000 120,120 /(a)/
Solera Holdings Inc................... 7,600 275,120
Sourcefire Inc........................ 4,100 77,900 /(a)/
SS&C Technologies Holdings Inc........ 2,990 47,930 /(a)/
Ultimate Software Group Inc........... 7,500 246,450 /(a)/
Unica Corp............................ 7,200 68,976 /(a)/
3,607,399
SPECIALTY RETAIL -- 3.9%
Aaron's Inc........................... 18,980 323,989
Aeropostale Inc....................... 11,160 319,622 /(a)/
American Eagle Outfitters Inc......... 7,000 82,250
Bebe Stores Inc....................... 7,400 47,360 /(a)/
J Crew Group Inc...................... 900 33,129 /(a)/
Jo-Ann Stores Inc..................... 5,350 200,678 /(a)/
JOS A Bank Clothiers Inc.............. 1,000 53,990 /(a)/
The Buckle Inc........................ 10,600 343,652
The Finish Line Inc................... 4,100 57,113
Tractor Supply Co..................... 4,450 271,317
Ulta Salon Cosmetics & Fragrance Inc.. 3,500 82,810 /(a)/
1,815,910
TEXTILES, APPAREL & LUXURY GOODS -- 2.0%
Carter's Inc.......................... 700 18,375 /(a)/
Columbia Sportswear Co................ 4,350 203,015
CROCS Inc............................. 5,500 58,190 /(a)/
Deckers Outdoor Corp.................. 2,523 360,461 /(a)/
Fossil Inc............................ 1,800 62,460 /(a)/
Maidenform Brands Inc................. 3,100 63,116 /(a)/
Steven Madden Ltd..................... 1,250 39,400 /(a)/
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements on page 15.
8
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
The Timberland Co.................... 1,600 $ 25,840 /(a)/
True Religion Apparel Inc............ 900 19,863 /(a)/
Unifirst Corp........................ 500 22,010
Wolverine World Wide Inc............. 1,800 45,396
918,126
TRADING COMPANIES & DISTRIBUTORS -- 0.5%
Applied Industrial Technologies Inc.. 6,260 158,503
Watsco Inc........................... 1,000 57,920
216,423
TOTAL COMMON STOCK
(COST $45,489,320).................. 44,819,444
------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
------------------------------------------------------------------
GEI Investment Fund
(COST $13).......................... 11 /(c)/
TOTAL INVESTMENTS IN SECURITIES
(COST $45,489,333).................. 44,819,455
VALUE
---------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 4.4%
---------------------------------------------------------------
GE Money Market Fund Institutional
Class 0.05%
(COST $2,057,511)..................... $ 2,057,511 /(b,c)/
TOTAL INVESTMENTS
(COST $47,546,844).................... 46,876,966
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (0.4)%......................... (181,892)
-----------
NET ASSETS -- 100.0%................... $46,695,074
===========
---------------------------------------------------------------
OTHER INFORMATION
---------------------------------------------------------------
The Fund had the following long futures contracts open at June 30, 2010
(unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
-------------------------------------------------------------------
Russell 2000 Mini
Index September 2010 7 $425,460 $(29,851)
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements on page 15.
9
Notes to Schedule of Investments June 30, 2010 (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
information regarding holdings, allocations and other characteristics are
presented to illustrate examples of securities that the Fund has bought and the
diversity of areas in which the Fund may invest as of a particular date. It may
not be representative of the Fund's current or future investments and should
not be construed as a recommendation to purchase or sell a particular security.
Please see the Fund's prospectus for complete descriptions of investment
objective, policies, risks and permissible investments.
(a)Non-income producing security.
(b)Coupon amount represents effective yield.
(c)GE Asset Management, the investment adviser of the Fund, also serves as
investment adviser of the GEI Investment Fund and the GE Funds-GE Money
Market Fund.
* Less than 0.01%.
+ Percentages are based on net assets as of June 30, 2010 .
Abbreviations:
ADR American Depository Receipt
10
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
SMALL-CAP EQUITY FUND
--------------------------------------------------------------------- -------------------------
CLASS 1 CLASS 4
--------------------------------------------------------------------- -------------------------
6/30/10+ 12/31/09 12/31/08/(C)/ 12/31/07 12/31/06 12/31/05 6/30/10+ 12/31/09
--------------------------------------------------------------------- --------------------------
INCEPTION DATE 4/28/00
Net asset value, beginning
of period................... $9.79 $7.48 $12.17 $14.39 $14.44 $13.62 $9.76 $7.49
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS:
Net investment
income.................... 0.05 0.04 0.09 0.06 0.05 0.02 (0.07) (0.05)
Net realized and
unrealized
gains/(losses) on
investments............... (0.15) 2.27 (4.67) 0.31 1.87 1.28 (0.05) 2.32
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT
OPERATIONS.................. (0.10) 2.31 (4.58) 0.37 1.92 1.30 (0.12) 2.27
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment
income.................... -- -- 0.05 0.06 0.04 0.03 -- --
Net realized gains......... -- -- 0.06 2.53 1.93 0.45 -- --
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS.......... -- 0.00 0.11 2.59 1.97 0.48 -- 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period...................... $9.69 $9.79 $7.48 $12.17 $14.39 $14.44 $9.64 $9.76
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/(A)/............ (1.02)% 30.88% (37.59)% 2.39% 13.27% 9.53% (1.23)% 30.31%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of period
(in thousands)............ $46,687 $54,114 $50,210 $104,010 $127,381 $128,142 $8 $8
Ratios to average net
assets:
Net investment
income*................. (0.07)% (0.04)% 0.46% 0.31% 0.31% 0.11% (0.51)% (0.51)%
Net Expenses*............ 1.21%/(b)/ 1.52%/(b)/ 0.94%/(b)/ 0.87% 0.86% 0.86% 1.64%/(b)/ 1.97%/(b)/
Gross Expenses*.......... 1.22% 1.52% 0.94% 0.87% 0.86% 0.86% 1.65% 1.97%
Portfolio turnover
rate.................... 22% 40% 85% 25% 52% 33% 22% 40%
-----------------
-----------------
12/31/08/(C)/**
----------------
INCEPTION DATE 5/1/08
Net asset value, beginning
of period................... $12.06
INCOME/(LOSS) FROM
INVESTMENT OPERATIONS:
Net investment
income.................... 0.02**
Net realized and
unrealized
gains/(losses) on
investments............... (4.51)
- ----------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT
OPERATIONS.................. (4.49)
- ----------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment
income.................... 0.02
Net realized gains......... 0.06
- ----------------------------------------------
TOTAL DISTRIBUTIONS.......... 0.08
- ----------------------------------------------
Net asset value, end of
period...................... $7.49
- ----------------------------------------------
TOTAL RETURN/(A)/............ (37.20)%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of period
(in thousands)............ $6
Ratios to average net
assets:
Net investment
income*................. (0.01)%*
Net Expenses*............ 1.39%/(b)/*
Gross Expenses*.......... 1.39%
Portfolio turnover
rate.................... 85%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a)Total returns are historical and assume changes in share price, reinvestment
of dividends and capital gains distributions and do not include the effect
of insurance contract charges. Past performance does not guarantee future
results.
(b)Reflects GE Asset Management's waiver of a portion of the Fund's management
fee in an amount equal to the management fee earned by GE Asset Management
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.
11
Statement of Assets SMALL CAP
and Liabilities JUNE 30, 2010 (UNAUDITED) EQUITY
FUND
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $45,489,320)......... $ 44,819,444
Investments in affiliated securities, at market (cost $13)...... 11
Short-term affiliated investments (at amortized cost)........... 2,057,511
Receivable for investments sold................................. 14,691
Income receivables.............................................. 33,354
Receivable for fund shares sold................................. 2,758
Other assets.................................................... 115,000
- --------------------------------------------------------------------------------
TOTAL ASSETS.................................................. 47,042,769
- --------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased............................... 97,923
Payable for fund shares redeemed................................ 29,730
Payable to GEAM................................................. 14,762
Accrued other expenses.......................................... 201,500
Variation margin payable........................................ 3,780
- --------------------------------------------------------------------------------
TOTAL LIABILITIES............................................. 347,695
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $ 46,695,074
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF :
Capital paid in................................................. 58,228,501
Undistributed (distribution in excess of) net investment income. (12,863)
Accumulated net realized gain (loss)............................ (10,820,835)
Net unrealized appreciation/(depreciation) on:
Investments................................................... (669,878)
Futures....................................................... (29,851)
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $ 46,695,074
- --------------------------------------------------------------------------------
CLASS 1:
NET ASSETS........................................................ $ 46,686,989
Shares outstanding ($0.01 par value; unlimited shares authorized). 4,815,850
Net asset value per share......................................... $9.69
CLASS 4:
NET ASSETS........................................................ $ 8,085
Shares outstanding ($0.01 par value; unlimited shares authorized). 838
Net asset value per share......................................... $9.64
See Notes to Financial Statements.
12
Statement of Operations SMALL-CAP
FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED) EQUITY
FUND
- -------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend............................................................ $ 292,346
Interest............................................................ 7,105
Interest from affiliated investments................................ 113
Less: Foreign taxes withheld........................................ (255)
- -------------------------------------------------------------------------------------
TOTAL INCOME.......................................................... 299,309
- -------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees.................................... 250,791
Distributors Fees (Note 6)
Class 4 19
Transfer agent...................................................... 8,940
Director's fees..................................................... 900
Custody and accounting expenses..................................... 41,920
Professional fees................................................... 10,578
Registration expenses............................................... 1,415
Other expenses...................................................... 6,984
- -------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT........................ 321,547
- -------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser............................ (3,877)
- -------------------------------------------------------------------------------------
Net expenses........................................................ 317,670
- -------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS).......................................... (18,361)
- -------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments....................................................... 1,193,803
Futures........................................................... 188,340
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON:
Investments....................................................... (1,415,406)
Futures........................................................... (56,990)
- -------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments.............. (90,253)
- -------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... $ (108,614)
- -------------------------------------------------------------------------------------
See Notes to Financial Statements.
13
Statements of SMALL CAP
Changes in Net Assets EQUITY
FUND
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2010 DECEMBER 31,
(UNAUDITED) 2009
- -----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss)...................................................... $ (18,361) $ (46,080)
Net realized gain (loss) on investments and futures................................ 1,382,143 (7,175,502)
Net increase (decrease) in unrealized appreciation/(depreciation) on investments
and futures...................................................................... (1,472,396) 20,714,743
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations............................................ (108,614) 13,493,161
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM :
Net investment income
Class 1.......................................................................... -- --
Class 4.......................................................................... -- --
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS.................................................................. -- --
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions.................. (108,614) 13,493,161
- -----------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS :
Proceeds from sale of shares
Class 1.......................................................................... 144,758 2,405,061
Class 4.......................................................................... -- --
Cost of shares redeemed
Class 1.......................................................................... (7,463,532) (11,991,743)
Class 4.......................................................................... -- --
- -----------------------------------------------------------------------------------------------------------------------
Net (decrease) from share transactions............................................. (7,318,774) (9,586,682)
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.............................................. (7,427,388) 3,906,479
NET ASSETS
Beginning of period.................................................................. 54,122,462 50,215,983
- -----------------------------------------------------------------------------------------------------------------------
End of period........................................................................ $ 46,695,074 $ 54,122,462
- -----------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD......... $ (12,863) $ 5,498
- -----------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold............................................................................ 13,900 309,191
Issued for distributions reinvested.................................................... -- --
Shares redeemed........................................................................ (723,700) (1,499,252)
- -----------------------------------------------------------------------------------------------------------------------
Net (decrease) in fund shares.......................................................... (709,800) (1,190,061)
- -----------------------------------------------------------------------------------------------------------------------
CLASS 4
Shares sold............................................................................ -- --
Issued for distributions reinvested.................................................... -- --
Shares redeemed........................................................................ -- --
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Fund Shares................................................. -- --
- -----------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
14
Notes to Financial Statements June 30, 2010 (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 Fund 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 the Fund.
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
References to Level 1, Level 2 and Level 3 below are the level classifications
in the fair value hierarchy and are described in the Fair Value Measurements
Section.
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 the NASDAQ are valued using the NASDAQ Official Closing Price, which
may not necessarily represent the last sale price Level 1 securities primarily
include exchange-traded equity securities. 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. These securities are included in Level 2. In the absence of
a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations and these would be classified
in Level 3.
Short-term investments of sufficient credit quality 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 and these are included in Level
2. 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 and these are
also included in Level 2.
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. These securities
would be classified in Level 3. 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. In those circumstances the Fund classifies the investment
15
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
security in Level 2. 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. In those circumstances the Fund
classifies the investment securities in Level 3. 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.
Portfolio securities may be valued using techniques other than market
quotations, under the circumstances described under above. The value
established for a portfolio security may be different than what would be
produced through the use of another methodology or if it had been priced using
market quotations. Portfolio securities that are valued using techniques other
than market quotations, including "fair valued" securities, may be subject to
greater fluctuation in their value from one day to the next than would be the
case if market quotations were used. In addition, there is no assurance that
the Fund could sell a portfolio security for the value established for it at
any time and it is possible that the Fund would incur a loss because a
portfolio security is sold at a discount to its established 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. 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. The Fund's income, expenses (other than distribution
fees) and realized and unrealized gains and losses are allocated proportionally
each day among each the Fund's respective share classes based upon the relative
net assets of each share class.
FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, Fair Valuation Measurements and Disclosures effective
October 1, 2008 for all financial instruments accounted for at fair value.
For financial assets and liabilities, fair value is the price the Fund would
receive 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 or 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 inputs are observable or whose
significant value drivers are observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
Policies and procedures are maintained to value investments using the best and
most relevant data available. In addition, GEAM performs periodic reviews of
the methodologies used by independent pricing services including price
validation of individual securities.
The following section describes the valuation methodologies the Fund uses to
measure different financial investments at fair value.
When available, the Fund uses quoted market prices to determine the 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, pricing information is obtained
from an independent pricing vendor. The pricing vendor uses various pricing
models for each asset class that are consistent with what other market
participants would use. The inputs and assumptions to the model of the pricing
vendor are derived from market observable sources including: benchmark yields,
reported trades, broker/dealer quotes, issuer spreads, benchmark securities,
bids, offers, and other market-related data. Since many fixed income
16
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
securities do not trade on a daily basis, the methodology of the pricing vendor
uses available information as applicable such as benchmark curves, benchmarking
of like securities, sector groupings, and matrix pricing. The pricing vendor
considers all available market observable inputs in determining the evaluation
for a security. Thus, certain securities may not be priced using quoted prices,
but rather determined from market observable information. These investments are
included in Level 2 and primarily comprise our portfolio of corporate fixed
income, government, mortgage and asset-backed securities. In infrequent
circumstances, pricing vendors may provide the Fund with valuations that are
based on significant unobservable inputs, and in those circumstances the
investment securities are included in Level 3.
The Fund uses non-binding broker quotes as the primary basis for valuation when
there is limited, or no, relevant market activity for a specific investment or
for other investments that share similar characteristics. The Fund has not
adjusted the prices obtained. Investment securities priced using non-binding
broker quotes are included in Level 3. As is the case with the primary pricing
vendor, third-party brokers do not provide access to their proprietary
valuation models, inputs and assumptions. Accordingly, GEAM conducts internal
reviews of pricing for all such investment securities periodically to ensure
reasonableness of valuations used in our financial statements. These reviews
are designed to identify prices that appear stale, those that have changed
significantly from prior valuations, and other anomalies that may indicate that
a price may not be accurate. Based on the information available, GEAM believes
that the fair values provided by the brokers are representative of prices that
would be received to sell the assets at the measurement date (exit prices).
Other financial investments are derivative investments 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.
The Fund uses closing prices for derivatives included in Level 1, which are
traded either on exchanges or liquid over-the counter markets. Derivative
assets and liabilities included in Level 2 primarily represent interest rate
swaps, cross-currency swaps and foreign currency and commodity forward and
option contracts. Derivative assets and liabilities included in Level 3
primarily represent interest rate products that contain embedded optionality or
prepayment features.
Transfers in and out of Level 3 are considered to occur at the beginning of the
period.
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. For example, money
market securities are valued using amortized cost, in accordance with the
Investment Company Act of 1940. Generally, amortized cost reflects the current
fair value of a security, but since the value is not obtained from a quoted
price in an active market, such securities are reflected as Level 2. Fair value
determinations are required for securities whose value is affected by a
significant event that will materially affect the value of a domestic or
foreign security and which occurs subsequent to the time of the close of the
principal market on which such domestic or foreign security trades but prior to
the calculation of the Fund's NAV.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Funds's investment
objective 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.
17
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 of foreign denominated securities from
the fluctuations arising from changes in the market prices of those 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.
DERIVATIVES The Fund is subject to equity price risk and foreign currency
exchange rate risk in the normal course of pursuing its investment objective.
The Fund may enter into derivative transactions for the purpose of hedging
against the effects of changes in the value of portfolio securities due to
anticipated changes in market conditions and to gain market exposure for
residual and accumulating cash positions. 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 and 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.
FUTURES CONTRACTS The Fund may invest in interest rate, financial, stock and
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.
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.
18
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
The Fund is subject to ASC 740, Income Taxes. ASC 740 provides guidance for
financial accounting and reporting for the effects of income taxes that result
from an entity's activities during the year. ASC 740 also provides guidance
regarding how certain uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements. ASC 740 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.
There are no adjustments to the Fund's net assets required under ASC 740. The
Fund's 2006, 2007, 2008 and 2009 fiscal years tax returns are still open to
examination by the Federal and applicable state tax authorities.
At June 30, 2010, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation) on
Tax Purposes Appreciation Depreciation Investments
-------------------------------------------------------------------
$47,985,893 $4,393,979 $(5,502,906) $(1,108,926)
As of December 31, 2009, the Fund has capital loss carryovers as follows:
Amount Expires
----------------------
$430,701 12/31/2016
11,121,731 12/31/2017
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 elected to defer incurred losses after October 31, 2009 as follows.
Capital Currency
-----------------
$184,357 $--
The tax composition of distributions paid during the years ended December 31,
2009 and December 31, 2008 were as follows:
Ordinary Long-Term Return of
Income Capital Gains Capital Total
-----------------------------------------------
2009 $ -- $ -- $ -- $ --
2008 348,614 379,085 10,808 738,507
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays any dividends from net
investment income annually. The Fund also declares and pays any 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.
19
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued FASB Accounting
Standards Codification (ASC) effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The ASC is an
aggregation of previously issued authoritative U.S. generally accepted
accounting principles (GAAP) in one comprehensive set of guidance organized by
subject area. In accordance with the ASC, references to previously issued
accounting standards have been replaced by ASC references. Subsequent revisions
to GAAP will be incorporated into the ASC through Accounting StandardsUpdates
(ASU).
The Fund adopted ASC 855, Subsequent Events effective October 2009. ASC 855
establishes principles and requirements for subsequent events, in particular
(a) the period after the balance sheet date during which management of a
reporting entity shall evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; (b) the
circumstances under which an entity shall recognize events or transactions
occurring after the balance sheet date in its financial statements; and (c) the
disclosures that an entity shall make about events or transactions that
occurred after the balance sheet date.
In January 2010, FASB issued ASU 2010-06, Improving Disclosures about Fair
Value Measurements. ASU 2010-06 requires reporting entities to make new
disclosures about the amounts and reasons for significant transfers in and out
of Level 1 and Level 2 fair value measurements and inputs and valuation
techniques used to measure fair value for both recurring and nonrecurring fair
value measurements that fall in either Level 2 or Level 3, and information on
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new disclosures are effective for interim and
annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures will
be effective for fiscal years beginning after December 15, 2010, and for
interim periods within those fiscal years. GEAM does not believe the adoption
of ASU 2010-06 will materially impact the financial statement amounts.
3. FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, Fair Valuation Measurements and Disclosures effective
October 2008. This guidance establishes a new framework for measuring fair
value and expands related disclosures. Broadly, the 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. It also establishes a three-level valuation
hierarchy based upon observable and non-observable inputs.
The following tables present the Fund's investments measured at fair value on a
recurring basis at June 30, 2010:
Level 1 Level 2 Level 3 Total
-----------------------------------------------------------------------------
Investments in Securities
Common Stock $44,819,444 $-- $-- $44,819,444
Other Investments -- 11 -- 11
Short-Term Investments 2,057,511 -- -- 2,057,511
-----------------------------------------------------------------------------
Total Investments in Securities $46,876,955 $11 $-- $46,876,966
-----------------------------------------------------------------------------
Other Financial Instruments
Futures Contracts -- Unrealized
Depreciation $ (29,851) $-- $-- $ (29,851)
20
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
4. DERIVATIVES TRANSACTIONS
Shown below are the derivative contracts entered into by the Fund, summarized
by primary risk exposure.
Asset Derivatives June 30, 2010 Liability Derivatives June 30, 2010
--------------------------------------- --------------------------------------
Derivatives not Location in the Location in
accounted for as Statements the Statements
hedging instruments of Assets Fair of Assets Fair
under ASC 815 and Liabilities Value ($) and Liabilities Value ($)
- ---------------------------------------------------------------------------------------------------
Equity Contracts Receivables, Net Assets -- Liabilities, Net Assets --
Net unrealized appreciation/ Net unrealized appreciation/
(depreciation) on Futures -- (depreciation) on Futures (29,851)*
- ---------------------------------------------------------------------------------------------------
*Includes cumulative appreciation/depreciation of futures contracts as reported
in the Schedule of Investments and within the components of net assets section
of the Statements of Assets and Liabilities. Only the current day's variation
margin is reported within the receivables and/or payables of the Statements of
Assets and Liabilities.
Refer to the Schedule of Investments for ending notional value.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Total Notional of Change in Unrealized
Derivatives not accounted Location in the Futures/Options Realized Gain or Appreciation/(Depreciation)
for as hedging instruments Statements of Contracts (Loss) on Derivatives on Derivatives
under ASC 815 Operations Purchased/(Sold) ($) Recognized in Income ($) Recognized in Income ($)
- ---------------------------------------------------------------------------------------------------------------------------------
Equity Contracts Realized gain/(loss) on
futures, Increase/
(decrease) in unrealized
appreciation/
(depreciation) on Futures 6,876,577/(7,643,107) 188,340 (56,990)
- ---------------------------------------------------------------------------------------------------------------------------------
5. 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 ("State Street"). The revolving credit facility
requires the payment of a commitment fee equal to 0.15% 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. Generally, borrowings under the credit facilities would accrue interest
at the Federal Funds Rate plus 50 basis points (0.50%) 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 six-month period
ended June 30, 2010.
6. FEES AND COMPENSATION PAID TO AFFILIATES
GE Asset Management, 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. GE Asset Management'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%.
GEAM waives a portion of the Fund's Management Fee in the amount equal to the
Management Fee earned by GEAM with respect to the Fund's Investment in the GE
Funds -- GE Money Market 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
21
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 is 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.)
7. 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.
8. 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, 2010 were as follows:
Purchases Sales
-----------------------
$10,936,586 $15,763,265
SECURITY LENDING For the six-month period ended June 30, 2010, the Fund did not
participate in securities lending.
OPTIONS During the period ended June 30, 2010, there were no options contracts
written.
9. SUBSEQUENT EVENTS
Subsequent events after the balance sheet date through the date that the
financial statements were issued have been evaluated in the preparation of the
Financial Statements. There are no items to report.
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 61
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 -- 13 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; 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;
Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993 and GE Institutional Funds since 1997; 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 2003;
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 49
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 GEAM from
February 1997 to July 2007; Vice President and Associate General Counsel of
GEAM from October 1992 to February 1997; Secretary of GE Funds from 1997 to
July 2007 and Vice President from September 2003 to June 2007; Secretary of GE
Institutional Funds and the Fund from 1997 to July 2007, and Vice President
from September 2003 to July 2007; Vice President of Elfun Funds and GE
Savings & Security Funds from October 2003 to July 2007; Assistant Secretary of
Elfun Funds and GE Savings & Security Funds from 1998 to July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds and General Electric Pension
Trust, since July 2007.
23
Additional Information (unaudited)
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 44
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 5 years (Vice President); 2 years (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Commercial Administrative Officer
of GEAM since April 2010; Senior Vice President and Deputy General Counsel at
GE Asset Management from October 2007 to April 2010; 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
Secretary of GE Funds and GE Institutional Funds since July 2007; Vice
President and Assistant Secretary of GE Institutional Funds and GE Investments
Funds, Inc. from September 2003 to 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
- --------------------------------------------------------------------------------
ROBERT HERLIHY
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Chief Compliance Officer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 4 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Chief Compliance Officer of GEAM,
GE Funds, GE Institutional Funds, Elfun Funds, and GE Savings and Security
Funds since July 2005; Manager of Fund Administration at GEAM from 2002-2005.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
- --------------------------------------------------------------------------------
EUNICE TSANG
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 50
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- less than one year
PRINCIPAL OCCUPATIONS(S) DURING PAST 5 YEARS Treasurer of GE Funds, GE
Institutional Funds, Elfun Funds and GE Savings and Security Funds since
January 2010; GEAM Operational Controllership and Technical Accounting Manager
since December 2007; Financial Planning & Analysis Manager -- Performance
Leader from June 2005 to December 2007; GEAM Quality Black Belt from 2001 to
June 2005; Financial Planning & Analysis Manager from 2000 to 2001; and Mutual
Fund Assistant Controller from October 1997 to 2000.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
24
Additional Information (unaudited)
- ---------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 64
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Vice President of Walden Capital Management
since 1996.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since 1997; Trustee of Fordham University from 1989 to 1995
and 2001 to 2007 and Trustee Emeritus since 2007; Trustee of NeuroScience
Research Institute since 1986; Trustee of Gregorian University Foundation from
1992 to 2007; Director of Artes medical from 2006 to 2008.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since July 2007 from
Fairfield University. From 1983 to July 2007, Vice President and Treasurer of
Fairfield University.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 74
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997. 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 1-800-493-3042.
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
Kimberley Costello
Michelle Matzelle
TREASURER
Eunice Tsang
ASSISTANT TREASURER
Leslie Spadone
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
Cheryl H. Beacock, Senior Vice President, Human Resources
Daniel O. Colao, Executive Vice President, Chief Financial Officer
Michael J. Cosgrove, President and Chief Executive Officer -- Mutual Funds &
Intermediary Business
Paul M. Colonna, President and Chief Investment Officer -- Fixed Income
Investments
Ralph R. Layman, President and Chief Investment Officer -- Public Equity
Investments
Maureen B. Mitchell, President -- Institutional Sales and Marketing
Matthew J. Simpson, Executive Vice President, General Counsel and Secretary
Judith A. Studer, Chief Market Strategist
Don W. Torey, President -- Alternative Investments
John J. Walker, Executive Vice President, Chief Operating Officer
David Wiederecht, President and Chief Investment Officer -- 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 1-800-493-3042; (ii) on the Fund's
website at http://www.geam.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.geam.com; and (ii) on the Commission's website at
http://www.sec.gov.
[LOGO] GE
GE Investments Funds, Inc.
S&P 500 Index Fund Letter from the Chairman
- ----------------------------------------------------------------------------
[PHOTO] 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, 2010. 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
The six-months ended June 30, 2010 presented investors with an extremely
challenging market environment after global equity markets tumbled in the
second half of the period due primarily to concerns about sovereign default
risk and slowing global growth. U.S. equities (S&P 500 Index) declined 6.7%
over the six-month period, while international stocks (MSCI EAFE Index) fell
13.2%.
At the start of 2010, equity markets experienced a selloff in January and early
February as investors reacted negatively to signs that there was a lower
probability of a V-shaped recovery. Concerns about new global financial
regulation, policy tightening in China, and high levels of U.S. and European
debt, especially Greek sovereign debt, further fueled the volatility. Stocks
reversed these losses in the second half of the first quarter, rising steadily
as optimism about corporate earnings changed the tone in the market. The S&P
500 Index advanced 5.4%, for the first quarter of 2010 and indexes tracking
smaller capitalization stocks enjoyed even greater advances. Gains were more
subdued in non-U.S. equity markets, with the MSCI EAFE Index advancing 0.9%
during the same quarter as fears of sovereign credit risk in Europe
overshadowed stronger earnings reports. Regionally, Japan took top honors in
the first quarter, rising 8.2% based on relatively attractive stock valuations.
Canada rose 6.0%, followed by the Pacific Rim (+3.1%), and Emerging Markets
(+2.4%). The U.K. fell 0.6% while Continental Europe dropped 2.4% as Greece's
budget deficit crisis raised concerns about other highly indebted Eurozone
countries, including Portugal, Italy, Ireland, Spain, and even the United
Kingdom. The U.S. bond market returned 1.8% (Barclays Capital U.S. Aggregate
Bond Index) in the first quarter helped by another solid performance by the
credit related sectors. Fixed income securities outside the U.S. performed
similarly, however the Barclays Global Aggregate Un-hedged Bond Index lost 0.3%
(in U.S. dollar terms) due primarily to the strengthening dollar versus other
major currencies.
Although the second quarter of 2010 started quietly, stocks plunged in May as
concerns about Europe's sovereign debt problems pressured equity markets and
many investors sought defensive investments such as gold and treasury bonds.
Adding to Greece's sovereign debt woes, anxieties around contagion grew as
Spain stepped further into the European debt crisis amid credit downgrades
driven by its deteriorating economy and public finances. In June, the 2010 G20
Toronto Summit confirmed that the industrialized world leaders were committed
to reducing budget deficits through austerity measures. Some investors,
however, worried that these measures could reduce global growth and slow the
economic recovery. Several other concerns fuelled greater risk aversion during
the second quarter including increased evidence of slower growth in China, a
new resource tax in Australia, an alarming May 6th "flash crash" which sent
U.S. stocks plummeting within minutes, impending U.S. financial reform
legislation, and the spreading impact of BP's massive oil spill in the Gulf of
Mexico. At quarter end, the S&P 500 Index and the MSCI EAFE Index had tumbled
11.4% and 14.0%, respectively, in the three months ended June 30. Regionally,
Emerging Markets fared best during the second quarter, down 8.4%, followed by
Japan (-10.1%), Canada (-10.5%) and the U.K. (-13.9%). The worst performing
regions were Europe (-15.8%) and the Pacific Rim (-14.3%). In this environment,
U.S. Treasuries were the "safe" investment of choice for many investors seeking
to avoid riskier asset classes. The "flight to quality" pulled treasury yields
down across all maturity periods. The Barclays Capital U.S.
[LOGO] GE
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
S&P 500 Index Fund
- ----------------------------------------------------
Aggregate Bond Index returned 3.49% in the second quarter, while the Barclays
Capital Global Aggregate Un-hedged Bond Index lost 0.04% over the same
three-month period owing mainly to widening spreads in European peripheral
countries and the declining euro.
Against a backdrop of weakening investor sentiment, financial markets posted
disparate results for the six- and twelve-month periods ended June 30, 2010.
TOTAL RETURNS AS OF JUNE 30, 2010 6-MONTH 12-MONTH
- -----------------------------------------------------------------------------
U.S. equities (S&P 500 Index) -6.7 14.4
Global equities (MSCI World Index) -9.8 10.2
International equities (MSCI EAFE Index) -13.2 5.9
Emerging Markets equities (MSCI EM Index) -6.2 23.2
Small-cap U.S. equities (Russell 2000 Index) -2.0 21.5
Mid-cap U.S. equities (Russell Mid Cap Index) -2.1 25.1
U.S. fixed income (Barclays Capital U.S. Aggregate Bond
Index) 5.3 9.5
U.S. short-term government fixed income (Barclays Capital
1-3 Year U.S. Government Bond Index) 1.9 2.9
U.S. tax-exempt income (Barclays Capital 10-Year U.S.
Municipal Bond Index) 4.1 9.6
- -----------------------------------------------------------------------------
OUTLOOK
In the face of the fiscal concerns throughout much of Europe and signs of
slowing economic activity around the globe, the wall of worry has become
exceedingly high for investors who want to see credible government budgets that
balance fiscal austerity and economic growth. At the core of the uncertainty,
in our view, is the issue of excessive borrowing, now afflicting sovereign
markets and reminding us that the financial crisis is not yet over. Our
economic view for the second half of 2010 still favors positive, albeit slow
growth which we believe should keep interest rates at record lows for months to
come. We also believe that the policy measures implemented in Europe will
improve sentiment towards sovereign and bank debt over the balance of the year.
But many challenges remain on the horizon, including the risk of fiscal policy,
taxation and regulation missteps that could hamper the recovery. As a result,
continued market volatility appears to be the one sure thing we can predict
with certainty.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. Today's
uncertain environment is why we believe it is important for long-term investors
to maintain a disciplined, diversified investment strategy consistent with
their goals, time horizon and risk tolerance. While diversified portfolios are
not immune to market downturns, history suggests they can put investors in a
position to benefit from a 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.
August 2010
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
GE Investments Funds, Inc.
S&P 500 Index Fund
Semi-Annual Report
June 30, 2010
[LOGO] GE
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........... 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, 2010 (unaudited)
- -----------------------------------------------------------------------------
Information on the following performance pages relating to the GE Investments
S&P 500 Index Fund's (the "Fund") total returns and Schedule of Investments is
unaudited. All other information, including the portfolio manager Q&A pages,
is also 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 fees and 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
800-493-3042 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in the 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 the 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(R) 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. They do not reflect the
actual cost of investing in the instruments that comprise the index.
The peer universe of the underlying annuity funds used for the peer group
average return calculation is based on a blend of Morningstar peer categories,
as shown. Morningstar is an independent mutual fund rating service. The 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
that of the Fund.
(C)2010 Morningstar, Inc. All Rights Reserved. The Morningstar information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not 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 of future results.
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.
- --------------
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
- --------------------------------------------------------------------------------
[GRAPHIC]
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 F. Tucker.
Karl Schneider is the lead portfolio manager for the Fund, and is 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 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, 2010
A. For the six-month period ended June 30, 2010, the Class 1 shares of the S&P
500 Index Fund returned -6.81%. The S&P 500 Index, the Fund's benchmark,
returned -6.65% and the Fund's Morningstar peer group of 465 US Insurance
Large Blend funds returned an average of -7.01% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE
A. 2010 started strongly for U.S. equities, but after a choppy April and a
traumatic May, stocks had to endure a June employment report that reflected
a disappointing amount of hiring in the private sector. Despite a brief
pause by the market to celebrate the apparent agreement on the main
ingredients of US financial reform, persistently high jobless claims and a
downbeat report on consumer confidence kept many investors on the defensive,
and the S&P 500 closed the first half of 2010 at its worst levels since
November 2009. The benchmark lost more than 11% in the second quarter,
leaving it with a year-to-date loss of 6.65%.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE
A. By utilizing a passive, full replication investment style, the Fund owned
the same stocks and sectors in approximately the same weights as the S&P 500
Index. As of June 30, 2010, the four largest sectors in the S&P 500 Index
were Information Technology (18.7%), Financials (16.3%), Health Care
(12.1%), and Consumer Staples (11.5%). The highest returning sector for the
last six months was Industrials (-1.2%) followed by Consumer Discretionary
(-1.8%). The lowest returning sectors were Materials (-13.1%) and Energy
(-12.5%).
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD
A. Over the last six months there were 9 index addition/deletion changes
announced by Standard & Poors that impacted the Fund. Not all of 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&P 500 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 fees and 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,
2010.
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 $1,000 = 8.6), then multiply the result by the
number given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholders reports of other funds.
Please note that the expenses shown in the table for both "Actual" and
"Hypothetical" do not reflect any transaction costs, such as sales charges or
redemption fees. Additionally, the expenses shown do not reflect the fees or
charges associated with variable contracts through which shares of the fund are
offered.
JANUARY 1, 2010 - JUNE 30, 2010
- ------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 931.89 1.82
- ------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,022.65 1.91
- ------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 0.38% (for the
period January 1, 2010 - June 30, 2010), multiplied by the average account
value over the period, multiplied by 181/365 (to reflect the one-half year
period).
**Actual Fund Return for the six-month period ended June 30, 2010 was: -6.81%.
Past performance does not guarantee future results.
3
S&P 500 Index Fund
- -----------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[CHART]
GEI S&P 500 Index S&P 500 Index
---------------- -------------
31-Dec-99 10,000.00 10,000.00
1-Dec-00 9,057.41 9,081.65
1-Dec-01 7,946.42 7,999.85
1-Dec-02 6,169.06 6,231.73
1-Dec-03 7,913.27 8,021.99
1-Dec-04 8,741.10 8,894.89
1-Dec-05 9,135.05 9,332.39
1-Dec-06 10,544.51 10,806.20
1-Dec-07 11,081.81 11,400.06
1-Dec-08 6,936.88 7,182.28
1-Dec-09 8,761.28 9,083.04
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 1 SHARES
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS+ YEAR YEAR YEAR $10,000 INVESTMENT/(A)/
-----------------------------------------------------------------------------
S&P 500 Index Fund -6.81% 14.13% -1.16% -1.95% $8,214
-----------------------------------------------------------------------------
S&P 500 Index -6.65% 14.43% -0.79% -1.59% $8,517
-----------------------------------------------------------------------------
Morningstar peer group
average annual
total return* -7.01% 13.44% -0.98% -1.60%
-----------------------------------------------------------------------------
Inception date 4/15/85
-----------------------------------------------------------------------------
INVESTMENT PROFILE [GRAPHIC]
A mutual 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.
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 3.09%
--------------------------------------------
Apple Inc. 2.43%
--------------------------------------------
Microsoft Corp. 1.86%
--------------------------------------------
The Procter & Gamble Co. 1.83%
--------------------------------------------
Johnson & Johnson 1.72%
--------------------------------------------
International Business Machines Corp. 1.68%
--------------------------------------------
General Electric Co. 1.63%
--------------------------------------------
JPMorgan Chase & Co. 1.54%
--------------------------------------------
Bank of America Corp. 1.53%
--------------------------------------------
AT&T Inc. 1.51%
--------------------------------------------
PORTFOLIO COMPOSITION AS OF JUNE 30, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $190,186 (in thousands)
[CHART]
Information Technology 19.5%
Financials 14.3%
Healthcare 12.4%
Energy 11.3%
Consumer Staples 11.2%
Industrials 10.0%
Consumer Discretionary 9.4%
Utilities 3.6%
Materials 3.6%
Telecommunication Services 3.1%
Short-Term 1.6%
Other Investments 0.0%**
(a)Ending value of a $10,000 investment for the ten-year period or since
inception, whichever is less.
* Morningstar performance comparisons are based on average annual total returns
for the six month, one year, five year and ten year periods indicated in the
U.S. Insurance Large Blend peer group consisting of 465, 461, 394 and 298
underlying annuity funds, respectively
**Less than 0.05%
+ Total returns for the period ended June 30, 2010 are not annualized.
++The securities information regarding holdings, allocations and other
characteristics are presented to illustrate examples of securities that the
Fund has bought and the diversity of areas in which the Fund may invest as of
a particular date. It may not be representative of the Fund's current or
future investments and should not be construed as a recommendation to
purchase or sell a particular security.
See Notes to Performance on page 1 for further information, including an
explanation of Morningstar peer categories.
Past performance does not predict future performance. The performance shown in
the graph and table do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares and do not
reflect the fees or charges that would be associated with variable contracts
through which shares of the Fund are offered.
4
S&P 500 INDEX FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
S&P 500 INDEX FUND
NUMBER
OF SHARES VALUE
COMMON STOCK -- 98.6% +
---------------------------------------------------------------------
AEROSPACE & DEFENSE -- 2.8%
General Dynamics Corp............ 7,767 $ 454,836
Goodrich Corp.................... 2,584 171,190
Honeywell International Inc...... 15,343 598,837
ITT Corp......................... 3,726 167,372
L-3 Communications Holdings Inc.. 2,300 162,932
Lockheed Martin Corp............. 6,352 473,224
Northrop Grumman Corp............ 6,122 333,282
Precision Castparts Corp......... 2,900 298,468
Raytheon Co...................... 7,569 366,264
Rockwell Collins Inc............. 3,268 173,629
The Boeing Co.................... 15,386 965,472 /(d)/
United Technologies Corp......... 18,772 1,218,491 /(d)/
5,383,997
AIR FREIGHT & LOGISTICS -- 1.0%
CH Robinson Worldwide Inc........ 3,400 189,244
Expeditors International of
Washington Inc.................. 4,200 144,942
FedEx Corp....................... 6,411 449,475
United Parcel Service Inc........ 19,896 1,131,883
1,915,544
AIRLINES -- 0.1%
Southwest Airlines Co............ 15,349 170,527
AUTO COMPONENTS -- 0.2%
Johnson Controls Inc............. 13,746 369,355
The Goodyear Tire & Rubber Co.... 4,519 44,919 /(a)/
414,274
AUTOMOBILES -- 0.4%
Ford Motor Co.................... 68,727 692,768 /(a)/
Harley-Davidson Inc.............. 4,700 104,481
797,249
BEVERAGES -- 2.6%
Brown-Forman Corp................ 2,147 122,873
Coca-Cola Enterprises Inc........ 6,518 168,555
Constellation Brands Inc......... 3,500 54,670 /(a)/
Dr Pepper Snapple Group Inc...... 5,100 190,689
Molson Coors Brewing Co.......... 3,298 139,703
PepsiCo Inc...................... 32,549 1,983,862 /(d)/
The Coca-Cola Co................. 46,502 2,330,680 /(d)/
4,991,032
BIOTECHNOLOGY -- 1.4%
Amgen Inc........................ 19,422 1,021,597 /(a,d)/
Biogen Idec Inc.................. 5,300 251,485 /(a)/
Celgene Corp..................... 9,363 475,828 /(a)/
NUMBER
OF SHARES VALUE
Cephalon Inc....................... 1,500 $ 85,125 /(a)/
Genzyme Corp....................... 5,400 274,158 /(a)/
Gilead Sciences Inc................ 17,849 611,864 /(a)/
2,720,057
BUILDING PRODUCTS -- 0.0%*
Masco Corp......................... 7,090 76,288
CAPITAL MARKETS -- 2.4%
Ameriprise Financial Inc........... 5,204 188,021
E*Trade Financial Corp............. 3,440 40,661 /(a)/
Federated Investors Inc............ 2,100 43,491
Franklin Resources Inc............. 3,000 258,570
Invesco Ltd........................ 8,600 144,738
Janus Capital Group Inc............ 3,400 30,192
Legg Mason Inc..................... 3,400 95,302
Morgan Stanley..................... 27,896 647,466
Northern Trust Corp................ 5,000 233,500
State Street Corp.................. 10,000 338,200 /(c)/
T Rowe Price Group Inc............. 5,200 230,828
The Bank of New York Mellon Corp... 24,703 609,917
The Charles Schwab Corp............ 20,011 283,756
The Goldman Sachs Group Inc........ 10,399 1,365,077
4,509,719
CHEMICALS -- 1.8%
Air Products & Chemicals Inc....... 4,232 274,276 /(d)/
Airgas Inc......................... 1,700 105,740
CF Industries Holdings Inc......... 1,470 93,272
Eastman Chemical Co................ 1,559 83,188
Ecolab Inc......................... 4,652 208,921
EI du Pont de Nemours & Co......... 18,261 631,648
FMC Corp........................... 1,400 80,402
International Flavors & Fragrances
Inc............................... 1,547 65,624
Monsanto Co........................ 11,023 509,483 /(d)/
PPG Industries Inc................. 3,337 201,588
Praxair Inc........................ 6,065 460,879
Sigma-Aldrich Corp................. 2,382 118,695
The Dow Chemical Co................ 23,394 554,906
The Sherwin-Williams Co............ 1,763 121,982
3,510,604
COMMERCIAL BANKS -- 3.0%
BB&T Corp.......................... 14,200 373,602
Comerica Inc....................... 3,356 123,601
Fifth Third Bancorp................ 16,316 200,524
First Horizon National Corp........ 5,100 58,394 /(a)/
Huntington Bancshares Inc.......... 13,934 77,194
KeyCorp............................ 17,128 131,714
M&T Bank Corp...................... 1,600 135,920
Marshall & Ilsley Corp............. 10,298 73,940
PNC Financial Services Group Inc... 10,404 587,826
Regions Financial Corp............. 23,768 156,393
SunTrust Banks Inc................. 10,229 238,336
US Bancorp......................... 38,609 862,911
Wells Fargo & Co................... 105,102 2,690,611
Zions Bancorporation............... 2,500 53,925
5,764,891
See Notes to Schedule of Investments on page 12 and Notes to Financial
Statements on page 17.
5
S&P 500 INDEX FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
COMMERCIAL SERVICES & SUPPLIES -- 0.5%
Avery Dennison Corp........... 2,355 $ 75,666
Cintas Corp................... 2,800 67,116
Iron Mountain Inc............. 3,500 78,610
Pitney Bowes Inc.............. 4,132 90,739
Republic Services Inc......... 6,550 194,732
RR Donnelley & Sons Co........ 4,399 72,012
Stericycle Inc................ 1,800 118,044 /(a)/
Waste Management Inc.......... 9,903 309,865
1,006,784
COMMUNICATIONS EQUIPMENT -- 2.3%
Cisco Systems Inc............. 115,164 2,454,145 /(a,d)/
Harris Corp................... 2,500 104,125
JDS Uniphase Corp............. 4,450 43,788 /(a)/
Juniper Networks Inc.......... 10,500 239,610 /(a)/
Motorola Inc.................. 46,050 300,246 /(a)/
QUALCOMM Inc.................. 33,229 1,091,240
Tellabs Inc................... 7,652 48,896
4,282,050
COMPUTERS & PERIPHERALS -- 4.5%
Apple Inc..................... 18,339 4,612,809 /(a)/
Dell Inc...................... 34,728 418,820 /(a,d)/
EMC Corp...................... 41,814 765,196 /(a)/
Hewlett-Packard Co............ 47,049 2,036,281
Lexmark International Inc..... 1,700 56,151 /(a)/
NetApp Inc.................... 6,900 257,439 /(a)/
QLogic Corp................... 2,200 36,564 /(a)/
SanDisk Corp.................. 4,600 193,522 /(a)/
Teradata Corp................. 3,300 100,584 /(a)/
Western Digital Corp.......... 4,600 138,736 /(a)/
8,616,102
CONSTRUCTION & ENGINEERING -- 0.2%
Fluor Corp.................... 3,478 147,815
Jacobs Engineering Group Inc.. 2,600 94,744 /(a)/
Quanta Services Inc........... 4,000 82,600 /(a)/
325,159
CONSTRUCTION MATERIALS -- 0.1%
Vulcan Materials Co........... 2,700 118,341
CONSUMER FINANCE -- 0.8%
American Express Co........... 24,191 960,383 /(d)/
Capital One Financial Corp.... 9,125 367,738
Discover Financial Services... 11,098 155,150
SLM Corp...................... 10,200 105,978 /(a)/
1,589,249
CONTAINERS & PACKAGING -- 0.2%
Ball Corp..................... 1,716 90,656
Bemis Company Inc............. 2,362 63,774
Owens-Illinois Inc............ 3,500 92,575 /(a)/
Pactiv Corp................... 2,548 70,962 /(a)/
Sealed Air Corp............... 3,414 67,324
385,291
NUMBER
OF SHARES VALUE
DISTRIBUTORS -- 0.1%
Genuine Parts Co................... 3,096 $ 122,137
DIVERSIFIED CONSUMER SERVICES -- 0.2%
Apollo Group Inc................... 2,700 114,669 /(a)/
DeVry Inc.......................... 1,200 62,988
H&R Block Inc...................... 6,292 98,721
276,378
DIVERSIFIED FINANCIAL SERVICES -- 4.4%
Bank of America Corp............... 202,729 2,913,216
Citigroup Inc...................... 454,206 1,707,815 /(a,d)/
CME Group Inc...................... 1,261 355,035
IntercontinentalExchange Inc....... 1,500 169,545 /(a)/
JPMorgan Chase & Co................ 80,050 2,930,631 /(d)/
Leucadia National Corp............. 3,700 72,187 /(a)/
Moody's Corp....................... 4,084 81,353
NYSE Euronext...................... 5,300 146,439
The NASDAQ OMX Group Inc........... 3,300 58,674 /(a)/
8,434,895
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.6%
AT&T Inc........................... 118,880 2,875,707
CenturyTel Inc..................... 5,900 196,529
Frontier Communications Corp....... 6,900 49,059
Qwest Communications International
Inc............................... 29,048 152,502
Verizon Communications Inc......... 56,967 1,596,215
Windstream Corp.................... 9,643 101,830
4,971,842
ELECTRIC UTILITIES -- 1.9%
Allegheny Energy Inc............... 3,200 66,176
American Electric Power Company
Inc............................... 9,725 314,118 /(d)/
Duke Energy Corp................... 26,809 428,944
Edison International............... 6,642 210,684
Entergy Corp....................... 3,785 271,082
Exelon Corp........................ 13,452 510,772
FirstEnergy Corp................... 6,320 222,654
NextEra Energy Inc................. 8,362 407,731
Northeast Utilities................ 3,500 89,180
Pepco Holdings Inc................. 4,600 72,128
Pinnacle West Capital Corp......... 2,200 79,992
PPL Corp........................... 9,244 230,638
Progress Energy Inc................ 5,656 221,828
Southern Co........................ 16,658 554,378
3,680,305
ELECTRICAL EQUIPMENT -- 0.5%
Emerson Electric Co................ 15,138 661,379
First Solar Inc.................... 1,010 114,968 /(a)/
Rockwell Automation Inc............ 2,868 140,790
Roper Industries Inc............... 2,000 111,920
1,029,057
See Notes to Schedule of Investments on page 12 and Notes to Financial
Statements on page 17.
6
S&P 500 INDEX FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.6%
Agilent Technologies Inc....... 7,185 $ 204,270 /(a)/
Amphenol Corp.................. 3,600 141,408
Corning Inc.................... 31,839 514,200
FLIR Systems Inc............... 3,200 93,088 /(a)/
Jabil Circuit Inc.............. 3,900 51,870
Molex Inc...................... 2,950 53,808
1,058,644
ENERGY EQUIPMENT & SERVICES -- 1.7%
Baker Hughes Inc............... 8,732 362,989
Cameron International Corp..... 4,800 156,096 /(a)/
Diamond Offshore Drilling Inc.. 1,500 93,285
FMC Technologies Inc........... 2,543 133,914 /(a)/
Halliburton Co................. 18,191 446,589
Helmerich & Payne Inc.......... 2,200 80,344
Nabors Industries Ltd.......... 6,000 105,720 /(a)/
National Oilwell Varco Inc..... 8,600 284,402
Rowan Companies Inc............ 2,177 47,763 /(a)/
Schlumberger Ltd............... 24,033 1,329,986
Smith International Inc........ 4,900 184,485
3,225,573
FOOD & STAPLES RETAILING -- 2.5%
Costco Wholesale Corp.......... 8,817 483,436
CVS Caremark Corp.............. 27,327 801,228
Safeway Inc.................... 7,900 155,314
SUPERVALU Inc.................. 4,613 50,005
Sysco Corp..................... 12,044 344,097
The Kroger Co.................. 13,266 261,208
Walgreen Co.................... 19,713 526,337
Wal-Mart Stores Inc............ 41,787 2,008,701
Whole Foods Market Inc......... 3,100 111,662 /(a)/
4,741,988
FOOD PRODUCTS -- 1.9%
Archer-Daniels-Midland Co...... 13,086 337,881
Campbell Soup Co............... 3,715 133,108
ConAgra Foods Inc.............. 9,168 213,798
Dean Foods Co.................. 3,700 37,259 /(a)/
General Mills Inc.............. 13,262 471,066
HJ Heinz Co.................... 6,297 272,156
Hormel Foods Corp.............. 1,400 56,672
Kellogg Co..................... 5,090 256,027
Kraft Foods Inc................ 35,090 982,520
McCormick & Company Inc........ 2,600 98,696
Mead Johnson Nutrition Co...... 4,250 213,010
Sara Lee Corp.................. 13,757 193,974
The Hershey Co................. 3,484 166,988
The JM Smucker Co.............. 2,417 145,552
Tyson Foods Inc................ 6,300 103,257
3,681,964
GAS UTILITIES -- 0.2%
EQT Corp....................... 2,914 105,312
Nicor Inc...................... 843 34,142
Oneok Inc...................... 2,200 95,150
NUMBER
OF SHARES VALUE
Questar Corp.......................... 3,400 $ 154,666
389,270
HEALTHCARE EQUIPMENT & SUPPLIES -- 1.8%
Baxter International Inc.............. 12,129 492,923 /(d)/
Becton Dickinson and Co............... 4,788 323,765
Boston Scientific Corp................ 29,643 171,929 /(a)/
CareFusion Corp....................... 3,375 76,613 /(a)/
CR Bard Inc........................... 1,902 147,462
DENTSPLY International Inc............ 2,900 86,739
Hospira Inc........................... 3,439 197,571 /(a)/
Intuitive Surgical Inc................ 820 258,808 /(a)/
Medtronic Inc......................... 22,032 799,101
St Jude Medical Inc................... 6,592 237,905 /(a)/
Stryker Corp.......................... 5,652 282,939
Varian Medical Systems Inc............ 2,400 125,472 /(a)/
Zimmer Holdings Inc................... 4,000 216,200 /(a)/
3,417,427
HEALTHCARE PROVIDERS & SERVICES -- 2.1%
Aetna Inc............................. 8,608 227,079
AmerisourceBergen Corp................ 5,661 179,737
Cardinal Health Inc................... 7,251 243,706
CIGNA Corp............................ 5,389 167,382
Coventry Health Care Inc.............. 3,100 54,808 /(a)/
DaVita Inc............................ 2,100 131,124 /(a)/
Express Scripts Inc................... 10,900 512,518 /(a)/
Humana Inc............................ 3,327 151,944 /(a)/
Laboratory Corporation of America
Holdings............................. 2,000 150,700 /(a)/
McKesson Corp......................... 5,502 369,514
Medco Health Solutions Inc............ 9,166 504,863 /(a)/
Patterson Companies Inc............... 2,100 59,913
Quest Diagnostics Inc................. 3,100 154,287
Tenet Healthcare Corp................. 7,895 34,264 /(a)/
UnitedHealth Group Inc................ 22,676 643,998
WellPoint Inc......................... 8,500 415,905 /(a)/
4,001,742
HEALTHCARE TECHNOLOGY -- 0.1%
Cerner Corp........................... 1,400 106,246 /(a)/
HOTELS, RESTAURANTS & LEISURE -- 1.7%
Carnival Corp......................... 8,800 266,112
Darden Restaurants Inc................ 2,729 106,022
International Game Technology......... 6,300 98,910
Marriott International Inc............ 5,214 156,107
McDonald's Corp....................... 21,790 1,435,307
Starbucks Corp........................ 15,198 369,311
Starwood Hotels & Resorts Worldwide
Inc.................................. 3,900 161,577
Wyndham Worldwide Corp................ 3,849 77,519
Wynn Resorts Ltd...................... 1,300 99,151
Yum! Brands Inc....................... 9,329 364,204
3,134,220
See Notes to Schedule of Investments on page 12 and Notes to Financial
Statements on page 17.
7
S&P 500 INDEX FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
HOUSEHOLD DURABLES -- 0.4%
DR Horton Inc........................ 5,600 $ 55,048
Fortune Brands Inc................... 3,141 123,064
Harman International Industries Inc.. 1,200 35,868 /(a)/
Leggett & Platt Inc.................. 3,300 66,198
Lennar Corp.......................... 3,200 44,512
Newell Rubbermaid Inc................ 5,856 85,732
Pulte Group Inc...................... 6,435 53,282 /(a)/
Stanley Black & Decker Inc........... 3,192 161,260
Whirlpool Corp....................... 1,443 126,724
751,688
HOUSEHOLD PRODUCTS -- 2.6%
Clorox Co............................ 2,784 173,053
Colgate-Palmolive Co................. 9,972 785,395
Kimberly-Clark Corp.................. 8,436 511,475 /(d)/
The Procter & Gamble Co.............. 58,073 3,483,219
4,953,142
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.2%
Constellation Energy Group Inc....... 4,203 135,547
NRG Energy Inc....................... 5,100 108,171 /(a)/
The AES Corp......................... 13,400 123,816 /(a)/
367,534
INDUSTRIAL CONGLOMERATES -- 2.3%
General Electric Co.................. 214,862 3,098,310 /(f)/
Textron Inc.......................... 5,725 97,153
3M Co................................ 14,380 1,135,876
4,331,339
INSURANCE -- 3.9%
Aflac Inc............................ 9,600 409,632
American International Group Inc..... 2,625 90,405 /(a)/
AON Corp............................. 5,436 201,784
Assurant Inc......................... 2,100 72,870
Berkshire Hathaway Inc............... 33,269 2,651,207 /(a)/
Chubb Corp........................... 6,494 324,765
Cincinnati Financial Corp............ 3,192 82,577
Genworth Financial Inc............... 9,600 125,472 /(a)/
Hartford Financial Services Group
Inc................................. 8,304 183,768
Lincoln National Corp................ 6,142 149,189
Loews Corp........................... 7,066 235,368
Marsh & McLennan Companies Inc....... 10,753 242,480
MetLife Inc.......................... 16,473 622,020
Principal Financial Group Inc........ 6,300 147,672
Prudential Financial Inc............. 9,500 509,770
The Allstate Corp.................... 10,986 315,628 /(d)/
The Progressive Corp................. 13,473 252,215
The Travelers Companies Inc.......... 9,899 487,526
Torchmark Corp....................... 1,572 77,830
Unum Group........................... 6,689 145,151
XL Group PLC......................... 7,200 115,272
7,442,601
NUMBER
OF SHARES VALUE
INTERNET & CATALOG RETAIL -- 0.5%
Amazoncom Inc.......................... 6,900 $ 753,894 /(a)/
Expedia Inc............................ 4,100 76,998
priceline.com Inc...................... 870 153,590 /(a)/
984,482
INTERNET SOFTWARE & SERVICES -- 1.7%
Akamai Technologies Inc................ 3,400 137,938 /(a)/
eBay Inc............................... 22,800 447,108 /(a)/
Google Inc............................. 4,914 2,186,484 /(a)/
Monster Worldwide Inc.................. 2,700 31,455 /(a)/
VeriSign Inc........................... 3,562 94,571 /(a)/
Yahoo! Inc............................. 23,289 322,087 /(a)/
3,219,643
IT SERVICES -- 3.1%
Automatic Data Processing Inc.......... 9,980 401,795
Cognizant Technology Solutions
Corp.................................. 5,900 295,354 /(a)/
Computer Sciences Corp................. 3,082 139,461
Fidelity National Information Services
Inc................................... 6,700 179,694
Fiserv Inc............................. 2,978 135,975 /(a)/
International Business Machines
Corp.................................. 25,830 3,189,488
Mastercard Inc......................... 1,900 379,107
Paychex Inc............................ 6,725 174,648
SAIC Inc............................... 6,100 102,114 /(a)/
The Western Union Co................... 13,124 195,679
Total System Services Inc.............. 4,402 59,867
Visa Inc............................... 9,100 643,825
5,897,007
LEISURE EQUIPMENT & PRODUCTS -- 0.2%
Eastman Kodak Co....................... 6,475 28,102 /(a)/
Hasbro Inc............................. 2,596 106,696
Mattel Inc............................. 7,651 161,895
296,693
LIFE SCIENCES TOOLS & SERVICES -- 0.5%
Life Technologies Corp................. 3,503 165,517 /(a)/
Millipore Corp......................... 1,145 122,114 /(a)/
PerkinElmer Inc........................ 2,310 47,748
Thermo Fisher Scientific Inc........... 8,228 403,583 /(a)/
Waters Corp............................ 1,900 122,930 /(a)/
861,892
MACHINERY -- 1.7%
Caterpillar Inc........................ 12,632 758,804
Cummins Inc............................ 4,056 264,167
Danaher Corp........................... 10,600 393,472
Deere & Co............................. 8,540 475,507
Dover Corp............................. 3,858 161,226
Eaton Corp............................. 3,300 215,952
Flowserve Corp......................... 1,200 101,760
Illinois Tool Works Inc................ 7,927 327,227
PACCAR Inc............................. 7,503 299,145
See Notes to Schedule of Investments on page 12 and Notes to Financial
Statements on page 17.
8
S&P 500 INDEX FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
Pall Corp.......................... 2,478 $ 85,169
Parker Hannifin Corp............... 3,172 175,919
Snap-On Inc........................ 1,309 53,551
3,311,899
MEDIA -- 3.1%
CBS Corp........................... 14,109 182,429
Comcast Corp....................... 57,158 992,834
DIRECTV............................ 18,400 624,128 /(a)/
Discovery Communications Inc....... 5,700 203,547 /(a)/
Gannett Company Inc................ 4,808 64,716
Meredith Corp...................... 598 18,616
News Corp.......................... 46,000 550,160
Omnicom Group Inc.................. 6,280 215,404
Scripps Networks Interactive Inc... 1,900 76,646
The Interpublic Group of Companies
Inc............................... 9,830 70,088 /(a)/
The McGraw-Hill Companies Inc...... 6,321 177,873
The New York Times Co.............. 2,788 24,116 /(a)/
The Walt Disney Co................. 39,420 1,241,730
The Washington Post Co............. 140 57,467
Time Warner Cable Inc.............. 7,096 369,560
Time Warner Inc.................... 22,838 660,247
Viacom Inc......................... 12,413 389,396
5,918,957
METALS & MINING -- 1.1%
AK Steel Holding Corp.............. 2,300 27,416
Alcoa Inc.......................... 20,940 210,656 /(d)/
Allegheny Technologies Inc......... 1,951 86,215
Cliffs Natural Resources Inc....... 2,700 127,332
Freeport-McMoRan Copper & Gold
Inc............................... 9,555 564,987
Newmont Mining Corp................ 9,828 606,781
Nucor Corp......................... 6,336 242,542
Titanium Metals Corp............... 1,600 28,144 /(a)/
United States Steel Corp........... 2,965 114,301
2,008,374
MULTILINE RETAIL -- 0.9%
Big Lots Inc....................... 1,800 57,762 /(a)/
Family Dollar Stores Inc........... 2,700 101,763
JC Penney Company Inc.............. 4,787 102,825
Kohl's Corp........................ 6,300 299,250 /(a)/
Macy's Inc......................... 8,430 150,897
Nordstrom Inc...................... 3,292 105,969
Sears Holdings Corp................ 1,019 65,878 /(a)/
Target Corp........................ 14,749 725,208
1,609,552
MULTI-UTILITIES -- 1.4%
Ameren Corp........................ 5,042 119,848
CenterPoint Energy Inc............. 7,618 100,253
CMS Energy Corp.................... 4,700 68,855
Consolidated Edison Inc............ 5,607 241,662
Dominion Resources Inc............. 11,900 461,006
DTE Energy Co...................... 3,366 153,523
Integrys Energy Group Inc.......... 1,531 66,966
NiSource Inc....................... 5,815 84,318
PG&E Corp.......................... 7,654 314,579
NUMBER
OF SHARES VALUE
Public Service Enterprise Group Inc.. 10,292 $ 322,448
SCANA Corp........................... 2,400 85,824
Sempra Energy........................ 4,875 228,101
TECO Energy Inc...................... 4,400 66,308
Wisconsin Energy Corp................ 2,400 121,776
Xcel Energy Inc...................... 8,980 185,078
2,620,545
OFFICE ELECTRONICS -- 0.1%
Xerox Corp........................... 26,947 216,654
OIL, GAS & CONSUMABLE FUELS -- 8.9%
Anadarko Petroleum Corp.............. 10,056 362,921
Apache Corp.......................... 6,748 568,114
Cabot Oil & Gas Corp................. 1,900 59,508
Chesapeake Energy Corp............... 13,000 272,350
Chevron Corp......................... 40,558 2,752,266
ConocoPhillips....................... 29,919 1,468,724
Consol Energy Inc.................... 4,600 155,296
Denbury Resources Inc................ 8,400 122,976 /(a)/
Devon Energy Corp.................... 9,092 553,885
El Paso Corp......................... 13,982 155,340
EOG Resources Inc.................... 5,100 501,687
Exxon Mobil Corp..................... 102,993 5,877,811 /(d)/
Hess Corp............................ 5,870 295,496 /(d)/
Marathon Oil Corp.................... 14,242 442,784
Massey Energy Co..................... 1,800 49,230
Murphy Oil Corp...................... 3,800 188,290
Noble Energy Inc..................... 3,600 217,188
Occidental Petroleum Corp............ 16,379 1,263,640
Peabody Energy Corp.................. 5,479 214,393
Pioneer Natural Resources Co......... 2,300 136,735
Range Resources Corp................. 3,200 128,480
Southwestern Energy Co............... 6,900 266,616 /(a)/
Spectra Energy Corp.................. 12,877 258,441
Sunoco Inc........................... 2,376 82,614
Tesoro Corp.......................... 3,300 38,511
The Williams Companies Inc........... 11,986 219,104
Valero Energy Corp................... 11,800 212,164
16,864,564
PAPER & FOREST PRODUCTS -- 0.2%
International Paper Co............... 8,575 194,052
MeadWestvaco Corp.................... 3,300 73,260
Weyerhaeuser Co...................... 4,366 153,683
420,995
PERSONAL PRODUCTS -- 0.2%
Avon Products Inc.................... 8,728 231,292
The Estee Lauder Companies Inc....... 2,400 133,752
365,044
PHARMACEUTICALS -- 6.1%
Abbott Laboratories.................. 31,004 1,450,367 /(d)/
Allergan Inc......................... 6,155 358,590
Bristol-Myers Squibb Co.............. 34,518 860,879 /(d)/
Eli Lilly & Co....................... 20,243 678,140
Forest Laboratories Inc.............. 6,000 164,580 /(a)/
See Notes to Schedule of Investments on page 12 and Notes to Financial
Statements on page 17.
9
S&P 500 INDEX FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
Johnson & Johnson.............. 55,486 $ 3,277,003
King Pharmaceuticals Inc....... 5,733 43,513 /(a)/
Merck & Company Inc............ 63,045 2,204,684
Mylan Inc...................... 6,165 105,052 /(a)/
Pfizer Inc..................... 162,214 2,313,172
Watson Pharmaceuticals Inc..... 2,300 93,311 /(a)/
11,549,291
PROFESSIONAL SERVICES -- 0.1%
Dun & Bradstreet Corp.......... 1,100 73,832
Equifax Inc.................... 2,600 72,956
Robert Half International Inc.. 3,200 75,360
222,148
REAL ESTATE INVESTMENT TRUSTS -- 1.3%
Apartment Investment &
Management Co................. 2,431 47,088
AvalonBay Communities Inc...... 1,701 158,822
Boston Properties Inc.......... 2,800 199,752
Equity Residential............. 5,700 237,348
HCP Inc........................ 6,000 193,500
Healthcare Inc................. 2,600 109,512
Host Hotels & Resorts Inc...... 13,617 183,557
Kimco Realty Corp.............. 7,600 102,144
Plum Creek Timber Company Inc.. 3,200 110,496
ProLogis....................... 9,900 100,287
Public Storage................. 2,800 246,148
Simon Property Group Inc....... 5,937 479,413
Ventas Inc..................... 3,300 154,935
Vornado Realty Trust........... 3,147 229,574
2,552,576
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.0%*
CB Richard Ellis Group Inc..... 5,500 74,855 /(a)/
ROAD & RAIL--0.8%
CSX Corp....................... 7,939 394,013
Norfolk Southern Corp.......... 7,418 393,525
Ryder System Inc............... 931 37,454
Union Pacific Corp............. 10,137 704,623
1,529,615
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.5%
Advanced Micro Devices Inc..... 11,874 86,918 /(a,d)/
Altera Corp.................... 6,000 148,860
Analog Devices Inc............. 6,100 169,946
Applied Materials Inc.......... 27,100 325,742 /(d)/
Broadcom Corp.................. 8,650 285,191
Intel Corp..................... 111,865 2,175,774 /(d)/
KLA-Tencor Corp................ 3,600 100,368
Linear Technology Corp......... 4,300 119,583
LSI Corp....................... 12,292 56,543 /(a)/
MEMC Electronic Materials Inc.. 4,500 44,460 /(a)/
Microchip Technology Inc....... 3,900 108,186
Micron Technology Inc.......... 16,654 141,392 /(a)/
National Semiconductor Corp.... 4,566 61,458
Novellus Systems Inc........... 1,700 43,112 /(a)/
NVIDIA Corp.................... 11,600 118,436 /(a)/
NUMBER
OF SHARES VALUE
Teradyne Inc................... 3,600 $ 35,100 /(a)/
Texas Instruments Inc.......... 24,451 569,219
Xilinx Inc..................... 5,687 143,654
4,733,942
SOFTWARE -- 3.7%
Adobe Systems Inc.............. 10,684 282,378 /(a,d)/
Autodesk Inc................... 4,648 113,225 /(a)/
BMC Software Inc............... 3,700 128,131 /(a)/
CA Inc......................... 7,800 143,520
Citrix Systems Inc............. 3,600 152,028 /(a)/
Compuware Corp................. 4,100 32,718 /(a)/
Electronic Arts Inc............ 6,900 99,360 /(a)/
Intuit Inc..................... 6,200 215,574 /(a)/
McAfee Inc..................... 3,300 101,376 /(a)/
Microsoft Corp................. 153,439 3,530,631 /(d)/
Novell Inc..................... 7,666 43,543 /(a)/
Oracle Corp.................... 78,852 1,692,164 /(d)/
Red Hat Inc.................... 4,000 115,760 /(a)/
Salesforce.com Inc............. 2,200 188,804 /(a)/
Symantec Corp.................. 16,585 230,200 /(a)/
7,069,412
SPECIALTY RETAIL -- 2.0%
Abercrombie & Fitch Co......... 1,900 58,311
AutoNation Inc................. 1,886 36,777 /(a)/
AutoZone Inc................... 544 105,112 /(a)/
Bed Bath & Beyond Inc.......... 5,400 200,232 /(a)/
Best Buy Company Inc........... 6,900 233,634
CarMax Inc..................... 4,500 89,550 /(a)/
GameStop Corp.................. 2,900 54,491 /(a)/
Home Depot Inc................. 33,733 946,885
Lowe's Companies Inc........... 28,602 584,053
Ltd Brands Inc................. 5,688 125,534
Office Depot Inc............... 5,400 21,816 /(a)/
O'Reilly Automotive Inc........ 2,700 128,412 /(a)/
RadioShack Corp................ 2,256 44,015
Ross Stores Inc................ 2,500 133,225
Staples Inc.................... 14,650 279,083
The Gap Inc.................... 8,779 170,839
Tiffany & Co................... 2,400 90,984
TJX Companies Inc.............. 8,180 343,151
Urban Outfitters Inc........... 2,800 96,292 /(a)/
3,742,396
TEXTILES, APPAREL & LUXURY GOODS -- 0.5%
Coach Inc...................... 6,000 219,300
NIKE Inc....................... 7,910 534,320
Polo Ralph Lauren Corp......... 1,200 87,552
VF Corp........................ 1,802 128,266
969,438
THRIFTS & MORTGAGE FINANCE -- 0.1%
Hudson City Bancorp Inc........ 9,600 117,504
People's United Financial Inc.. 7,800 105,300
222,804
See Notes to Schedule of Investments on page 12 and Notes to Financial
Statements on page 17.
10
S&P 500 INDEX FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
TOBACCO -- 1.5%
Altria Group Inc................... 41,653 $ 834,726
Lorillard Inc...................... 3,111 223,930
Philip Morris International Inc.... 37,479 1,718,037
Reynolds American Inc.............. 3,400 177,208
2,953,901
TRADING COMPANIES & DISTRIBUTORS -- 0.1%
Fastenal Co........................ 2,600 130,494
WW Grainger Inc.................... 1,282 127,495
257,989
WIRELESS TELECOMMUNICATION SERVICES -- 0.3%
American Tower Corp................ 8,100 360,450 /(a)/
MetroPCS Communications Inc........ 4,600 37,674 /(a)/
Sprint Nextel Corp................. 60,600 256,944 /(a)/
655,068
TOTAL COMMON STOCK
(COST $200,224,198)............... 187,824,886
-------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
-------------------------------------------------------------------
GEI Investment Fund
(COST $90,842).................... 79,032 /(e)/
TOTAL INVESTMENTS IN SECURITIES
(COST $200,315,040)............... 187,903,918
-------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.2%
-------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.0%
GE Money Market Fund Institutional
Class 0.05%....................... 1,882,653 /(b,e)/
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT -- 0.2%
U.S. Cash Management Bill
0.09% 10/14/10............. $400,000 $ 399,841 /(b)/
TOTAL SHORT-TERM INVESTMENTS
(COST $2,282,545)............ 2,282,494
TOTAL INVESTMENTS
(COST $202,597,585).......... 190,186,412
OTHER ASSETS AND LIABILITIES,
NET -- 0.2%.................. 390,320
------------
NET ASSETS -- 100.0%.......... $190,576,732
============
------------------------------------------------------------
OTHER INFORMATION
------------------------------------------------------------
The Fund had the following long futures contracts open at June 30, 2010
(unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
------------------------------------------------------------------
S&P 500 Emini
Index Futures September 2010 63 $3,233,790 $(183,944)
See Notes to Schedule of Investments on page 12 and Notes to Financial
Statements on page 17.
11
Notes to Schedule of Investments June 30, 2010 (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
information regarding holdings, allocations and other characteristics are
presented to illustrate examples of securities that the Fund has bought and the
diversity of areas in which the Fund may invest as of a particular date. It may
not be representative of the Fund's current or future investments and should
not be construed as a recommendation to purchase or sell a particular security.
Please see the Fund's prospectus for complete descriptons of investment
objective, 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, 2010, 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)GE Asset Management, the investment adviser of the Fund, also serves as
investment adviser of the GEI Investment Fund and the GE Funds-GE Money
Market Fund
(f)General Electric Co. is the parent company of GE Asset Management
Incorporated, the Fund's investment adviser.
* Less than 0.05%.
+ Percentages are based on net assets as of June 30, 2010.
12
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
S&P 500 INDEX FUND
-----------------------------------------------------------------------
6/30/10+ 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05
-----------------------------------------------------------------------
INCEPTION DATE 4/15/85
Net asset value, beginning of period....... $ 19.82 $15.99 $26.52 $26.06 $22.94 $22.30
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income.................... 0.17 0.38 0.52 0.47 0.42 0.36
Net realized and unrealized
gains/(losses) on investments........... (1.52) 3.84 (10.46) 0.86 3.12 0.65
- -------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS..................... (1.35) 4.22 (9.94) 1.33 3.54 1.01
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.................... 0.00 0.39 0.50 0.47 0.42 0.37
Net realized gains....................... 0.00 0.00 0.09 0.40 -- --
- -------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS........................ 0.00 0.39 0.59 0.87 0.42 0.37
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period............. $18.47 $19.82 $15.99 $26.52 $26.06 $22.94
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/(A)/.......................... (6.81)% 26.30% (37.40)% 5.10% 15.43% 4.51%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands). $190,577 $224,165 $209,176 $447,426 $497,105 $531,015
Ratios to average net assets:
Net investment income*................. 1.67% 2.05% 1.91% 1.62% 1.58% 1.47%
Net expenses*.......................... 0.38%/(b)(c)/ 0.43%/(b)/ 0.41%/(b)/ 0.39% 0.40% 0.40%
Gross expenses*........................ 0.43% 0.43% 0.41% 0.39% 0.40% 0.40
Portfolio turnover rate................ 2% 5% 4% 6% 4% 4%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a)Total returns are historical and assume changes in share price, reinvestment
of dividends and capital gains distributions and do not include the effect
of insurance contract charges. Past performance does not guarantee future
results.
(b)Reflects GE Asset Management waiver of a portion of the Fund's management
fee in an amount equal to the management fee earned by GE Asset Management
with respect to the Fund's investment in the GE Funds -- GE Money Market
Fund. Excluding waiver, the expense ratios would be unchanged.
(c)Effective January 1, 2010, GEAM has entered into a contractual arrangement
with the Company to limit the management fee charged to the Fund to 0.30% of
the average daily net assets of the Fund. Unless terminated or amended, this
agreement will continue in effect until April 30, 2011. The agreement may be
changed or terminated with the approval of the Company's Board of Directors
and GEAM.
* Annualized for periods less than one year.
+ Unaudited.
See Notes to Financial Statements.
13
Statement of Assets S&P 500
and Liabilities JUNE 30, 2010 (UNAUDITED) INDEX
FUND
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $200,224,198)........ $187,824,886
Investments in affiliated securities, at market (cost $90,842).. 79,032
Short-term Investments at market (cost $399,892)................ 399,841
Short-term affiliated investments (at amortized cost)........... 1,882,653
Receivable for investments sold................................. 518,819
Income receivables.............................................. 258,532
Receivable for fund shares sold................................. 16,088
- --------------------------------------------------------------------------------
TOTAL ASSETS.................................................. 190,979,851
- --------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed................................ 103,010
Payable to GEAM................................................. 96,035
Accrued other expenses.......................................... 176,311
Variation margin payable........................................ 27,763
- --------------------------------------------------------------------------------
TOTAL LIABILITIES............................................. 403,119
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $190,576,732
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in................................................. 257,333,883
Undistributed (distribution in excess of) net investment income. 1,804,157
Accumulated net realized loss................................... (55,966,191)
Net unrealized appreciation/ (depreciation) on:
Investments................................................... (12,411,173)
Futures....................................................... (183,944)
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $190,576,732
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $190,576,732
Shares outstanding ($0.01 par value; unlimited shares authorized). 10,315,602
Net asset value per share......................................... $18.47
See Notes to Financial Statements.
14
Statement of Operations S&P 500
FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED) INDEX
FUND
- ----------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend.............................................................. $ 2,103,189
Interest.............................................................. 106,583
Interest from affiliated investments.................................. 85
- ----------------------------------------------------------------------------------------
TOTAL INCOME............................................................ 2,209,857
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees...................................... 380,496
Transfer agent........................................................ 20
Director's fees....................................................... 3,632
Custody and accounting expenses....................................... 20,813
Professional fees..................................................... 20,306
Registration expenses................................................. 14,563
Other expenses........................................................ 24,932
- ----------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT.......................... 464,762
- ----------------------------------------------------------------------------------------
Less: Expenses waived or borne by the adviser......................... (54,094)
Less: Expenses reimbursed by the adviser.............................. (3,412)
- ----------------------------------------------------------------------------------------
Net expenses.......................................................... 407,256
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS)............................................ 1,802,601
- ----------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments......................................................... (3,241,252)
Futures............................................................. (1,865)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION / (DEPRECIATION) ON:
Investments......................................................... (11,838,926)
Futures............................................................. (239,105)
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments................ (15,321,148)
- ----------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......... $(13,518,547)
- ----------------------------------------------------------------------------------------
See Notes to Financial Statements.
15
Statements of S&P 500
Changes in Net Assets INDEX
FUND
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2010 DECEMBER 31,
(UNAUDITED) 2009
- ------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income............................................................... $ 1,802,601 $ 4,156,927
Net realized gain (loss) on investments and futures.................................. (3,243,117) (18,244,107)
Net increase (decrease) in unrealized appreciation / (depreciation) on investments
and futures........................................................................ (12,078,031) 61,943,292
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations.............................................. (13,518,547) 47,856,112
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................................................ -- (4,356,429)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS.................................................................... -- (4,356,429)
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions.................... (13,518,547) 43,499,683
- ------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares......................................................... 699,624 3,626,812
Value of distributions reinvested.................................................... -- 4,356,429
Cost of shares redeemed.............................................................. (20,769,470) (36,493,594)
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions...................................... (20,069,846) (28,510,353)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................................................ (33,588,393) 14,989,330
NET ASSETS
Beginning of period.................................................................... 224,165,125 209,175,795
- ------------------------------------------------------------------------------------------------------------------------
End of period.......................................................................... $190,576,732 $224,165,125
- ------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD........... $ 1,804,157 $ 1,556
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN FUND SHARES
Shares sold.......................................................................... 34,400 230,073
Issued for distributions reinvested.................................................. -- 217,713
Shares redeemed...................................................................... (1,029,794) (2,212,725)
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................... (995,394) (1,764,939)
- ------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
16
Notes to Financial Statements June 30, 2010 (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 Fund 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 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
References to Level 1, Level 2 and Level 3 below are the level classifications
in the fair value hierarchy and are described in the Fair Value Measurements
section.
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 the NASDAQ are valued using the NASDAQ Official Closing Price, which
may not necessarily represent the last sale price. Level 1 securities primarily
include publicly-traded equity securities. If no sales occurred on the exchange
or NASDAQ that day, the portfolio security generally is valued using the last
reported bid price. In these circumstances the Fund classifies the investment
securities in Level 2.
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. These securities are included in Level 2. In the absence of
a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations and would be classified in
Level 3. Short-term investments of sufficient credit quality 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 and these are included
in Level 2. 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
and these are also included in Level 2.
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. These securities
would be classified in Level 3. 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 of
the Fund in the appropriate circumstances.
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. In those circumstances the Fund classifies the investment securities
in Level 2. 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,
17
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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. In these circumstances the Fund classifies the investment securities
in Level 3. 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.
Portfolio securities may be valued using techniques other than market
quotations, under the circumstances described under above. The value
established for a portfolio security may be different than what would be
produced through the use of another methodology or if it had been priced using
market quotations. Portfolio securities that are valued using techniques other
than market quotations, including "fair valued" securities, may be subject to
greater fluctuation in their value from one day to the next than would be the
case if market quotations were used. In addition, there is no assurance that
the Fund could sell a portfolio security for the value established for it at
any time and it is possible that the Fund would incur a loss because a
portfolio security is sold at a discount to its established 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. 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. The Fund's income, expenses (other than distribution
fees) and realized and unrealized gains and losses are allocated proportionally
each day among each the Fund's respective share classes based upon the relative
net assets of each share class.
FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, Fair Valuation Measurements and Disclosures effective
October 1, 2008 for all financial instruments accounted for at fair value.
For financial assets and liabilities, fair value is the price the Fund would
receive 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 or 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 inputs are observable or whose
significant value drivers are observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
Policies and procedures are maintained to value investments using the best and
most relevant data available. In addition, GEAM performs periodic reviews of
the methodologies used by independent pricing services including price
validation of individual securities.
The following section describes the valuation methodologies the Fund uses to
measure different financial investments at fair value.
When available, the Fund uses quoted market prices to determine the 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, pricing information is obtained
from an independent pricing vendor. The pricing vendor uses various pricing
models for each asset class that are consistent with what other market
participants would use. The inputs and assumptions to the model of the pricing
vendor are derived from market observable sources including: benchmark yields,
reported trades, broker/dealer quotes, issuer spreads, benchmark securities,
bids, offers, and other market-related data. Since many fixed income securities
do not trade on a daily basis, the methodology of the pricing vendor uses
available information as applicable such as benchmark curves, benchmarking of
like securities, sector groupings, and matrix pricing. The pricing vendor
considers all available market observable
18
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
inputs in determining the evaluation for a security. Thus, certain securities
may not be priced using quoted prices, but rather determined from market
observable information. These investments are included in Level 2 and primarily
comprise our portfolio of corporate fixed income, government, mortgage and
asset-backed securities. In infrequent circumstances, pricing vendors may
provide the Fund with valuations that are based on significant unobservable
inputs, and in those circumstances the investment securities are included in
Level 3.
The Fund uses non-binding broker quotes as the primary basis for valuation when
there is limited, or no, relevant market activity for a specific investment or
for other investments that share similar characteristics. The Fund has not
adjusted the prices obtained. Investment securities priced using non-binding
broker quotes are included in Level 3. As is the case with the primary pricing
vendor, third-party brokers do not provide access to their proprietary
valuation models, inputs and assumptions. Accordingly, GEAM conducts internal
reviews of pricing for all such investment securities periodically to ensure
reasonableness of valuations used in our financial statements. These reviews
are designed to identify prices that appear stale, those that have changed
significantly from prior valuations, and other anomalies that may indicate that
a price may not be accurate. Based on the information available, the Fund
believes that the fair values provided by the brokers are representative of
prices that would be received to sell the assets at the measurement date (exit
prices).
Other financial investments are derivative investments 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.
The Fund uses closing prices for derivatives included in Level 1, which are
traded either on exchanges or liquid over-the counter markets. Derivative
assets and liabilities included in Level 2 primarily represent interest rate
swaps, cross-currency swaps and foreign currency and commodity forward and
option contracts. Derivative assets and liabilities included in Level 3
primarily represent interest rate products that contain embedded optionality or
prepayment features.
Transfers in and out of Level 3 are considered to occur at the beginning of the
period.
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. For example, money
market securities are valued using amortized cost, in accordance with the
Investment Company Act of 1940. Generally, amortized cost reflects the current
fair value of a security, but since the value is not obtained from a quoted
price in an active market, such securities are reflected as Level 2. Fair value
determinations are required for securities whose value is affected by a
significant event that will materially affect the value of a domestic or
foreign security and which occurs subsequent to the time of the close of the
principal market on which such domestic or foreign security trades but prior to
the calculation of the Fund's NAV.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objective 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,
19
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 of foreign denominated securities from
the fluctuations arising from changes in the market prices of those 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.
DERIVATIVES 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 enter into derivative transactions for the purpose of hedging
against the effects of changes in the value of portfolio securities due to
anticipated changes in market conditions and to gain market exposure for
residual and accumulating cash positions. 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 and 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.
FUTURES CONTRACTS The Fund may invest in interest rate, financial, stock and
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 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
20
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
The Fund is subject to ASC 740, Income Taxes. ASC 740 provides guidance for
financial accounting and reporting for the effects of income taxes that result
from an entity's activities during the year. ASC 740 also provides guidance
regarding how certain uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements. ASC 740 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.
There are no adjustments to the Fund's net assets required under ASC 740. The
Fund's 2006, 2007, 2008 and 2009 fiscal years tax returns are still open to
examination by the Federal and applicable state tax authorities.
At June 30, 2010, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation) on
Tax Purposes Appreciation Depreciation Investments
---------------------------------------------------------------------
$212,662,170 $34,486,976 $(56,962,734) $(22,475,758)
As of December 31, 2009, the Fund has capital loss carryovers, as indicated
below.
Amount Expires
----------------------
$21,852,323 12/31/2016
19,967,105 12/31/2017
During the year ended December 31, 2009, 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 elected to defer losses incurred after October 31, 2009 as follows:
Capital Currency
-------------------
$1,376,573 $--
The tax composition of distributions paid during the years ended December 31,
2009 and December 31, 2008 were as follows:
Ordinary Long-Term
Income Capital Gains Total
-----------------------------------------
2009 $4,356,429 $ -- $4,356,429
2008 6,315,180 1,148,328 7,463,508
21
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays any dividends from net
investment income annually. The Fund also declares and pays any 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.
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.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued FASB Accounting
Standards Codification (ASC) effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The ASC is an
aggregation of previously issued authoritative U.S. generally accepted
accounting principles (GAAP) in one comprehensive set of guidance organized by
subject area. In accordance with the ASC, references to previously issued
accounting standards have been replaced by ASC references. Subsequent revisions
to GAAP will be incorporated into the ASC through Accounting Standards Updates
(ASU).
The Fund adopted ASC 855, Subsequent Events effective October 2009. ASC 855
establishes principles and requirements for subsequent events, in particular
(a) the period after the balance sheet date during which management of a
reporting entity shall evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; (b) the
circumstances under which an entity shall recognize events or transactions
occurring after the balance sheet date in its financial statements; and (c) the
disclosures that an entity shall make about events or transactions that
occurred after the balance sheet date.
In January 2010, FASB issued ASU 2010-06, Improving Disclosures about Fair
Value Measurements. ASU 2010-06 requires reporting entities to make new
disclosures about the amounts and reasons for significant transfers in and out
of Level 1 and Level 2 fair value measurements and inputs and valuation
techniques used to measure fair value for both recurring and nonrecurring fair
value measurements that fall in either Level 2 or Level 3, and information on
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new disclosures were effective for interim and
annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures will
be effective for fiscal years beginning after December 15, 2010, and for
interim periods within those fiscal years. GEAM does not believe the adoption
of ASU 2010-06 will materially impact the financial statement amounts.
3. FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, Fair Valuation Measurements and Disclosures effective
October 2008. This guidance establishes a new framework for measuring fair
value and expands related disclosures. Broadly, the 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. It also establishes a three-level valuation
hierarchy based upon observable and non-observable inputs.
22
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
The following tables present the Fund's investments measured at fair value on a
recurring basis at June 30, 2010:
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------------
Investments in Securities
Common Stock $187,824,886 $ -- $-- $187,824,886
Other Investments -- 79,032 -- 79,032
Short-Term Investments 1,882,653 399,841 -- 2,282,494
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES $189,707,539 $478,873 $-- $190,186,412
- --------------------------------------------------------------------------------
OTHER FINANCIAL INSTRUMENTS
Futures Contracts -- Unrealized
Depreciation $ (183,944) $ -- $-- $ (183,944)
4. DERIVATIVES TRANSACTIONS
Shown below are the derivative contracts entered into by the Fund, summarized
by primary risk exposure.
Asset Derivatives June 30, 2010 Liability Derivatives June 30, 2010
--------------------------------------- --------------------------------------
Derivatives not Location in Location in
accounted for as the Statements the Statements
hedging instruments of Assets Fair of Assets Fair
under ASC 815 and Liabilities Value ($) and Liabilities Value ($)
- ------------------- ----------------------------- --------- ---------------------------- ---------
Equity Contracts Receivables, Net Assets -- Liabilities, Net Assets --
Net unrealized appreciation/ Net unrealized appreciation/
(depreciation) on Futures -- (depreciation) on Futures (183,944)*
- ----------------------------------------------------------------------------------------------------
*Includes cumulative appreciation/depreciation of futures contracts as reported
in the Schedule of Investments and within the components of net assets section
of the Statements of Assets and Liabilities. Only the current day's variation
margin is reported within the receivables and/or payables of the Statements of
Assets and Liabilities.
Refer to the Schedule of Investments for ending notional value.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Total Notional of
Derivatives not accounted Location in the Futures/Options Realized Gain or
for as hedging instruments Statements of Contracts (Loss) on Derivatives
under ASC 815 Operations Purchased/(Sold) ($) Recognized in Income ($)
- ---------------------------------------------------------------------------------------------------------
Equity Contracts Realized gain/(loss) on
futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on Futures 7,603,175/(8,682,284) (1,865)
- ---------------------------------------------------------------------------------------------------------
Change in Unrealized
Derivatives not accounted Appreciation/(Depreciation)
for as hedging instruments on Derivatives
under ASC 815 Recognized in Income ($)
- -------------------------------------------------------
Equity Contracts
(239,105)
- -------------------------------------------------------
5. FEES AND COMPENSATION 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%.
Effective January 1, 2010, GEAM has entered into a contractual arrangement with
the Company to limit the management fee charged to the Fund to 0.30% of the
average daily net assets of the Fund. Unless terminated or amended, this
agreement will continue in effect until April 30, 2011. The agreement may be
changed or terminated with the approval of the Company's Board of Directors and
GEAM.
GEAM waives a portion of the Fund's management fee in the amount equal to the
management fee earned by GEAM with respect to the Fund's investment in the GE
Funds -- GE Money Market Fund.
23
Notes to Financial Statements June 30, 2010 (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 is 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).
6. 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.
7. 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, 2010 were as follows:
Purchases Sales
----------------------
$4,480,510 $21,604,689
SECURITY LENDING For the six-month period ended June 30, 2010, the Fund did not
participate in securities lending.
8. SUBSEQUENT EVENTS
Subsequent events after the balance sheet date through the date that the
financial statements were issued, have been evaluated in the preparation of the
Financial Statements. There were no items to report.
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 61
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 -- 13 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; 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;
Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993 and GE Institutional Funds since 1997; 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 2003;
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 49
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 GEAM from
February 1997 to July 2007; Vice President and Associate General Counsel of
GEAM from October 1992 to February 1997; Secretary of GE Funds from 1997 to
July 2007 and Vice President from September 2003 to June 2007; Secretary of GE
Institutional Funds and the fund from 1997 to July 2007, and Vice President
from September 2003 to July 2007; Vice President of Elfun Funds and GE
Savings & Security Funds from October 2003 to July 2007; Assistant Secretary of
Elfun Funds and GE Savings & Security Funds from 1998 to July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds and General Electric Pension
Trust, since July 2007.
25
Additional Information (unaudited)
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 44
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 5 years (Vice President); 2 years (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Commercial Administrative Officer
of GEAM since April 2010; Senior Vice President and Deputy General Counsel at
GE Asset Management from October 2007 to April 2010; 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
Secretary of GE Funds and GE Institutional Funds since July 2007; Vice
President and Assistant Secretary of GE Institutional Funds and GE Investments
Funds, Inc. from September 2003 to 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
- --------------------------------------------------------------------------------
ROBERT HERLIHY
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Chief Compliance Officer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 4 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Chief Compliance Officer of GEAM,
GE Funds, GE Institutional Funds, Elfun Funds, and GE Savings and Security
Funds since July 2005; Manager of Fund Administration at GEAM from 2002-2005.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
- --------------------------------------------------------------------------------
EUNICE TSANG
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 50
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- less than one year
PRINCIPAL OCCUPATIONS(S) DURING PAST 5 YEARS Treasurer of GE Funds, GE
Institutional Funds, Elfun Funds and GE Savings and Security Funds since
January 2010; GEAM Operational Controllership and Technical Accounting Manager
since December 2007; Financial Planning & Analysis Manager -- Performance
Leader from June 2005 to December 2007; GEAM Quality Black Belt from 2001 to
June 2005; Financial Planning & Analysis Manager from 2000 to 2001; and Mutual
Fund Assistant Controller from October 1997 to 2000.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
26
Additional Information (unaudited)
- ---------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 64
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Vice President of Walden Capital Management
since 1996.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since 1997; Trustee of Fordham University from 1989 to 1995
and 2001 to 2007 and Trustee Emeritus since 2007; Trustee of NeuroScience
Research Institute since 1986; Trustee of Gregorian University Foundation from
1992 to 2007; Director of Artes medical from 2006 to 2008.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since July 2007 from
Fairfield University. From 1983 to July 2007, Vice President and Treasurer of
Fairfield University.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 74
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997. 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 1-800-493-3042.
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
Eunice Tsang
Kimberley Costello
Michelle Matzelle
ASSISTANT TREASURER
Leslie Spadone
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
Cheryl H. Beacock, Senior Vice President, Human Resources
Daniel O. Colao, Executive Vice President, Chief Financial Officer
Michael J. Cosgrove, President and Chief Executive Officer -- Mutual Funds &
Intermediary Business
Paul M. Colonna, President and Chief Investment Officer -- Fixed Income
Investments
Ralph R. Layman, President and Chief Investment Officer -- Public Equity
Investments
Maureen B. Mitchell, President -- Institutional Sales and Marketing
Matthew J. Simpson, Executive Vice President, General Counsel and Secretary
Judith A. Studer, Chief Market Strategist
Don W. Torey, President -- Alternative Investments
John J. Walker, Executive Vice President, Chief Operating Officer
David Wiederecht, President and Chief Investment Officer -- 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 1-800-493-3042; (ii) on the Fund's
website at http://www.geam.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.geam.com; and (ii) on the Commission's website at
http://www.sec.gov.
[LOGO] GE
GE Investments Funds, Inc.
Total Return Fund Letter from the Chairman
- ----------------------------------------------------------------------------
[PHOTO] 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, 2010. 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
The six-months ended June 30, 2010 presented investors with an extremely
challenging market environment after global equity markets tumbled in the
second half of the period due primarily to concerns about sovereign default
risk and slowing global growth. U.S. equities (S&P 500 Index) declined 6.7%
over the six-month period, while international stocks (MSCI EAFE Index) fell
13.2%.
At the start of 2010, equity markets experienced a selloff in January and early
February as investors reacted negatively to signs that there was a lower
probability of a V-shaped recovery. Concerns about new global financial
regulation, policy tightening in China, and high levels of U.S. and European
debt, especially Greek sovereign debt, further fueled the volatility. Stocks
reversed these losses in the second half of the first quarter, rising steadily
as optimism about corporate earnings changed the tone in the market. The S&P
500 Index advanced 5.4%, for the first quarter of 2010 and indexes tracking
smaller capitalization stocks enjoyed even greater advances. Gains were more
subdued in non-U.S. equity markets, with the MSCI EAFE Index advancing 0.9%
during the same quarter as fears of sovereign credit risk in Europe
overshadowed stronger earnings reports. Regionally, Japan took top honors in
the first quarter, rising 8.2% based on relatively attractive stock valuations.
Canada rose 6.0%, followed by the Pacific Rim (+3.1%), and Emerging Markets
(+2.4%). The U.K. fell 0.6% while Continental Europe dropped 2.4% as Greece's
budget deficit crisis raised concerns about other highly indebted Eurozone
countries, including Portugal, Italy, Ireland, Spain, and even the United
Kingdom. The U.S. bond market returned 1.8% (Barclays Capital U.S. Aggregate
Bond Index) in the first quarter helped by another solid performance by the
credit related sectors. Fixed income securities outside the U.S. performed
similarly, however the Barclays Global Aggregate Un-hedged Bond Index lost 0.3%
(in U.S. dollar terms) due primarily to the strengthening dollar versus other
major currencies.
Although the second quarter of 2010 started quietly, stocks plunged in May as
concerns about Europe's sovereign debt problems pressured equity markets and
many investors sought defensive investments such as gold and treasury bonds.
Adding to Greece's sovereign debt woes, anxieties around contagion grew as
Spain stepped further into the European debt crisis amid credit downgrades
driven by its deteriorating economy and public finances. In June, the 2010 G20
Toronto Summit confirmed that the industrialized world leaders were committed
to reducing budget deficits through austerity measures. Some investors,
however, worried that these measures could reduce global growth and slow the
economic recovery. Several other concerns fuelled greater risk aversion during
the second quarter including increased evidence of slower growth in China, a
new resource tax in Australia, an alarming May 6th "flash crash" which sent
U.S. stocks plummeting within minutes, impending U.S. financial reform
legislation, and the spreading impact of BP's massive oil spill in the Gulf of
Mexico. At quarter end, the S&P 500 Index and the MSCI EAFE Index had tumbled
11.4% and 14.0%, respectively, in the three months ended June 30. Regionally,
Emerging Markets fared best during the second quarter, down 8.4%, followed by
Japan (-10.1%), Canada (-10.5%) and the U.K. (-13.9%). The worst performing
regions were Europe (-15.8%) and the Pacific Rim (-14.3%). In this environment,
U.S. Treasuries were the "safe" investment of choice for many investors seeking
to avoid riskier asset classes. The "flight to quality" pulled treasury yields
down across all maturity periods. The Barclays Capital U.S.
[LOGO] GE
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
Total Return Fund
- ----------------------------------------------------
Aggregate Bond Index returned 3.49% in the second quarter, while the Barclays
Capital Global Aggregate Un-hedged Bond Index lost 0.04% over the same
three-month period owing mainly to widening spreads in European peripheral
countries and the declining euro.
Against a backdrop of weakening investor sentiment, financial markets posted
disparate results for the six- and twelve-month periods ended June 30, 2010.
TOTAL RETURNS AS OF JUNE 30, 2010 6-MONTH 12-MONTH
- -----------------------------------------------------------------------------
U.S. equities (S&P 500 Index) -6.7 14.4
Global equities (MSCI World Index) -9.8 10.2
International equities (MSCI EAFE Index) -13.2 5.9
Emerging Markets equities (MSCI EM Index) -6.2 23.2
Small-cap U.S. equities (Russell 2000 Index) -2.0 21.5
Mid-cap U.S. equities (Russell Mid Cap Index) -2.1 25.1
U.S. fixed income (Barclays Capital U.S. Aggregate Bond
Index) 5.3 9.5
U.S. short-term government fixed income (Barclays Capital
1-3 Year U.S. Government Bond Index) 1.9 2.9
U.S. tax-exempt income (Barclays Capital 10-Year U.S.
Municipal Bond Index) 4.1 9.6
- -----------------------------------------------------------------------------
OUTLOOK
In the face of the fiscal concerns throughout much of Europe and signs of
slowing economic activity around the globe, the wall of worry has become
exceedingly high for investors who want to see credible government budgets that
balance fiscal austerity and economic growth. At the core of the uncertainty,
in our view, is the issue of excessive borrowing, now afflicting sovereign
markets and reminding us that the financial crisis is not yet over. Our
economic view for the second half of 2010 still favors positive, albeit slow
growth which we believe should keep interest rates at record lows for months to
come. We also believe that the policy measures implemented in Europe will
improve sentiment towards sovereign and bank debt over the balance of the year.
But many challenges remain on the horizon, including the risk of fiscal policy,
taxation and regulation missteps that could hamper the recovery. As a result,
continued market volatility appears to be the one sure thing we can predict
with certainty.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. Today's
uncertain environment is why we believe it is important for long-term investors
to maintain a disciplined, diversified investment strategy consistent with
their goals, time horizon and risk tolerance. While diversified portfolios are
not immune to market downturns, history suggests they can put investors in a
position to benefit from a 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.
AUGUST 2010
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
GE Investments Funds, Inc.
Total Return Fund
Semi-Annual Report
JUNE 30, 2010
[LOGO] GE
GE Investments Funds, Inc.
Total Return Fund Contents
- ------------------------------------------------------------
NOTES TO PERFORMANCE....................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS. 2
NOTES TO SCHEDULE OF INVESTMENTS........... 27
FINANCIAL STATEMENTS
Financial Highlights.................... 28
Statement of Assets and Liabilities..... 30
Statement of Operations................. 31
Statements of Changes in Net Assets..... 32
Notes to Financial Statements........... 34
APPROVAL OF SUBADVISORY AGREEMENT.......... 45
ADDITIONAL INFORMATION..................... 46
INVESTMENT TEAM............................ 49
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, 2010 (unaudited)
- -----------------------------------------------------------------------------
Information on the following performance pages relating to the GE Investments
Total Return Fund (the "Fund") total returns and Schedule of Investments is
unaudited. All other information, including the portfolio manager Q&A pages, is
also 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 fees and 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
800-493-3042 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in the 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 the Fund is subject to risk, including
possible loss of principal invested.
The S&P 500(R) 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 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 indices assume the reinvestment of net dividends or
interest. They do not reflect the actual cost of investing in the instruments
that comprise each Index.
The peer universe of the underlying annuity funds used for the peer group
average annual total return calculation is based on a blend of Morningstar peer
categories, as shown. Morningstar is an independent mutual fund rating service.
The 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 that of the Fund
(C)2010 Morningstar, Inc. All Rights Reserved. The Morningstar information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not 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 of 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
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[PHOTO] Paul M. Colonna
PAUL M. COLONNA
[PHOTO] Ralph R. Layman
RALPH R. LAYMAN
[PHOTO] Thomas R. Lincoln
THOMAS R. LINCOLN
[PHOTO] Judith A. Studer
JUDITH A. STUDER
[PHOTO] Diane M. Wehner
DIANE M. WEHNER
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 AND DIANE
M. WEHNER. MS. STUDER IS 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 INCORPORATED ("GE
ASSET MANAGEMENT"). EACH OF THE OTHER PORTFOLIO MANAGERS IS RESPONSIBLE FOR
MANAGING ONE OF THE FOLLOWING 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 SECURITIES MANAGEMENT, INC. ("URDANG") AND
PALISADE CAPITAL MANAGEMENT, L.L.C. ("PALISADE") TO EACH ACT AS SUB-ADVISER TO
THAT PORTION OF THE FUND'S ASSETS ALLOCATED BY MS. STUDER TO REAL
ESTATE-RELATED INVESTMENTS AND SMALL-CAP EQUITY INVESTMENTS RESPECTIVELY. THE
SUB-PORTFOLIOS UNDERLYING THE FUND ARE MANAGED INDEPENDENTLY OF EACH OTHER AND
THE PORTFOLIO MANAGERS AND SUB-ADVISERS HAVE FULL DISCRETION OVER THEIR
PARTICULAR SUB-PORTFOLIO; HOWEVER, THE PORTFOLIO MANAGEMENT TEAM IS
COLLABORATIVE TO ENSURE STRICT ADHERENCE TO THE FUND'S OBJECTIVE. IN ADDITION
TO OVERSIGHT AUTHORITY FOR ASSET ALLOCATION, MS. STUDER MAY AT TIMES ADJUST THE
FUND'S INVESTMENT EXPOSURE THROUGH THE USE OF VARIOUS INVESTMENT TECHNIQUES
SUCH AS INVESTMENTS IN DERIVATIVE INSTRUMENTS.
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. MR. COLONNA BECAME
PRESIDENT -- FIXED INCOME IN MARCH 2007. 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.
RALPH R. LAYMAN IS PRESIDENT AND CHIEF INVESTMENT OFFICER -- PUBLIC EQUITIES
AND A DIRECTOR AT 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 AND PRESIDENT --
INTERNATIONAL EQUITIES IN MARCH 2007.
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.
JUDITH A. STUDER IS THE CHIEF MARKET STRATEGIST AND A DIRECTOR AT GE ASSET
MANAGEMENT. SHE HAS LED THE TEAM OF PORTFOLIO MANAGERS FOR THE TOTAL RETURN
FUND SINCE JULY 2004. MS. STUDER JOINED GE ASSET MANAGEMENT IN AUGUST 1984 AND
HAS HELD VARIOUS POSITIONS AT GE ASSET MANAGEMENT INCLUDING SENIOR VICE
PRESIDENT -- U.S. EQUITIES FROM 1991 TO 1995, SENIOR VICE PRESIDENT --
INTERNATIONAL EQUITIES FROM 1995 TO 2006, PRESIDENT -- INVESTMENT STRATEGIES
FROM JULY 2006 TO JUNE 2007, PRESIDENT -- U.S. EQUITIES FROM JUNE 2007 TO JULY
2009.
DIANE M. WEHNER IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. SHE HAS
SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR 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.
2
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[GRAPHIC]
Q. HOW DID THE TOTAL RETURN FUND PERFORM COMPARED TO ITS BENCHMARK AND
MORNINGSTAR PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2010?
A. For the six-month period ended June 30, 2010, the Total Return Fund returned
-6.06% for the Class 1 shares, -6.08% for the Class 2 shares, and -6.20% for
the Class 3 shares. The Fund's broad based benchmarks, the S&P 500 Index and
the Barclays Capital U.S. Aggregate Bond Index, returned -6.65% and 5.33%,
respectively. The Fund's Morningstar peer group of 330 U.S. Insurance
Moderate Allocation funds returned an average of -3.17% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE AND WHAT WERE THE PRIMARY
DRIVERS OF FUND PERFORMANCE?
A. The performance of the Total Return Fund for the six-month period ended
June 30, 2010 was primarily driven by the equity and fixed income sleeves of
the Fund underperforming their respective benchmarks. Fund performance was
also impacted by its underweight position in fixed income and overweight
position in equities and cash.
U.S. Equity
The six-months ended June 30, 2010 presented U.S. equity investors with an
extremely challenging market environment as the investment climate changed
strikingly in the middle of the period. In the first three months, the U.S.
and global economies continued their gradual recovery, which was, for the
most part, reflected by further gains in U.S. stock prices. In this
environment, the S&P 500 advanced over 5%. However, beginning in April
concerns grew that Europe's sovereign debt crisis would halt the recovery
and the markets witnessed a rise in risk aversion. Stocks tumbled after
reaching a peak in mid-April, and defensively positioned sectors performed
best. From April through June the S&P 500 declined over 11%.
Telecommunication and utilities stocks went from being the worst performers
to the best performing sectors in the S&P 500. Similarly, the performance of
financials stocks flip-flopped as the mood turned from euphoria to fear.
Concerns surrounding financial sector reform and the Goldman Sachs civil
fraud suit also pressured the sector. All the while, the U.S. central bank
provided reassurances that interest rates would remain low. Improving
corporate earnings worked to pare U.S. equity losses in the second half of
the period.
Every S&P 500 sector declined during the first half of the year, with the
worst returns among the materials (-12%), energy (-12%), and technology
(-11%) sectors. Materials and energy were affected by growth concerns, a
strengthening dollar which weighed on commodities and the catastrophic BP
oil well explosion in the Gulf of Mexico. The industrials (-1%), consumer
discretionary (-2%), and consumer staples (-3%) sectors held up the best in
the schizophrenic market environment. In general, smaller-cap companies
outperformed large-caps, with S&P 500 stocks below $3 billion in market cap
returning -0.6% versus returns of -8% for stocks over $10 billion in market
cap.
After last year's significant outperformance, an investment environment
largely favoring small-cap, low quality companies challenged performance in
the first half of this year with the focus on large-cap, high quality
companies. Financials and technology were the key sectors that negatively
affected performance. Amid fears that the economic recovery was losing
steam, quality tech companies lagged. We maintained our long-term conviction
and took advantage of weakness to add to our holdings in select quality
technology stocks. On the positive side, the Fund's telecom, consumer
staples, and utilities holdings outperformed.
Our investment process remained consistent as we continued to seek
large-cap, high quality companies that we felt had the potential to survive
and grow market share during a slow, gradual recovery. We continued to
emphasize companies with strong balance sheets and earnings stability, over
more cyclical or leveraged opportunities. We added to consumer staples and
health care, increased our underweight in consumer discretionary, and became
underweight in energy. At the end of the period, the Fund's largest U.S.
large-cap equity overweights were in technology and health care, and the
largest underweights were in industrials, consumer discretionary, and
consumer staples. Valuations for many companies remain attractive, even
after the strong rebound that began in March 2009. As the slow growth
recovery continues, we believe that market share winners with strong balance
sheets and management teams have the most potential to survive and
outperform. Amid changing market conditions in the past six months, we have
maintained our bottom-up stock selection approach with a focus on a
long-term investment horizon.
3
Total Return Fund
- --------------------------------------------------------------------------------
[GRAPHIC]
U.S. Mid-Cap Equity
The year began with a sense of optimism that the economy was continuing a
recovery, which began in the middle of last year, and resulted in a rally in
many mid-cap stocks. The stock market advance quickly reversed when investor
sentiment turned decidedly negative and resulted in a decline since
mid-April of 15.7% for mid-cap stocks as measured by the Russell Mid-Cap
Index. While high beta, low quality stocks won the day early in the year,
many of these stocks were abandoned in favor of higher quality, more
defensive stocks during the second quarter. However, for the period, stocks
of lower quality companies outperformed those with higher returns on
equities and stronger balance sheets. While quality growth companies fared
better in the second quarter, more cyclical value stocks performed the best
so far this period. The focus on higher quality growth companies and weak
performance of certain stocks within the financials, materials, industrials,
and energy sectors led to underperformance of the mid-cap equity portion of
the Fund during the period. On the positive side, performance was enhanced
by solid stock selection within information technology, consumer
discretionary, and utilities.
During the period we increased the mid-cap equity weighting in the
financials, health care, and industrials sectors, and we reduced our
exposure to the information technology, consumer discretionary, and
utilities sectors. 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 mid-cap companies that we believe provide prospects for
above-average earnings growth. Therefore, at the end of the first half of
2010, health care and information technology companies represented a
meaningful percentage of our mid-cap equity holdings.
International Equity
Growing concern over the direction of the global economy spurred the
period's weakness for international equities, especially in May. Disarray in
Europe over sovereign debt and lack of transparency regarding regulatory
reform and capital requirements all served to keep investors uncommitted.
The U.S. dollar was strong for much of the period, acting as a headwind for
overseas market returns and volumes have generally been light, in our view,
reflecting the lack of real trend in market sentiment as investors await
further information. Deteriorating financials in some small European
countries have been the main driver of sentiment during the period. Faced
with potential default, Greece has quickly introduced budgetary solutions to
repair the budget, backed by a massive ECB/IMF loan package. Meanwhile,
budgetary excesses in other countries have reminded investors this is not an
exclusively Greek issue. Where austerity measures have been announced, it
appears investors are assuming that the growth outlook will be lower.
Positive contributions in the international equity allocation to the Fund
came from holdings in energy, notably an underweight in BP which fell over
50% during the period as a result of the unfolding Gulf of Mexico crisis. On
the negative side, financials continued to exert an influence on the
portfolio with several European banks and a Japanese investment bank
performing poorly. European banks were hit on perceived association with the
deteriorating European debt market which sent prices sharply lower.
The shifting environment in Japan and Europe led to changes in the
international equity portfolio. Japanese holdings were reduced due to
increased political uncertainty, receding potential for reform in the
domestic market, and deteriorating conditions for certain companies. In
Europe, holdings in industrials were increased due to the export potential
arising from a weaker Euro and holdings in information technology were
increased due to evidence of corporate spending restarting after a
protracted slowdown during the crisis. Holdings in European banks were
reduced. Individual companies where we still foresee great opportunities
overseas, especially in China, were increased.
U.S. Fixed Income
Through April, fixed income outperformed its benchmark but events in May and
June caused relative performance to turn negative. As the European debt
crisis heightened fears around the global recovery, many investors shunned
riskier asset classes such as high yield and emerging market debt to buy
U.S. Treasuries which pushed treasury yields
4
- --------------------------------------------------------------------------------
[GRAPHIC]
downward. Exposure to these two asset classes, plus overweight positions in
investment grade credit and commercial MBS were a drag on fixed income
performance. The shorter duration relative to the benchmark also impacted
relative return negatively as interest rates declined.
News in the U.S. clearly showed a slowing in economic activity beginning
with the employment data reported in May and June. While headline non-farm
payroll figures were skewed by census workers added in May and taken away in
June, private payrolls declined from an increase of 241,000 in April to an
increase of 83,000 in June. The unemployment rate fell in June from 9.7% to
9.5% due mainly to a decline in the participation rate, which was not viewed
as a favorable sign. The housing market weakened as new home sales slumped
after the $8,000 tax credit offered to first-time homebuyers ended in April.
Inflation in the U.S., as measured by the year-over-year personal
consumption expenditure core price index, remained low at just 1.2% in May.
The Federal Reserve's outlook for slow economic growth and low inflation did
not change during the first half of 2010 and therefore the fed funds target
rate remained unchanged at 0%-0.25% throughout the six months. In
Washington, a finance reform bill intended to overhaul financial regulation
was passed by the House of Representatives and awaited action by the Senate,
which raised uncertainty around the banking sector.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. During this period, we lowered the Fund's exposure to cash and increased its
exposure to fixed income with a Fed policy to keep interest rates low. We
also used a portion of cash to add real estate exposure to the Fund using a
REIT strategy managed by Urdang, which helped to increase diversification.
At the end of the period, we were slightly underweight in fixed income and
slightly overweight in equities and cash.
5
Total Return Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund, you incur ongoing fees and expenses, which
include portfolio management fees, distribution and service fees (for
shareholders of Classes 2 and 3), 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,
2010.
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 $1,000 = 8.6), then multiply the result by the
number given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholders reports of other funds.
Please note that the expenses shown in the table for both "Actual" and
"Hypothetical" do not reflect any transaction costs, such as sales charges or
redemption fees. Additionally, the expenses shown do not reflect the fees or
charges associated with variable contracts through which shares of the Fund are
offered.
JANUARY 1, 2010 - JUNE 30, 2010
- ------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING PERIOD ($)*
- ------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ------------------------------------------------------------------------------------
Class 1 1,000.00 939.39 3.46
Class 2 1,000.00 939.19 3.70
Class 3 1,000.00 937.95 4.66
- ------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ------------------------------------------------------------------------------------
Class 1 1,000.00 1,021.00 3.61
Class 2 1,000.00 1,020.76 3.86
Class 3 1,000.00 1,019.79 4.86
- ------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.72% FOR CLASS
1 SHARES, 0.77% FOR CLASS 2 SHARES, AND 0.97% FOR CLASS 3 SHARES (FOR THE
PERIOD JANUARY 1, 2010 - JUNE 30, 2010), 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, 2010 WERE AS
FOLLOWS: -6.06% FOR CLASS 1 SHARES, -6.08% FOR CLASS 2 SHARES, AND -6.20% FOR
CLASS 3 SHARES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
6
Total Return Fund (unaudited)
- ---------------------------------------------------------------
INVESTMENT PROFILE
A mutual 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 U.S. and
foreign equity and debt securities and cash.
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Federal National Mortgage
Assoc.
4.50%, 05/01/18 - 06/01/40 1.89%
---------------------------------
U.S. Treasury Notes
3.63%, 02/15/20 1.56%
---------------------------------
Federal National Mortgage
Assoc.
5.50%, 04/01/14 - 04/01/38 1.44%
---------------------------------
U.S. Treasury Bonds
4.63%, 02/15/40 1.10%
---------------------------------
Federal National Mortgage
Assoc.
5.00%, 07/01/20 - 06/01/40 0.96%
---------------------------------
PepsiCo Inc. 0.82%
---------------------------------
Amgen Inc. 0.81%
---------------------------------
Microsoft Corp. 0.81%
---------------------------------
NII Holdings Inc. 0.70%
---------------------------------
Cisco Systems Inc. 0.66%
---------------------------------
MORNINGSTAR PERFORMANCE COMPARISON
U.S. Insurance Moderate Allocation Peer Group*
Based on average annual total returns for the periods ended 6/30/10
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
------ ---- ---- ----
Number of funds
in peer group 330 321 199 146
------------------------------------------
Peer group
average annual
total return* -3.17% 12.81% 1.39% 1.80%
------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIODS ENDED JUNE 30, 2010
[CHART]
Barclays Capital
Total Return Fund S&P 500 Index U.S. Aggregate Bond Index
----------------- ------------- -------------------------
Dec 31, 1999 $10,000.00 $10,000.00 $10,000.00
Dec 1, 2000 10,494.38 9,081.65 11,162.61
Dec 1, 2001 10,191.13 7,999.85 12,105.12
Dec 1, 2002 9,242.12 6,231.73 13,346.50
Dec 1, 2003 11,119.53 8,021.99 13,894.31 SIX ONE FIVE TEN
Dec 1, 2004 12,030.03 8,894.89 14,497.15 MONTHS+ YEAR YEAR YEAR
Dec 1, 2005 12,471.48 9,332.39 14,849.22 ------- ------ ------ ------
Total Return Fund -6.06% 7.10% 1.38% 2.11%
S&P 500 Index -6.65% 14.43% -0.79% -1.59%
Barclays Capital
U.S. Aggregate
Bond Index 5.33% 9.50% 5.54% 6.47%
Inception date 7/1/85
CLASS 1 SHARES
[CHART]
Barclays Capital
Total Return Fund S&P 500 Index U.S. Aggregate Bond Index
----------------- ------------- -------------------------
Dec 31, 1999 $10,000.00 $10,000.00 $10,000.00
Dec 1, 2000 10,494.38 9,081.65 11,162.61
Dec 1, 2001 10,191.13 7,999.85 12,105.12 ENDING
Dec 1, 2002 9,242.12 6,231.73 13,346.50 VALUE OF A
Dec 1, 2003 11,119.53 8,021.99 13,894.31 $10,000
Dec 1, 2004 12,030.03 8,894.89 14,497.15 INVESTMENT/(A)/
Dec 1, 2005 12,471.48 9,332.39 14,849.22 --------------
$12,325
$ 8,517
$18,714
- --------------------------------------------------------------------------------
CLASS 2 SHARES TOTAL RETURN
FOR THE
PERIODS ENDED
JUNE 30, 2010
ENDING
VALUE OF A
[CHART] SIX ONE SINCE $10,000
MONTHS+ YEAR INCEPTION INVESTMENT/(A)/
Barclays Capital ------- ------ --------- --------------
Total
Return
Fund -6.08% 7.02% -1.03% $ 9,578
S&P 500
Index -6.65% 14.43% -3.55% $ 8,603
Barclays
Capital
U.S.
Aggregate
Bond
Index 5.33% 9.50% 6.92% $13,214
Inception
date 5/1/06
- --------------------------------------------------------------------------------
CLASS 3 SHARES TOTAL RETURN
FOR THE
PERIODS ENDED
JUNE 30, 2010
ENDING
VALUE OF A
[CHART] SIX ONE SINCE $10,000
MONTHS+ YEAR INCEPTION INVESTMENT/(A)/
Barclays Capital ------- ------ --------- --------------
Total
Return
Fund -6.20% 6.80% -1.10% $ 9,551
S&P 500
Index -6.65% 14.43% -3.55% $ 8,603
Barclays
Capital
U.S.
Aggregate
Bond
Index 5.33% 9.50% 6.92% $13,214
Inception
date 5/1/06
[GRAPHIC]
(A)ENDING VALUE OF A $10,000 INVESTMENT FOR THE TEN-YEAR PERIOD OR SINCE
INCEPTION, WHICHEVER IS LESS.
* 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
U.S. INSURANCE MODERATE ALLOCATION PEER GROUP CONSISTING OF 330, 321, 199 AND
146 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
+ TOTAL RETURNS FOR THE PERIOD ENDED JUNE 30, 2010 ARE NOT ANNUALIZED.
++THE SECURITIES INFORMATION REGARDING HOLDINGS, ALLOCATIONS AND OTHER
CHARACTERISTICS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF SECURITIES THAT THE
FUND HAS BOUGHT AND THE DIVERSITY OF AREAS IN WHICH THE FUND MAY INVEST AS OF
A PARTICULAR DATE. IT MAY NOT BE REPRESENTATIVE OF THE FUND'S CURRENT OR
FUTURE INVESTMENTS AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL A PARTICULAR SECURITY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE. THE PERFORMANCE SHOWN IN
THE GRAPHS AND TABLES DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES AND DO NOT
REFLECT THE FEES OR CHARGES THAT WOULD BE ASSOCIATED WITH VARIABLE CONTRACTS
THROUGH WHICH SHARES OF THE FUND ARE OFFERED.
7
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
TOTAL RETURN FUND
Portfolio Composition as a % of the Market Value of $2,475,464 (in thousands)
as of June 30, 2010
[CHART]
Domestic Equity 32.5%
Foreign Equity 28.6%
Bonds & Notes 22.0%
Short-Term 16.7%
Other Investments 0.2%
NUMBER
OF SHARES VALUE
DOMESTIC EQUITY -- 32.8%+
-----------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.7%
Alliant Techsystems Inc........ 50,648 $ 3,143,215 /(a)/
Hexcel Corp.................... 324,344 5,030,576 /(a)/
Honeywell International Inc.... 162,704 6,350,337
ITT Corp....................... 36,192 1,625,745
Rockwell Collins Inc........... 20,880 1,109,354
17,259,227
AIR FREIGHT & LOGISTICS -- 0.0%*
UTi Worldwide Inc.............. 70,329 870,673
BEVERAGES -- 1.0%
Coca-Cola Enterprises Inc...... 118,546 3,065,600
Molson Coors Brewing Co........ 27,840 1,179,302
PepsiCo Inc.................... 334,397 20,381,498
24,626,400
BIOTECHNOLOGY -- 1.7%
Alexion Pharmaceuticals Inc.... 39,051 1,999,021 /(a)/
Amgen Inc...................... 378,998 19,935,295 /(a,h)/
Gilead Sciences Inc............ 382,704 13,119,093 /(a)/
Human Genome Sciences Inc...... 75,311 1,706,547 /(a)/
Incyte Corp Ltd................ 97,626 1,080,720 /(a)/
Vertex Pharmaceuticals Inc..... 78,735 2,590,382 /(a)/
40,431,058
CAPITAL MARKETS -- 1.8%
Affiliated Managers Group Inc.. 58,969 3,583,546 /(a)/
Ameriprise Financial Inc....... 77,952 2,816,406
Invesco Ltd.................... 206,947 3,482,918
Morgan Stanley................. 61,248 1,421,566
State Street Corp.............. 392,423 13,271,746 /(e)/
NUMBER
OF SHARES VALUE
The Bank of New York Mellon Corp... 136,417 $ 3,368,136
The Goldman Sachs Group Inc........ 113,584 14,910,172
42,854,490
CHEMICALS -- 0.8%
Intrepid Potash Inc................ 88,662 1,735,115 /(a)/
Monsanto Co........................ 165,009 7,626,716
Praxair Inc........................ 146,952 11,166,883
20,528,714
COMMERCIAL BANKS -- 0.3%
Regions Financial Corp............. 373,523 2,457,781
SunTrust Banks Inc................. 60,669 1,413,588
US Bancorp......................... 76,561 1,711,138
Wells Fargo & Co................... 54,044 1,383,526
Zions Bancorporation............... 41,653 898,455
7,864,488
COMMERCIAL SERVICES & SUPPLIES -- 0.6%
Corrections Corporation of America. 418,730 7,989,368 /(a)/
Iron Mountain Inc.................. 190,870 4,286,940
Stericycle Inc..................... 23,709 1,554,836 /(a)/
13,831,144
COMMUNICATIONS EQUIPMENT -- 1.4%
Cisco Systems Inc.................. 764,196 16,285,017 /(a,h)/
Juniper Networks Inc............... 137,240 3,131,817 /(a)/
QUALCOMM Inc....................... 463,629 15,225,576
34,642,410
COMPUTERS & PERIPHERALS -- 0.7%
Apple Inc.......................... 36,598 9,205,495 /(a)/
Hewlett-Packard Co................. 113,449 4,910,073
Synaptics Inc...................... 142,963 3,931,483 /(a)/
18,047,051
DIVERSIFIED FINANCIAL SERVICES -- 1.3%
Bank of America Corp............... 593,511 8,528,753
CBOE Holdings Inc.................. 72,007 2,343,828 /(a)/
CME Group Inc...................... 47,292 13,315,063
JPMorgan Chase & Co................ 190,046 6,957,584
MSCI Inc........................... 60,738 1,664,221 /(a)/
32,809,449
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.2%
AT&T Inc........................... 142,681 3,451,453
Verizon Communications Inc......... 62,641 1,755,201
5,206,654
ELECTRIC UTILITIES -- 0.7%
Edison International............... 83,521 2,649,286
Entergy Corp....................... 29,933 2,143,801
ITC Holdings Corp.................. 120,173 6,358,353
NextEra Energy Inc................. 19,954 972,958
Northeast Utilities................ 192,820 4,913,053
17,037,451
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
8
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.1%
Cogent Inc..................... 184,029 $ 1,658,101 /(a)/
Corning Inc.................... 90,481 1,461,268
3,119,369
ENERGY EQUIPMENT & SERVICES -- 1.1%
Dresser-Rand Group Inc......... 91,174 2,876,540 /(a)/
Halliburton Co................. 34,801 854,365
Nabors Industries Ltd.......... 83,679 1,474,424 /(a)/
National Oilwell Varco Inc..... 19,489 644,501
Noble Corp..................... 71,126 2,198,505
Schlumberger Ltd............... 288,259 15,952,253
Weatherford International Ltd.. 189,619 2,491,594 /(a)/
26,492,182
OFFICE -- 0.0%*
Hudson Pacific Properties Inc.. 11,660 201,135 /(a)/
FOOD & STAPLES RETAILING -- 0.1%
Safeway Inc.................... 55,680 1,094,669
Sysco Corp..................... 67,543 1,929,703
3,024,372
FOOD PRODUCTS -- 0.6%
Archer-Daniels-Midland Co...... 97,440 2,515,901
Kraft Foods Inc................ 182,794 5,118,232
McCormick & Company Inc........ 121,936 4,628,690
Mead Johnson Nutrition Co...... 49,276 2,469,713
14,732,536
GAS UTILITIES -- 0.1%
EQT Corp....................... 40,444 1,461,646
HEALTHCARE EQUIPMENT & SUPPLIES -- 1.4%
Baxter International Inc....... 94,994 3,860,556
Becton Dickinson and Co........ 33,408 2,259,049
Covidien PLC................... 200,616 8,060,751
Gen-Probe Inc.................. 48,726 2,213,135 /(a)/
Hologic Inc.................... 127,811 1,780,407 /(a)/
Masimo Corp.................... 158,200 3,766,742
Medtronic Inc.................. 130,772 4,743,100
ResMed Inc..................... 120,407 7,321,950 /(a)/
34,005,690
HEALTHCARE PROVIDERS & SERVICES -- 0.9%
Cardinal Health Inc............ 59,871 2,012,264
Catalyst Health Solutions Inc.. 93,072 3,210,984 /(a)/
Express Scripts Inc............ 284,474 13,375,968 /(a)/
McKesson Corp.................. 16,705 1,121,908
Omnicare Inc................... 83,520 1,979,424
21,700,548
HEALTHCARE TECHNOLOGY -- 0.1%
MedAssets Inc.................. 64,155 1,480,697 /(a)/
NUMBER
OF SHARES VALUE
HOTELS, RESTAURANTS & LEISURE -- 0.3%
Carnival Corp......................... 139,821 $ 4,228,187
Marriott International Inc............ 28,094 841,134
Orient-Express Hotels Ltd............. 7,540 55,796 /(a)/
Penn National Gaming Inc.............. 113,367 2,618,778 /(a)/
Starwood Hotels & Resorts Worldwide
Inc.................................. 13,200 546,876
8,290,771
HOUSEHOLD DURABLES -- 0.1%
MDC Holdings Inc...................... 44,628 1,202,725
HOUSEHOLD PRODUCTS -- 0.5%
Clorox Co............................. 63,336 3,936,966
The Procter & Gamble Co............... 128,760 7,723,025
11,659,991
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.0%*
Calpine Corp.......................... 62,640 796,781 /(a)/
INDUSTRIAL CONGLOMERATES -- 0.1%
McDermott International Inc........... 99,866 2,163,098 /(a)/
INSURANCE -- 1.1%
ACE Ltd............................... 152,835 7,867,945
Aflac Inc............................. 111,977 4,778,059
AON Corp.............................. 38,976 1,446,790
HCC Insurance Holdings Inc............ 233,998 5,793,790
PartnerRe Ltd......................... 19,488 1,366,888
Principal Financial Group Inc......... 91,872 2,153,480
Prudential Financial Inc.............. 69,600 3,734,736
27,141,688
INTERNET SOFTWARE & SERVICES -- 0.5%
Equinix Inc........................... 24,972 2,028,226 /(a)/
Google Inc............................ 16,966 7,549,022 /(a)/
MercadoLibre Inc...................... 55,030 2,891,826 /(a)/
12,469,074
IT SERVICES -- 1.2%
Cognizant Technology Solutions Corp... 62,219 3,114,683 /(a)/
International Business Machines Corp.. 64,729 7,992,737
The Western Union Co.................. 612,806 9,136,938
Visa Inc.............................. 139,949 9,901,391
30,145,749
LIFE SCIENCES TOOLS & SERVICES -- 0.8%
Covance Inc........................... 72,507 3,721,059 /(a)/
Illumina Inc.......................... 86,099 3,747,889 /(a)/
Life Technologies Corp................ 71,079 3,358,483 /(a)/
Mettler-Toledo International Inc...... 30,945 3,454,391 /(a)/
Thermo Fisher Scientific Inc.......... 119,444 5,858,728 /(a)/
20,140,550
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
9
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
MACHINERY -- 0.4%
Cummins Inc......................... 32,077 $ 2,089,175
Deere & Co.......................... 54,288 3,022,756
Eaton Corp.......................... 33,262 2,176,665
Harsco Corp......................... 130,654 3,070,370
10,358,966
MEDIA -- 1.7%
DIRECTV............................. 255,853 8,678,534 /(a)/
Discovery Communications Inc........ 4,896 174,836 /(a)/
Discovery Communications Inc........ 48,254 1,492,496 /(a)/
Liberty Global Inc.................. 235,029 6,108,404 /(a)/
News Corp........................... 76,494 914,868
Omnicom Group Inc................... 338,958 11,626,259
Regal Entertainment Group........... 216,837 2,827,554
The Walt Disney Co.................. 104,400 3,288,600
Time Warner Inc..................... 209,500 6,056,646
41,168,197
METALS & MINING -- 0.5%
Allegheny Technologies Inc.......... 191,123 8,445,725
Freeport-McMoRan Copper & Gold Inc.. 26,449 1,563,929
Steel Dynamics Inc.................. 142,255 1,876,344
11,885,998
MULTILINE RETAIL -- 0.4%
Dollar General Corp................. 96,398 2,655,765 /(a)/
Kohl's Corp......................... 29,271 1,390,373 /(a)/
Target Corp......................... 119,772 5,889,189
9,935,327
MULTI-UTILITIES -- 0.2%
Dominion Resources Inc.............. 97,441 3,774,864
OIL, GAS & CONSUMABLE FUELS--1.6%
Apache Corp......................... 64,115 5,397,842
Chesapeake Energy Corp.............. 31,320 656,154
Chevron Corp........................ 73,776 5,006,439
Devon Energy Corp................... 43,848 2,671,220
El Paso Corp........................ 124,717 1,385,606
Exxon Mobil Corp.................... 190,009 10,843,814 /(h)/
Marathon Oil Corp................... 125,281 3,894,986
Occidental Petroleum Corp........... 27,440 2,116,996
Peabody Energy Corp................. 47,345 1,852,610
Petrohawk Energy Corp............... 105,994 1,798,718 /(a)/
Pioneer Natural Resources Co........ 41,840 2,487,388
Southwestern Energy Co.............. 47,497 1,835,284 /(a)/
39,947,057
PAPER & FOREST PRODUCTS -- 0.0%*
Weyerhaeuser Co..................... 24,360 857,472
PERSONAL PRODUCTS -- 0.2%
Alberto-Culver Co................... 64,462 1,746,276
Avon Products Inc................... 65,456 1,734,584
3,480,860
NUMBER
OF SHARES VALUE
PHARMACEUTICALS -- 0.5%
Abbott Laboratories.................. 17,400 $ 813,972
Bristol-Myers Squibb Co.............. 144,073 3,593,181
Johnson & Johnson.................... 100,609 5,941,968
Pfizer Inc........................... 174,001 2,481,253
12,830,374
PROFESSIONAL SERVICES -- 0.1%
IHS Inc.............................. 57,985 3,387,484 /(a)/
REAL ESTATE INVESTMENT TRUSTS -- 1.1%
Acadia Realty Trust.................. 6,550 110,171
Alexandria Real Estate Equities Inc.. 3,700 234,469
AMB Property Corp.................... 16,290 386,236
Apartment Investment & Management
Co.................................. 15,940 308,758
Boston Properties Inc................ 14,670 1,046,558
Brandywine Realty Trust.............. 36,340 390,655
Camden Property Trust................ 17,690 722,637
CBL & Associates Properties Inc...... 6,070 75,511
Chesapeake Lodging Trust............. 5,050 79,891 /(a)/
Cogdell Spencer Inc.................. 16,010 108,228
Colonial Properties Trust............ 13,020 189,181
DiamondRock Hospitality Co........... 15,300 125,766 /(a)/
Digital Realty Trust Inc............. 10,240 590,643
Douglas Emmett Inc................... 151,039 2,147,775
Duke Realty Corp..................... 23,300 264,455
Equity Residential................... 36,500 1,519,860
Essex Property Trust Inc............. 7,010 683,755
Federal Realty Investment Trust...... 5,800 407,566
HCP Inc.............................. 21,100 680,475
Healthcare Inc....................... 13,360 562,723
Host Hotels & Resorts Inc............ 39,470 532,056
HRPT Properties Trust................ 43,550 270,446
Kilroy Realty Corp................... 13,210 392,733
Kimco Realty Corp.................... 73,350 985,824
LaSalle Hotel Properties............. 11,670 240,052
Medical Properties Trust Inc......... 8,270 78,069
National Retail Properties Inc....... 8,460 181,382
Nationwide Health Properties Inc..... 9,520 340,530
Parkway Properties Inc............... 8,720 127,050
Pebblebrook Hotel Trust.............. 10,180 191,893 /(a)/
Plum Creek Timber Company Inc........ 9,460 326,654
ProLogis............................. 88,960 901,164
Public Storage....................... 19,840 1,744,134
Senior Housing Properties Trust...... 18,030 362,583
Simon Property Group Inc............. 22,710 1,833,832
SL Green Realty Corp................. 35,997 1,981,274
Starwood Property Trust Inc.......... 7,270 123,226
Strategic Hotels & Resorts Inc....... 9,530 41,837 /(a)/
Sunstone Hotel Investors Inc......... 13,030 129,388 /(a)/
Tanger Factory Outlet Centers........ 6,500 268,970
Taubman Centers Inc.................. 12,820 482,417
The Macerich Co...................... 20,790 775,883
UDR Inc.............................. 34,730 664,385
U-Store-It Trust..................... 16,230 121,076
Ventas Inc........................... 10,530 494,384
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
10
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
Vornado Realty Trust............... 20,850 $ 1,521,008
Weingarten Realty Investors........ 18,140 345,567
26,093,130
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.3%
CB Richard Ellis Group Inc......... 547,044 7,445,269 /(a,h)/
ROAD & RAIL -- 0.1%
Union Pacific Corp................. 44,544 3,096,253
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.9%
Hittite Microwave Corp............. 80,535 3,603,136 /(a)/
Intel Corp......................... 463,121 9,007,704 /(h)/
KLA-Tencor Corp.................... 45,240 1,261,291
Marvell Technology Group Ltd....... 248,557 3,917,258 /(a)/
Microchip Technology Inc........... 38,280 1,061,887
NVIDIA Corp........................ 27,840 284,247 /(a)/
Texas Instruments Inc.............. 114,841 2,673,498
21,809,021
SOFTWARE -- 1.8%
Activision Blizzard Inc............ 338,512 3,550,991
ArcSight Inc....................... 86,563 1,938,146 /(a)/
Blackboard Inc..................... 63,456 2,368,812 /(a)/
Citrix Systems Inc................. 72,848 3,076,371 /(a)/
Microsoft Corp..................... 866,100 19,928,961 /(h)/
Oracle Corp........................ 189,442 4,065,425
Rovi Corp.......................... 242,394 9,189,157 /(a)/
44,117,863
SPECIALTY RETAIL -- 1.0%
Bed Bath & Beyond Inc.............. 157,672 5,846,478 /(a,h)/
Lowe's Companies Inc............... 607,053 12,396,022
O'Reilly Automotive Inc............ 89,269 4,245,634 /(a)/
Urban Outfitters Inc............... 49,248 1,693,638 /(a)/
24,181,772
TEXTILES, APPAREL & LUXURY GOODS -- 0.2%
Coach Inc.......................... 102,621 3,750,798
THRIFTS & MORTGAGE FINANCE -- 0.1%
People's United Financial Inc...... 230,395 3,110,333
TOBACCO -- 0.2%
Altria Group Inc................... 20,881 418,455
Philip Morris International Inc.... 73,080 3,349,987
3,768,442
TRADING COMPANIES & DISTRIBUTORS -- 0.1%
MSC Industrial Direct Co........... 32,076 1,624,970
WATER UTILITIES -- 0.1%
American Water Works Company
Inc............................... 134,935 2,779,661
NUMBER
OF SHARES VALUE
WIRELESS TELECOMMUNICATION SERVICES -- 1.1%
American Tower Corp.................... 144,872 $ 6,446,804 /(a)/
Crown Castle International Corp........ 10,310 384,151 /(a)/
NII Holdings Inc....................... 531,781 17,293,518 /(a)/
Syniverse Holdings Inc................. 124,530 2,546,638 /(a)/
26,671,111
TOTAL DOMESTIC EQUITY
(COST $838,627,692)................... 802,313,033
------------------------------------------------------------------------
FOREIGN EQUITY -- 25.6%
------------------------------------------------------------------------
COMMON STOCK -- 25.0%
AEROSPACE & DEFENSE -- 0.5%
CAE Inc................................ 543,829 4,723,608
European Aeronautic Defence and
Space Company N.V..................... 245,845 5,025,571
Safran S.A............................. 85,002 2,375,127
12,124,306
AUTOMOBILES -- 0.7%
Daimler AG............................. 104,135 5,276,550
Maruti Suzuki India Ltd................ 24,102 732,223
Suzuki Motor Corp...................... 361,995 7,098,276
Toyota Motor Corp...................... 93,565 3,212,042
16,319,091
BEVERAGES -- 0.2%
Anadolu Efes Biracilik Ve Malt Sanayii
AS.................................... 44,794 522,882
Diageo PLC............................. 66,270 1,042,356
Heineken N.V........................... 50,154 2,129,456
3,694,694
BUILDING PRODUCTS -- 0.1%
Daikin Industries Ltd.................. 66,000 2,010,654
CAPITAL MARKETS -- 0.8%
Credit Suisse Group AG (Regd.)......... 151,956 5,710,476
Egyptian Financial Group-Hermes
Holding............................... 232,628 1,181,888 /(a)/
Mirae Asset Securities Company Ltd..... 17,874 781,049
Nomura Holdings Inc.................... 1,832,235 10,001,899
Yuanta Financial Holding Company
Ltd................................... 2,201,251 1,175,040
18,850,352
CHEMICALS -- 1.4%
Linde AG............................... 80,969 8,528,139
Potash Corp of Saskatchewan Inc........ 25,752 2,220,852
Potash Corporation of Saskatchewan
Inc................................... 95,966 8,280,358
Sinofert Holdings Ltd.................. 2,484,658 976,806
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
11
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
Sociedad Quimica y Minera de Chile S.A.
ADR.................................... 82,434 $ 2,688,172
SODIFF Advanced Materials Company
Ltd.................................... 10,372 995,845 /(a)/
Syngenta AG............................. 21,584 4,983,939
Taiwan Fertilizer Company Ltd........... 541,979 1,417,969
Taiyo Nippon Sanso Corp................. 403,954 3,205,085
33,297,165
COMMERCIAL BANKS -- 3.2%
Akbank TAS.............................. 259,647 1,243,770 /(a)/
Axis Bank Ltd........................... 46,909 1,240,254 /(a)/
Banco Santander Brasil S.A.............. 601,000 6,178,380
Banco Santander S.A..................... 875,706 9,198,208
BNP Paribas............................. 160,883 8,670,138
China Merchants Bank Company Ltd........ 419,738 1,004,107
Credit Agricole S.A..................... 207,065 2,151,931
Grupo Financiero Banorte SAB de C.V..... 213,776 813,001
Halyk Savings Bank of Kazakhstan
JSC.................................... 56,722 449,805 /(a)/
HSBC Holdings PLC....................... 1,326,901 12,138,383
Industrial & Commercial Bank of
China.................................. 1,814,576 1,321,197
Kasikornbank PCL........................ 366,126 1,064,474
Kazkommertsbank......................... 62,335 311,052 /(a)/
KB Financial Group Inc.................. 96,791 3,710,073
Korea Exchange Bank..................... 63,870 650,933
Lloyds Banking Group PLC................ 7,768,336 6,141,042
Metropolitan Bank & Trust............... 854,099 1,130,721
Mitsubishi UFJ Financial Group Inc...... 1,425,803 6,468,663
Raiffeisen International Bank Holding
AG..................................... 9,164 348,640 /(a)/
Siam Commercial Bank PCL................ 12,209 30,155
Standard Bank Group Ltd................. 68,360 907,616
Sumitomo Mitsui Financial Group Inc..... 63,680 1,800,765
The Bank of Yokohama Ltd................ 967,981 4,424,244
UniCredit S.p.A......................... 2,905,217 6,437,214
77,834,766
COMMERCIAL SERVICES & SUPPLIES -- 0.3%
Brambles Ltd............................ 633,671 2,895,726
G4S PLC................................. 859,877 3,413,756
G4S PLC................................. 391,247 1,558,454
7,867,936
COMMUNICATIONS EQUIPMENT -- 0.9%
HTC Corp................................ 89,348 1,186,551
Nokia Oyj............................... 197,333 1,611,120
Research In Motion Ltd.................. 213,844 10,533,955 /(a)/
Research In Motion Ltd.................. 102,177 5,031,687 /(a)/
Telefonaktiebolaget LM Ericsson......... 384,898 4,277,792
ZTE Corp................................ 173,253 526,041
23,167,146
COMPUTERS & PERIPHERALS -- 0.0%*
Asustek Computer Inc.................... 429 3,160
Pegatron Corp........................... 1,155 1,080 /(a)/
4,240
NUMBER
OF SHARES VALUE
CONSTRUCTION & ENGINEERING -- 0.5%
China State Construction International
Holdings Ltd.......................... 1,493,790 $ 453,947
Doosan Heavy Industries and
Construction Company Ltd.............. 25,206 1,542,357
Empresas ICA SAB de C.V................ 326,252 773,318 /(a)/
Hyundai Development Co................. 18,318 408,133
Larsen & Toubro Ltd.................... 110,931 4,291,253
Murray & Roberts Holdings Ltd.......... 182,333 918,733
Vinci S.A.............................. 78,908 3,281,883
11,669,624
CONSTRUCTION MATERIALS -- 0.2%
CRH PLC................................ 201,410 4,156,629
DIVERSIFIED CONSUMER SERVICES -- 0.0%*
MegaStudy Company Ltd.................. 4,638 612,815
DIVERSIFIED FINANCIAL SERVICES -- 0.3%
Deutsche Boerse AG..................... 130,182 7,922,268
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.2%
Telefonica S.A......................... 167,639 3,110,666
Telekomunikasi Indonesia Tbk PT........ 670,292 568,148
3,678,814
ELECTRIC UTILITIES -- 0.1%
Iberdrola S.A.......................... 407,149 2,292,242
ELECTRICAL EQUIPMENT -- 0.3%
ABB Ltd. ADR........................... 66,541 1,149,828
Schneider Electric S.A................. 64,572 6,532,704
Zhuzhou CSR Times Electric Company
Ltd................................... 372,607 788,760
8,471,292
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.4%
Byd Company Ltd........................ 124,500 915,693
China Security & Surveillance
Technology Inc........................ 51,771 239,182 /(a)/
Delta Electronics Inc.................. 1,781,890 5,688,068
Hon Hai Precision Industry Company
Ltd................................... 521,127 1,826,639
Samsung SDI Company Ltd................ 4,280 598,981 /(a)/
Wasion Group Holdings Ltd.............. 776,430 487,351 /(a)/
9,755,914
FOOD & STAPLES RETAILING -- 0.7%
Alliance Global Group Inc.............. 4,657,150 534,457 /(a)/
Koninklijke Ahold N.V.................. 279,531 3,463,563
Metro AG............................... 85,749 4,382,378
Tesco PLC.............................. 1,216,561 6,872,302
X5 Retail Group N.V. GDR............... 26,835 909,707 /(a)/
16,162,407
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
12
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
FOOD PRODUCTS -- 1.0%
American Dairy Inc................... 30,528 $ 486,922 /(a)/
China Agri-Industries Holdings Ltd... 562,003 649,778
Cosan SA Industria e Comercio........ 95,040 1,190,570 /(a)/
Danone............................... 48,982 2,630,336
Global Bio-Chem Technology Group
Company Ltd......................... 1,155,081 160,371
IOI Corporation Bhd.................. 74,048 114,125
Nestle S.A........................... 327,788 15,798,226
Nestle S.A. ADR...................... 27,840 1,343,002
Unilever N.V......................... 63,883 1,747,519
24,120,849
HEALTHCARE EQUIPMENT & SUPPLIES -- 0.4%
Cie Generale d'Optique Essilor
International S.A................... 162,101 9,648,976
HEALTHCARE PROVIDERS & SERVICES -- 0.1%
Fleury S.A........................... 85,100 943,772 /(a)/
Life Healthcare Group Holdings Ltd... 307,047 542,734 /(a)/
Sinopharm Group Co................... 116,000 422,646 /(a)/
1,909,152
HOUSEHOLD DURABLES -- 0.1%
LG Electronics Inc................... 14,510 1,103,398
Techtronic Industries Co............. 640,498 499,042
1,602,440
HOUSEHOLD PRODUCTS -- 0.6%
Reckitt Benckiser Group PLC.......... 205,539 9,573,303
Unicharm Corp........................ 55,300 6,230,690
15,803,993
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.0%*
China WindPower Group Ltd............ 4,859,793 474,680 /(a)/
INDUSTRIAL CONGLOMERATES -- 1.0%
Chongqing Machinery & Electric
Company Ltd......................... 2,970,224 712,325
Koninklijke Philips Electronics N.V.. 310,242 9,279,997
MAX India Ltd........................ 120,430 394,450 /(a)/
Siemens AG........................... 140,472 12,584,834
Siemens AG ADR....................... 10,440 934,693
23,906,299
INSURANCE -- 1.1%
AXA S.A.............................. 306,225 4,686,070
China Life Insurance Company Ltd..... 287,689 1,256,273
Prudential PLC....................... 1,137,337 8,589,961
Samsung Fire & Marine Insurance
Company Ltd......................... 4,880 774,633 /(a)/
Sony Financial Holdings Inc.......... 1,893 6,309,237
Tong Yang Life Insurance............. 86,334 898,960
Zurich Financial Services AG......... 21,317 4,696,377
27,211,511
NUMBER
OF SHARES VALUE
INTERNET SOFTWARE & SERVICES -- 0.5%
Baidu Inc. ADR..................... 182,254 $12,407,853 /(a)/
Tencent Holdings Ltd............... 13,600 225,307
12,633,160
IT SERVICES -- 0.3%
Cap Gemini S.A..................... 113,403 4,992,371
HCL Technologies Ltd............... 107,288 831,957
Infosys Technologies Ltd........... 14,825 884,189 /(a)/
Telvent GIT S.A.................... 59,761 998,009
7,706,526
MACHINERY -- 0.4%
China South Locomotive and Rolling
Stock Corp........................ 5,730,151 3,909,873
Fanuc Ltd.......................... 22,700 2,561,169
Mitsubishi Heavy Industries Ltd.... 663,000 2,285,241
8,756,283
MARINE -- 0.2%
AP Moller -- Maersk A/S............ 641 5,056,866
MEDIA -- 0.2%
Grupo Televisa S.A. ADR............ 40,381 703,033
Vivendi S.A........................ 157,443 3,204,933
Zee Entertainment Enterprises Ltd.. 85,324 561,392
4,469,358
METALS & MINING -- 1.7%
Anglo American PLC................. 12,670 442,079 /(a)/
Antofagasta PLC.................... 86,836 1,011,656
Barrick Gold Corp.................. 41,760 1,896,322
BHP Billiton PLC................... 365,036 9,477,513
China Molybdenum Company Ltd....... 629,780 352,837
Harmony Gold Mining Company Ltd.
ADR............................... 97,009 1,025,385
Hidili Industry International
Development Ltd................... 442,544 323,730 /(a)/
Impala Platinum Holdings Ltd....... 26,761 623,585
Kinross Gold Corp.................. 91,092 1,560,132
Maanshan Iron & Steel.............. 1,070,876 466,948
New World Resources N.V............ 116,343 1,198,516
POSCO.............................. 2,650 1,004,114
Rio Tinto PLC...................... 182,207 8,012,212
Sumitomo Metal Industries Ltd...... 3,572,049 8,069,696
Tata Steel Ltd..................... 46,182 478,894
ThyssenKrupp AG.................... 92,029 2,271,686
Vale S.A. ADR...................... 198,086 4,163,768
42,379,073
MULTI-UTILITIES -- 0.4%
National Grid PLC.................. 1,073,178 7,845,717
Veolia Environnement............... 99,821 2,349,022
10,194,739
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
13
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
OIL, GAS & CONSUMABLE FUELS -- 2.1%
Afren PLC............................. 774,453 $ 979,311 /(a)/
BG Group PLC.......................... 412,049 6,136,537
CNOOC Ltd............................. 428,000 725,264
ENI S.p.A............................. 236,373 4,346,150
Gazprom OAO ADR....................... 118,664 2,232,070
Lukoil OAO ADR........................ 39,740 2,046,610
Paladin Energy Ltd.................... 881,459 2,633,726 /(a)/
PetroChina Company Ltd................ 660,000 728,315
Petroleo Brasileiro S.A. ADR.......... 186,953 5,571,199
Reliance Industries Ltd............... 66,744 1,552,368 /(a)/
Royal Dutch Shell PLC................. 205,734 5,198,860
Suncor Energy Inc..................... 239,838 7,060,830
Suncor Energy Inc..................... 132,042 3,892,981
Total S.A............................. 162,264 7,255,413
50,359,634
PHARMACEUTICALS -- 0.9%
Bayer AG.............................. 115,291 6,453,426
Novartis AG........................... 113,252 5,485,998
Roche Holding AG...................... 78,666 10,822,696
22,762,120
PROFESSIONAL SERVICES -- 0.2%
Experian PLC.......................... 89,934 783,140
The Capita Group PLC.................. 440,153 4,855,755
5,638,895
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.2%
Franshion Properties China Ltd........ 287,623 79,076
Glorious Property Holdings Ltd........ 2,183,000 621,609
Mitsubishi Estate Company Ltd......... 324,982 4,520,455
Unitech Ltd........................... 536,943 851,259
6,072,399
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.0%
ASM Pacific Technology Ltd............ 51,787 402,305
Samsung Electronics Company Ltd....... 17,330 10,869,616
Taiwan Semiconductor Manufacturing
Company Ltd.......................... 5,574,433 10,418,853
Taiwan Semiconductor Manufacturing
Company Ltd. ADR..................... 293,104 2,860,696
24,551,470
SOFTWARE -- 0.3%
Autonomy Corporation PLC.............. 135,105 3,687,668 /(a)/
SAP AG................................ 89,223 3,974,151
Shanda Interactive Entertainment Ltd.
ADR.................................. 15,983 634,046 /(a)/
8,295,865
NUMBER
OF SHARES VALUE
SPECIALTY RETAIL -- 0.3%
Esprit Holdings Ltd................. 685,976 $ 3,693,185
Hennes & Mauritz AB................. 18,131 499,266
Yamada Denki Company Ltd............ 62,075 4,052,529
8,244,980
TEXTILES, APPAREL & LUXURY GOODS -- 0.2%
Adidas AG........................... 97,960 4,750,674
Ports Design Ltd.................... 320,488 815,128
5,565,802
TRADING COMPANIES & DISTRIBUTORS -- 0.2%
Mitsubishi Corp..................... 204,000 4,216,862
TRANSPORTATION INFRASTRUCTURE -- 0.0%*
Dalian Port PDA Company Ltd......... 948,087 409,232
WIRELESS TELECOMMUNICATION SERVICES -- 0.8%
America Movil SAB de C.V. ADR....... 50,576 2,402,361
China Mobile Ltd.................... 261,957 2,594,882
Mobile Telesystems OJSC ADR......... 234,897 4,500,627
MTN Group Ltd....................... 450,191 5,906,898
Vodafone Group PLC.................. 2,108,973 4,351,333
19,756,101
TOTAL COMMON STOCK
(COST $679,329,986)................ 611,639,620
---------------------------------------------------------------------
PREFERRED STOCK -- 0.6%
---------------------------------------------------------------------
AUTOMOBILES -- 0.2%
Volkswagen AG....................... 57,969 5,095,341
BANKING -- 0.1%
Citigroup Capital XII............... 34,425 860,281 /(i)/
COMMERCIAL BANKS -- 0.1%
Itau Unibanco Holding S.A........... 105,291 1,898,451 /(a)/
ELECTRIC UTILITIES -- 0.0%*
Cia Energetica de Minas Gerais...... 34,635 502,658 /(a)/
HEALTHCARE EQUIPMENT & SUPPLIES -- 0.0%*
Fresenius SE........................ 39,452 2,610,259
MEDIA -- 0.1%
NET Servicos de Comunicacao S.A..... 68,604 647,028 /(a)/
METALS & MINING -- 0.1%
Usinas Siderurgicas de Minas Gerais
S.A................................ 23,287 621,547
Vale S.A............................ 113,794 2,393,304 /(a)/
3,014,851
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
14
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
OIL, GAS & CONSUMABLE FUELS -- 0.0%*
Petroleo Brasileiro S.A........ 58,915 $ 877,923
TOTAL PREFERRED STOCK
(COST $15,289,113)............ 15,506,792
----------------------------------------------------------------
RIGHTS -- 0.0%*
----------------------------------------------------------------
ELECTRIC UTILITIES -- 0.0%*
Cia Energetica de Minas Gerais. 407,149 88,848 /(a)/
FOOD PRODUCTS -- 0.0%*
Fresenius SE................... 462,032 18,096 /(a)/
TOTAL RIGHTS
(COST $95,473)................ 106,944
TOTAL FOREIGN EQUITY
(COST $694,714,572)........... 627,253,356
PRINCIPAL
AMOUNT VALUE
----------------------------------------------------------------
BONDS AND NOTES -- 26.8%
----------------------------------------------------------------
U.S. TREASURIES -- 4.1%
U.S. Treasury Bonds
4.38% 11/15/39.............. $ 2,506,400 2,705,737
4.50% 08/15/39.............. 3,189,400 3,512,824
4.63% 02/15/40.............. 24,139,900 27,134,744
U.S. Treasury Notes
0.59% 04/30/12.............. 14,267,100 14,374,103 /(d)/
2.50% 04/30/15.............. 14,551,100 15,068,348
3.63% 02/15/20.............. 36,595,200 38,665,098 /(h)/
101,460,854
AGENCY MORTGAGE BACKED -- 6.6%
Federal Home Loan Mortgage Corp.
4.50% 06/01/33 - 02/01/35... 40,685 42,550 /(h)/
5.00% 07/01/35.............. 272,839 289,350 /(h)/
5.50% 05/01/20 - 04/01/39... 4,094,660 4,416,953 /(h)/
6.00% 04/01/17 - 11/01/37... 3,605,493 3,923,085 /(h)/
6.50% 06/01/29 - 03/01/30... 4,560 5,075 /(h)/
7.00% 06/01/29 - 08/01/36... 173,294 193,550 /(h)/
7.50% 01/01/28 - 09/01/33... 21,386 24,450 /(h)/
8.00% 01/01/30 - 11/01/30... 12,346 14,241 /(h)/
9.00% 10/01/25.............. 426 498 /(h)/
Federal National Mortgage Assoc.
4.00% 05/01/19 - 06/01/19... 151,688 160,312 /(h)/
4.50% 05/01/18 - 06/01/40... 45,059,062 46,799,751 /(h)/
5.00% 07/01/20 - 06/01/40... 22,451,182 23,796,348 /(h)/
5.25% 04/01/37.............. 27,852 29,033 /(i)/
5.50% 04/01/14 - 04/01/38... 33,038,554 35,587,774 /(h)/
5.64% 03/01/37.............. 10,155 10,589 /(i)/
6.00% 09/01/19 - 08/01/35... 6,445,123 7,077,164 /(h)/
PRINCIPAL
AMOUNT VALUE
6.50% 09/01/17 - 08/01/36. $ 529,400 $ 581,536 /(h)/
7.00% 04/01/17 - 12/01/33. 9,202 10,170 /(h)/
7.50% 09/01/13 - 03/01/34. 57,298 64,269 /(h)/
8.00% 12/01/11 - 11/01/33. 18,709 21,466 /(h)/
8.50% 06/01/30............ 63 70 /(h)/
9.00% 04/01/16 - 12/01/22. 4,639 5,089 /(h)/
4.50% TBA................. 8,200,000 8,498,529 /(c)/
5.50% TBA................. 9,600,000 10,369,498 /(c)/
6.00% TBA................. 10,767,000 11,677,145 /(c)/
6.50% TBA................. 5,044,000 5,523,967 /(c)/
7.00% TBA................. 975,000 1,081,755 /(c)/
Government National Mortgage
Assoc.
4.50% 08/15/33 - 09/15/34. 200,345 210,283 /(h)/
6.00% 04/15/27 - 09/15/36. 425,678 467,825 /(h)/
6.50% 04/15/24 - 09/15/36. 370,840 409,878 /(h)/
7.00% 03/15/12 - 10/15/36. 307,580 339,158 /(h)/
8.00% 03/15/30............ 3,206 3,722 /(h)/
9.00% 11/15/16 - 12/15/21. 11,724 13,020 /(h)/
161,648,103
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.4%
Fannie Mae Whole Loan
0.97% 08/25/43............ 3,797,638 117,545 /(g,o)/
Federal Home Loan Mortgage
Corp.
0.12% 09/25/43............ 289,186 3,177 /(g,h,i,o)/
8.00% 02/01/23 - 07/01/24. 2,652 581 /(g,h,o)/
Federal Home Loan Mortgage
Corp. REMIC
5.00% 02/15/38............ 654,952 65,319 /(g,o)/
5.00% 05/15/38............ 605,196 647,670
5.50% 04/15/17............ 28,231 1,154 /(g,h,o)/
Federal Home Loan Mortgage
Corp. REMIC (Series 1980)
(Class OF)
7.50% 07/15/27............ 3,756 859 /(g,h,o)/
Federal Home Loan Mortgage
Corp. REMIC (Series 2543)
(Class LR)
7.50% 01/15/16............ 1,023 1,032 /(h)/
Federal Home Loan Mortgage
Corp. REMIC (Series 2631)
(Class DI)
5.50% 06/15/33............ 51,024 10,974 /(g,h,o)/
Federal Home Loan Mortgage
Corp. REMIC (Series 2642)
(Class AW)
4.50% 03/15/19............ 11,403 64 /(g,h,o)/
Federal Home Loan Mortgage
Corp. REMIC (Series 2643)
(Class IM)
4.50% 03/15/18............ 41,656 3,238 /(g,h,o)/
Federal Home Loan Mortgage
Corp. REMIC (Series 2645)
(Class BI)
4.50% 02/15/18............ 22,624 1,363 /(g,h,o)/
Federal Home Loan Mortgage
Corp. REMIC (Series 2647)
(Class DI)
4.50% 10/15/16............ 13,503 282 /(g,h,o)/
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
15
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
Federal Home Loan Mortgage Corp.
REMIC (Series 2656) (Class IU)
5.00% 04/15/28............ $ 29,570 $ 374 /(g,h,o)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2722) (Class PI)
5.00% 06/15/28............ 12,900 417 /(g,h,o)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2763) (Class JI)
5.00% 10/15/18............ 55,520 4,717 /(g,h,o)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2781) (Class IC)
5.00% 11/15/17 - 05/15/18. 56,083 3,084 /(g,h,o)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2795) (Class IC)
5.00% 07/15/17............ 17,484 522 /(g,h,o)/
Federal Home Loan Mortgage Corp.
REMIC (Series 2852) (Class OJ)
9.91% 09/15/34............ 509,640 487,930 /(d,f)/
Federal Home Loan Mortgage
STRIPS
5.58% 08/01/27............ 636 523 /(d,f,h)/
Federal National Mortgage Assoc.
REMIC
5.00% 08/25/38............ 610,962 650,398
5.00% 02/25/40............ 671,876 90,751 /(g,o)/
Federal National Mortgage Assoc.
REMIC (Class BZ)
5.50% 01/25/33............ 686,671 756,643
Federal National Mortgage Assoc.
REMIC (Class CS)
7.35% 08/25/16............ 16,542 529 /(g,h,i,o)/
Federal National Mortgage Assoc.
REMIC (Class VZ)
5.00% 10/25/35............ 472,085 477,331
Federal National Mortgage Assoc.
REMIC (Series 1992) (Class K)
1008.00% 05/25/22............ 3 76 /(g,h,o)/
Federal National Mortgage Assoc.
REMIC (Series 2003) (Class HI)
5.00% 10/25/22............ 52,268 3,771 /(g,h,o)/
Federal National Mortgage Assoc.
REMIC (Series 2003) (Class IJ)
5.00% 02/25/32............ 1,131,402 103,652 /(g,o)/
Federal National Mortgage Assoc.
REMIC (Series 2003) (Class IO)
1.20% 12/25/42............ 148,982 3,336 /(g,h,i,o)/
Federal National Mortgage Assoc.
REMIC (Series 2003) (Class KI)
4.50% 05/25/18............ 31,864 1,004 /(g,h,o)/
Federal National Mortgage Assoc.
REMIC (Series 2003) (Class SL)
15.85% 03/25/31............ 39,413 42,393 /(h,i)/
Federal National Mortgage Assoc.
REMIC (Series 2008) (Class ZW)
5.00% 07/25/38............ 487,056 517,133
Federal National Mortgage Assoc.
STRIPS
5.50% 11/25/39............ 5,853,021 923,607 /(g,o)/
6.00% 01/01/35............ 704,830 104,180 /(g,o)/
PRINCIPAL
AMOUNT VALUE
Federal National Mortgage Assoc.
STRIPS (Class 2)
4.50% 08/01/35............. $ 1,136,913 $ 204,644 /(g,o)/
5.00% 03/25/38............. 980,054 140,770 /(g,o)/
5.50% 12/01/33............. 244,320 41,614 /(g,o)/
7.50% 11/01/23............. 16,442 2,921 /(g,h,o)/
8.00% 08/01/23 - 07/01/24.. 5,575 1,242 /(g,h,o)/
Federal National Mortgage Assoc.
STRIPS (Series 364) (Class 1)
4.50% 09/01/35............. 1,943,271 349,789 /(g,o)/
Federal National Mortgage Assoc.
STRIPS (Series 364) (Class 13)
6.00% 09/01/35............. 1,864,298 264,851 /(g,o)/
Federal National Mortgage Assoc.
STRIPS (Series 378) (Class 1)
4.50% 01/01/36............. 1,568,667 282,360 /(g,o)/
Federal National Mortgage Assoc.
STRIPS (Series 387) (Class 1)
5.00% 05/25/38............. 1,038,344 152,188 /(g,o)/
Government National Mortgage
Assoc.
4.50% 05/20/38............. 895,887 124,236 /(g,o)/
5.00% 10/20/37 - 09/20/38.. 4,825,343 792,555 /(g,o)/
6.10% 08/20/39............. 7,681,693 893,512 /(g,o)/
Government National Mortgage
Assoc. (Class IC)
5.90% 04/16/37............. 2,093,685 257,314 /(g,o)/
Vendee Mortgage Trust
0.39% 04/15/40............. 3,919,883 80,750 /(g,o)/
Vendee Mortgage Trust
(Class 2003)
0.86% 05/15/33............. 2,346,935 94,385 /(g,o)/
8,708,760
ASSET BACKED -- 0.3%
Bear Stearns Asset Backed
Securities Trust (Class 2A2)
23.57% 11/25/35............. 1,283,772 1,184,234 /(d,i)/
Bear Stearns Asset Backed
Securities Trust (Series 2003)
(Class A)
6.08% 01/25/34............. 7,139 5,441 /(d,i)/
Citicorp Residential Mortgage
Securities Inc. (Series 2006)
(Class A5)
6.04% 09/25/36............. 3,750,000 3,314,081
Countrywide Asset-Backed
Certificates (Class AF4)
5.31% 08/25/35............. 250,000 230,010 /(i)/
Countrywide Asset-Backed
Certificates (Class AF6)
4.74% 10/25/35............. 628,450 549,648 /(i)/
Countrywide Asset-Backed
Certificates (Class M1T4)
1.40% 06/26/33............. 586,601 145,258 /(i)/
GSAMP Trust
44.32% 05/25/46............. 254,752 236,919 /(b,d,i)/
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
16
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
GSR Mortgage Loan Trust (Class A1)
32.15% 11/25/30......... $ 1,418,919 $ 453,210 /(d,i)/
Indymac Residential Asset Backed
Trust
17.90% 06/25/36......... 52,047 51,424 /(d,i)/
Indymac Seconds Asset Backed
Trust (Class A)
14.90% 02/25/37......... 1,240,460 396,947 /(d,i)/
Mid-State Trust (Class A3)
7.54% 07/01/35......... 3,860 3,749 /(h,n)/
Popular ABS Mortgage Pass-
Through Trust (Class AF4)
5.30% 11/25/35......... 700,000 600,069
Residential Asset Securities Corp.
(Series 2002) (Class A2b)
37.91% 07/25/32......... 4,612 2,314 /(d,h,i)/
Saxon Asset Securities Trust
5.23% 08/25/35......... 221,951 204,081 /(i)/
SLM Student Loan Trust
(Series 2004) (Class A1)
1.56% 06/15/18......... 27,495 27,327 /(d,h,i)/
7,404,712
CORPORATE NOTES -- 10.8%
Abu Dhabi National Energy Co.
4.75% 09/15/14......... 300,000 302,646 /(b)/
6.25% 09/16/19......... 300,000 305,782 /(b)/
AES El Salvador Trust
6.75% 02/01/16......... 300,000 280,479 /(b)/
AES Panama S.A.
6.35% 12/21/16......... 270,000 277,852 /(b)/
Agilent Technologies Inc.
5.50% 09/14/15......... 472,000 508,045
Air Jamaica Ltd.
9.38% 07/08/15......... 259,286 259,286
Alliance One International Inc.
10.00% 07/15/16......... 942,000 958,485 /(b)/
ALROSA Finance S.A.
8.88% 11/17/14......... 300,000 318,000 /(b)/
America Movil SAB de C.V.
5.00% 03/30/20......... 1,000,000 1,033,173 /(b)/
American Tower Corp.
4.63% 04/01/15......... 432,000 449,382
Amsted Industries Inc.
8.13% 03/15/18......... 1,110,000 1,107,225 /(b)/
Anadarko Petroleum Corp.
6.20% 03/15/40......... 1,360,000 1,076,006
Anheuser-Busch InBev Worldwide
Inc.
5.00% 04/15/20......... 1,921,000 2,008,473 /(b)/
5.38% 11/15/14......... 1,922,000 2,101,359 /(b)/
ARAMARK Corp.
8.50% 02/01/15......... 1,000,000 1,010,000
Arizona Public Service Co.
6.25% 08/01/16......... 370,000 413,508 /(h)/
AT&T Inc.
6.40% 05/15/38......... 2,849,000 3,132,313
6.70% 11/15/13......... 934,000 1,077,907
PRINCIPAL
AMOUNT VALUE
Avis Budget Car Rental LLC
9.63% 03/15/18..... $ 532,000 $ 537,320 /(b)/
Banco do Brasil Cayman
8.50% 10/29/49..... 900,000 992,250 /(b)/
Banco do Brasil S.A.
4.50% 01/22/15..... 300,000 303,000 /(b)/
Banco Mercantil del Norte S.A.
6.14% 10/13/16..... 148,000 147,627 /(i)/
Bank of America Corp.
4.50% 04/01/15..... 2,205,000 2,228,640
5.63% 07/01/20..... 645,000 650,123
5.75% 12/01/17..... 3,250,000 3,370,513
6.50% 08/01/16..... 1,275,000 1,379,833
BE Aerospace Inc.
8.50% 07/01/18..... 1,330,000 1,396,500
BlackRock Inc.
5.00% 12/10/19..... 878,000 933,201
Boise Paper Holdings LLC
8.00% 04/01/20..... 666,000 664,335 /(b)/
Bombardier Inc.
7.75% 03/15/20..... 3,002,000 3,114,575 /(b)/
Boston Scientific Corp.
4.50% 01/15/15..... 414,000 406,686
CA Inc.
5.38% 12/01/19..... 1,126,000 1,193,719
6.13% 12/01/14..... 345,000 381,791
Calpine Corp.
7.25% 10/15/17..... 3,049,000 2,927,040 /(b)/
Cantor Fitzgerald LP
7.88% 10/15/19..... 710,000 734,641 /(b)/
Case New Holland Inc.
7.88% 12/01/17..... 1,225,000 1,234,187 /(b)/
CBS Corp.
5.75% 04/15/20..... 1,862,000 1,998,533
CCO Holdings LLC
7.88% 04/30/18..... 2,140,000 2,150,700 /(b)/
8.13% 04/30/20..... 402,000 411,045 /(b)/
Cellco Partnership
5.55% 02/01/14..... 1,500,000 1,681,717
Cenovus Energy Inc.
6.75% 11/15/39..... 685,000 786,453 /(b)/
Centrais Eletricas Brasileiras S.A.
6.88% 07/30/19..... 800,000 867,000 /(b)/
Central American Bank for Economic
Integration
5.38% 09/24/14..... 770,000 815,224 /(b)/
CFG Investment SAC
9.25% 12/19/13..... 400,000 412,000
Chesapeake Energy Corp.
7.25% 12/15/18..... 1,000,000 1,032,500
Cincinnati Bell Inc.
8.25% 10/15/17..... 2,265,000 2,117,775
8.75% 03/15/18..... 798,000 724,185
Citigroup Inc.
5.00% 09/15/14..... 859,000 859,172
5.13% 05/05/14..... 3,063,000 3,123,847
6.38% 08/12/14..... 1,682,000 1,786,541
8.50% 05/22/19..... 5,720,000 6,818,949
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
17
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
City National Capital Trust I
9.63% 02/01/40...... $ 638,000 $ 671,396
Columbus International Inc.
11.50% 11/20/14...... 100,000 106,507 /(b)/
Comcast Corp.
6.40% 03/01/40...... 686,000 738,354
6.50% 01/15/15...... 685,000 786,203
Community Health Systems Inc.
8.88% 07/15/15...... 2,026,000 2,089,313
Consolidated Edison Company of
New York Inc.
6.65% 04/01/19...... 528,000 640,999
Consolidated Edison Company of
New York Inc. (Series 2008)
5.85% 04/01/18...... 315,000 360,112
Corp Nacional del Cobre de Chile
5.63% 09/21/35...... 134,000 136,921 /(b)/
COX Communications Inc.
7.13% 10/01/12...... 240,000 266,667 /(h)/
Credit Suisse
6.00% 02/15/18...... 962,000 1,003,813
Credit Suisse AG
5.40% 01/14/20...... 1,686,000 1,676,329
Credit Suisse First Boston
International for CJSC The EXIM
of Ukraine
7.65% 09/07/11...... 600,000 591,000
Crown Castle International Corp.
7.13% 11/01/19...... 1,338,000 1,307,895
Crown Castle Towers LLC
6.11% 01/15/40...... 652,000 715,605 /(b)/
CVS Caremark Corp.
3.25% 05/18/15...... 730,000 741,503
5.75% 06/01/17...... 264,000 293,695
6.13% 09/15/39...... 1,871,000 1,999,979
DASA Finance Corp.
8.75% 05/29/18...... 1,554,000 1,682,205
Denbury Resources Inc.
8.25% 02/15/20...... 662,000 691,790
Diamond Offshore Drilling Inc.
5.70% 10/15/39...... 1,696,000 1,527,302
Digicel Ltd.
8.25% 09/01/17...... 100,000 99,000 /(b)/
DirecTV Holdings LLC
4.75% 10/01/14...... 1,026,000 1,086,608
5.20% 03/15/20...... 1,308,000 1,363,215
5.88% 10/01/19...... 798,000 871,724
DISH DBS Corp.
7.13% 02/01/16...... 1,569,000 1,572,923
Dolphin Energy Ltd.
5.89% 06/15/19...... 767,440 793,341 /(b)/
Drummond Company Inc.
7.38% 02/15/16...... 108,000 101,520
9.00% 10/15/14...... 898,000 902,490 /(b)/
El Paso Corp.
8.05% 10/15/30...... 664,000 656,426
Empresa Nacional del Petroleo
6.25% 07/08/19...... 1,300,000 1,379,602 /(b)/
PRINCIPAL
AMOUNT VALUE
EnCana Corp.
6.50% 02/01/38....... $ 690,000 $ 766,859
European Investment Bank
4.88% 01/17/17....... 1,600,000 1,784,541
Exelon Corp.
4.90% 06/15/15....... 978,000 1,044,425
Exelon Generation Company LLC
5.20% 10/01/19....... 317,000 337,219
6.25% 10/01/39....... 513,000 547,984
Export-Import Bank of Korea
5.88% 01/14/15....... 300,000 325,055
Fibria Overseas Finance Ltd.
7.50% 05/04/20....... 358,000 363,370 /(b)/
Ford Motor Credit Company LLC
7.00% 04/15/15....... 1,600,000 1,582,672
Forest Oil Corp.
7.25% 06/15/19....... 1,393,000 1,344,245
Gaz Capital SA for Gazprom
8.13% 07/31/14....... 100,000 108,880 /(b)/
9.25% 04/23/19....... 750,000 862,500
Genworth Financial Inc.
8.63% 12/15/16....... 638,000 680,371
GlaxoSmithKline Capital Inc.
4.85% 05/15/13....... 1,562,000 1,707,735
Globo Comunicacao e Participacoes
S.A.
7.25% 04/26/22....... 300,000 312,000 /(b)/
Hana Bank
4.50% 10/30/15....... 500,000 498,918 /(b)/
Hartford Financial Services Group Inc.
5.50% 03/30/20....... 1,378,000 1,337,474
HCA Inc.
9.25% 11/15/16....... 1,646,000 1,744,760
Health Management Associates Inc.
6.13% 04/15/16....... 926,000 877,385
Host Hotels & Resorts LP (REIT)
9.00% 05/15/17....... 500,000 535,000
HSBC Bank USA NA
7.00% 01/15/39....... 750,000 842,911
HSBC Finance Corp.
5.00% 06/30/15....... 2,545,000 2,655,448
5.70% 06/01/11....... 1,466,000 1,515,139
6.75% 05/15/11....... 405,000 421,602 /(h)/
HSBC Holdings PLC
6.50% 05/02/36....... 2,182,000 2,263,103 /(h)/
6.80% 06/01/38....... 750,000 808,261
Hydro Quebec
8.05% 07/07/24....... 820,000 1,178,619 /(h)/
Icahn Enterprises LP
8.00% 01/15/18....... 848,000 822,560 /(b)/
Illinois Power Co.
9.75% 11/15/18....... 796,000 1,045,056
Indo Integrated Energy BV
9.00% 06/01/12....... 300,000 310,658
Ingles Markets Inc.
8.88% 05/15/17....... 2,590,000 2,635,325
Intelsat Subsidiary Holding Company
S.A.
8.50% 01/15/13....... 672,000 677,040
8.88% 01/15/15....... 676,000 686,985
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
18
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
Intergas Finance BV
6.38% 05/14/17.............. $ 100,000 $ 100,000 /(b)/
6.88% 11/04/11.............. 200,000 208,500
Intergen N.V.
9.00% 06/30/17.............. 1,500,000 1,492,500 /(b)/
International Paper Co.
7.50% 08/15/21.............. 2,337,000 2,736,382
JP Morgan Chase Capital XXV
(Series Y)
6.80% 10/01/37.............. 846,000 836,164
JPMorgan Chase & Co.
5.13% 09/15/14.............. 1,839,000 1,962,452
JPMorgan Chase Bank NA
5.88% 06/13/16.............. 618,000 676,078
JPMorgan Chase Capital XXVII
7.00% 11/01/39.............. 1,009,000 1,026,090
Kazakhstan Temir Zholy Finance BV
6.50% 05/11/11.............. 300,000 303,000
KazMunaiGaz Finance Sub BV
7.00% 05/05/20.............. 200,000 200,760 /(b)/
9.13% 07/02/18.............. 100,000 114,750 /(b)/
11.75% 01/23/15.............. 100,000 122,380 /(b)/
KeyBank NA
5.80% 07/01/14.............. 1,060,000 1,131,659
Korea Hydro & Nuclear Power
Company Ltd.
6.25% 06/17/14.............. 400,000 436,440 /(b)/
Korea National Oil Corp.
5.38% 07/30/14.............. 500,000 530,465 /(b)/
Kraft Foods Inc.
5.38% 02/10/20.............. 1,622,000 1,738,056
Kreditanstalt fuer Wiederaufbau
3.50% 03/10/14.............. 3,348,000 3,535,153
4.13% 10/15/14.............. 413,000 446,434
4.50% 07/16/18.............. 2,182,000 2,371,417
L-3 Communications Corp.
5.88% 01/15/15.............. 777,000 767,287
LBI Escrow Corp.
8.00% 11/01/17.............. 700,000 721,000 /(b)/
Levi Strauss & Co.
7.63% 05/15/20.............. 400,000 392,000 /(b)/
Lincoln National Corp.
6.25% 02/15/20.............. 431,000 461,738
8.75% 07/01/19.............. 1,120,000 1,372,659
Listrindo Capital BV
9.25% 01/29/15.............. 400,000 423,444 /(b)/
Lloyds TSB Bank PLC
5.80% 01/13/20.............. 1,458,000 1,376,199 /(b)/
Majapahit Holding BV
7.25% 10/17/11.............. 500,000 525,000 /(b)/
7.75% 10/17/16 - 01/20/20... 1,125,000 1,233,687 /(b)/
MDC-GMTN B.V.
7.63% 05/06/19.............. 250,000 281,291 /(b)/
Merrill Lynch & Company Inc.
6.05% 08/15/12.............. 919,000 977,123
6.88% 04/25/18.............. 544,000 580,329
Morgan Stanley
5.50% 01/26/20.............. 2,744,000 2,654,546
5.63% 09/23/19.............. 1,367,000 1,322,454
PRINCIPAL
AMOUNT VALUE
6.00% 04/28/15...... $ 533,000 $ 557,025
7.30% 05/13/19...... 1,256,000 1,350,726
Morgan Stanley (Series F)
6.63% 04/01/18...... 500,000 524,067
Motiva Enterprises LLC
6.85% 01/15/40...... 652,000 745,148 /(b)/
Mylan Inc.
7.88% 07/15/20...... 950,000 969,000 /(b)/
NAK Naftogaz Ukraine
9.50% 09/30/14...... 200,000 207,590 /(l)/
National Agricultural Cooperative
Federation
5.00% 09/30/14...... 737,000 766,998 /(b)/
Navistar International Corp.
8.25% 11/01/21...... 1,000,000 1,015,000
NET Servicos de Comunicacao S.A.
7.50% 01/27/20...... 300,000 313,500 /(b)/
Nevada Power Co. (Series I)
6.50% 04/15/12...... 515,000 555,469 /(h)/
New Communications Holdings Inc.
8.25% 04/15/17...... 936,000 939,510 /(b)/
Newmont Mining Corp.
6.25% 10/01/39...... 1,399,000 1,526,754
News America Inc.
6.65% 11/15/37...... 956,000 1,072,925
Nexen Inc.
6.20% 07/30/19...... 1,659,000 1,862,679
6.40% 05/15/37...... 1,638,000 1,708,131
Nisource Finance Corp.
6.13% 03/01/22...... 602,000 642,557
Noble Group Ltd.
6.75% 01/29/20...... 300,000 291,000 /(b)/
NRG Energy Inc.
7.38% 02/01/16...... 1,095,000 1,089,525
Omnicare Inc.
7.75% 06/01/20...... 2,801,000 2,857,020
One Malaysia Sukuk Global Berhad
3.93% 06/04/15...... 250,000 253,711 /(b)/
Pacific Gas & Electric Co.
5.80% 03/01/37...... 500,000 543,424
Pacific Rubiales Energy Corp.
8.75% 11/10/16...... 100,000 108,000 /(b)/
PacifiCorp
6.25% 10/15/37...... 153,000 179,658
PAETEC Holding Corp.
8.88% 06/30/17...... 32,000 32,000
8.88% 06/30/17...... 392,000 392,000 /(b)/
Pemex Finance Ltd.
9.03% 02/15/11...... 39,750 40,346 /(h)/
Pemex Project Funding Master Trust
6.63% 06/15/38...... 210,000 214,255
Petrobras International Finance Co.
5.75% 01/20/20...... 450,000 453,172
Petroleos Mexicanos
4.88% 03/15/15...... 880,000 910,800 /(b)/
6.00% 03/05/20...... 270,000 283,500 /(b)/
8.00% 05/03/19...... 130,000 154,700
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
19
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
Petroleum Company of Trinidad &
Tobago Ltd.
6.00% 05/08/22........ $ 1,300,000 $ 1,225,701
Petronas Capital Ltd.
5.25% 08/12/19........ 500,000 525,705 /(b)/
7.88% 05/22/22........ 200,000 249,930 /(b)/
Petronas Global Sukuk Ltd.
4.25% 08/12/14........ 400,000 410,662 /(b)/
Pioneer Natural Resources Co.
7.50% 01/15/20........ 605,000 623,511
Plains All American Pipeline LP
4.25% 09/01/12........ 1,035,000 1,081,324
Plains Exploration & Production Co.
7.63% 06/01/18........ 1,006,000 983,365
Pontis Ltd.
6.25% 07/20/10........ 300,000 295,500 /(b)/
Power Sector Assets & Liabilities
Management Corp.
7.25% 05/27/19........ 1,600,000 1,769,957
7.39% 12/02/24........ 100,000 109,000 /(b)/
Principal Financial Group Inc.
8.88% 05/15/19........ 475,000 582,422
Prudential Financial Inc.
3.63% 09/17/12........ 342,000 352,250
3.88% 01/14/15........ 2,003,000 2,017,249
5.15% 01/15/13........ 792,000 838,198
7.38% 06/15/19........ 685,000 793,199
Qtel International Finance Ltd.
6.50% 06/10/14........ 500,000 547,187 /(b)/
QVC Inc.
7.50% 10/01/19........ 1,328,000 1,304,760 /(b)/
RailAmerica Inc.
9.25% 07/01/17........ 796,000 833,810
Republic Services Inc.
5.25% 11/15/21........ 637,000 670,220 /(b)/
5.50% 09/15/19........ 822,000 889,504 /(b)/
Reynolds Group Issuer Inc.
7.75% 10/15/16........ 1,870,000 1,827,925 /(b)/
Rockies Express Pipeline LLC
5.63% 04/15/20........ 2,625,000 2,496,687 /(b)/
RR Donnelley & Sons Co.
4.95% 04/01/14........ 997,000 1,016,007
7.63% 06/15/20........ 863,000 855,589
RSHB Capital SA for OJSC Russian
Agricultural Bank
6.30% 05/15/17........ 400,000 397,000 /(b)/
6.97% 09/21/16........ 200,000 197,500 /(i)/
Russian Railways
5.74% 04/03/17........ 200,000 196,750
SBA Telecommunications Inc.
8.00% 08/15/16........ 296,000 306,360 /(b)/
8.25% 08/15/19........ 444,000 467,310 /(b)/
Simon Property Group LP (REIT)
5.65% 02/01/20........ 978,000 1,035,758
Solutia Inc.
7.88% 03/15/20........ 665,000 663,337
Southern Copper Corp.
5.38% 04/16/20........ 57,000 57,133
6.75% 04/16/40........ 155,000 153,214
7.50% 07/27/35........ 500,000 539,648
PRINCIPAL
AMOUNT VALUE
Spirit Aerosystems Inc.
7.50% 10/01/17.............. $ 467,000 $ 457,660
Star Energy Geothermal Wayang
Windu Ltd.
11.50% 02/12/15.............. 400,000 418,000 /(b)/
Talecris Biotherapeutics Holdings
Corp.
7.75% 11/15/16.............. 1,500,000 1,597,500 /(b)/
Talisman Energy Inc.
7.75% 06/01/19.............. 374,000 459,153
Telecom Italia Capital S.A.
6.00% 09/30/34.............. 964,000 825,893
7.18% 06/18/19.............. 680,000 732,097
Telefonica Emisiones SAU
3.73% 04/27/15.............. 693,000 690,979
5.13% 04/27/20.............. 866,000 867,986
Tesoro Corp. (Series B)
6.63% 11/01/15.............. 1,770,000 1,659,375
TGI International Ltd.
9.50% 10/03/17.............. 100,000 111,000
The AES Corp.
8.00% 10/15/17 - 06/01/20... 1,233,000 1,242,510
The Dow Chemical Co.
5.90% 02/15/15.............. 1,397,000 1,526,678
8.55% 05/15/19.............. 1,000,000 1,224,113
The Goldman Sachs Group Inc.
5.38% 03/15/20.............. 6,775,000 6,694,486
The Kroger Co.
6.15% 01/15/20.............. 1,096,000 1,266,071
The Travelers Companies Inc.
5.80% 05/15/18.............. 2,024,000 2,219,994
The Williams Companies Inc.
7.88% 09/01/21.............. 707,000 810,287
Ticketmaster Entertainment LLC
10.75% 08/01/16.............. 500,000 538,750
Time Warner Cable Inc.
5.00% 02/01/20.............. 1,976,000 2,020,739
6.75% 07/01/18.............. 1,864,000 2,139,645
7.50% 04/01/14.............. 622,000 722,699
Time Warner Inc.
5.88% 11/15/16.............. 1,582,000 1,783,397
6.20% 03/15/40.............. 688,000 725,678
TNK-BP Finance S.A.
6.13% 03/20/12.............. 300,000 306,375
7.25% 02/02/20.............. 163,000 162,804 /(b)/
TransDigm Inc.
7.75% 07/15/14.............. 403,000 403,000 /(b)/
UPC Germany GmbH
8.13% 12/01/17.............. 700,000 686,000 /(b)/
USB Capital XIII Trust
6.63% 12/15/39.............. 983,000 1,036,416
Vale Overseas Ltd.
6.88% 11/10/39.............. 854,000 892,172
Valero Energy Corp.
6.13% 02/01/20.............. 1,990,000 2,044,916
Vedanta Resources PLC
9.50% 07/18/18.............. 400,000 425,000 /(b)/
Verizon Communications Inc.
6.35% 04/01/19.............. 1,618,000 1,872,248
6.40% 02/15/38.............. 210,000 231,434
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
20
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
6.90% 04/15/38........ $ 536,000 $ 626,429
8.75% 11/01/18........ 1,998,000 2,597,346
VIP Finance Ireland Limited for
OJSC Vimpel Communications
(Class A)
8.38% 04/30/13........ 400,000 423,200 /(b)/
Virgin Media Finance PLC
8.38% 10/15/19........ 700,000 708,750
9.50% 08/15/16........ 1,700,000 1,795,625
VTB Capital S.A.
6.47% 03/04/15........ 400,000 400,000 /(b)/
WEA Finance LLC
6.75% 09/02/19........ 1,374,000 1,527,139 /(b)/
7.50% 06/02/14........ 1,028,000 1,164,995 /(b)/
Weatherford International Ltd.
6.50% 08/01/36........ 694,000 628,883
Williams Partners LP
5.25% 03/15/20........ 1,236,000 1,263,893 /(b)/
6.30% 04/15/40........ 980,000 984,617 /(b)/
Windstream Corp.
7.88% 11/01/17........ 266,000 259,683
Woodside Finance Ltd.
4.50% 11/10/14........ 1,517,000 1,547,207 /(b)/
Woori Bank
4.50% 10/07/15........ 400,000 397,298 /(b)/
Wyeth
5.50% 03/15/13........ 1,364,000 1,508,686
Wynn Las Vegas LLC
7.88% 05/01/20........ 2,383,000 2,394,915 /(b)/
XL Capital Ltd.
5.25% 09/15/14........ 1,520,000 1,555,304
Xstrata Finance Canada Ltd.
5.80% 11/15/16........ 685,275 734,605 /(b)/
265,525,009
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.5%
Banc of America Commercial
Mortgage Inc.
5.93% 02/10/51........ 2,217,000 2,314,397
Banc of America Commercial
Mortgage Inc. (Class A4)
5.63% 07/10/46........ 3,712,000 3,814,891
Banc of America Commercial
Mortgage Inc. (Class C)
5.88% 04/10/49........ 400,000 65,332 /(h,i,n)/
Banc of America Funding Corp.
(Class 2M1)
4.64% 02/20/36........ 48,970 453 /(h,i,n)/
Banc of America Funding Corp.
(Class B1)
5.45% 03/20/36........ 191,455 7,974 /(h,i,n)/
Banc of America Mortgage
Securities Inc. (Class B1)
5.13% 01/25/36........ 153,015 14,750 /(h,i,n)/
5.40% 02/25/36........ 156,490 26,625 /(h,i,n)/
Banc of America Mortgage
Securities Inc. (Class B2)
5.13% 01/25/36........ 43,158 561 /(h,i,n)/
PRINCIPAL
AMOUNT VALUE
Bear Stearns Commercial Mortgage
Securities (Class A2)
5.58% 03/11/39........ $ 1,000,000 $ 1,011,674 /(h,i)/
5.63% 04/12/38........ 1,175,000 1,186,284 /(h,i)/
Bear Stearns Commercial Mortgage
Securities (Class A4)
5.33% 02/11/44........ 980,000 960,172
5.47% 01/12/45........ 1,125,000 1,164,031
5.69% 06/11/50........ 6,900,000 6,984,650 /(i)/
Bear Stearns Commercial Mortgage
Securities (Class AJ)
5.62% 03/11/39........ 600,000 518,739 /(i)/
5.91% 06/11/40........ 710,000 449,098 /(i)/
Bear Stearns Commercial Mortgage
Securities (Class AM)
5.24% 12/11/38........ 580,000 520,887
5.84% 09/11/42........ 910,000 809,107
5.92% 06/11/50........ 620,000 535,477 /(i)/
Citigroup Commercial Mortgage
Trust (Class AJ)
5.92% 03/15/49........ 690,000 570,864 /(i)/
Citigroup Commercial Mortgage
Trust (Series 2006) (Class AJ)
5.48% 10/15/49........ 730,000 479,500
Citigroup Commercial Mortgage
Trust (Series 2006) (Class AM)
5.65% 10/15/48........ 730,000 637,951
Commercial Mortgage Pass
Through Certificates (Class A4)
5.96% 06/10/46........ 1,850,000 1,966,988 /(i)/
Countrywide Commercial Mortgage
Trust (Class A4)
5.70% 09/12/49........ 1,300,000 1,294,420
Countrywide Commercial Mortgage
Trust (Class AJ)
5.49% 07/12/46........ 500,000 324,503 /(i)/
Credit Suisse First Boston Mortgage
Securities Corp. (Class CB1)
5.34% 10/25/35........ 163,692 10,482 /(h,i,n)/
Credit Suisse Mortgage Capital
Certificates (Class A3)
5.47% 09/15/39........ 682,000 670,252 /(h)/
Credit Suisse Mortgage Capital
Certificates (Class C)
5.73% 02/15/39........ 500,000 300,295
Credit Suisse Mortgage Capital
Certificates (Class CB1)
5.65% 02/25/36........ 109,017 8,053 /(h,i,n)/
Crusade Global Trust (Series 2003)
(Class ANT)
0.74% 01/17/34........ 1,118,867 1,118,463 /(d,h,i)/
Federal National Mortgage Assoc.
REMIC
6.15% 09/25/37........ 5,876,923 650,937 /(g,o)/
6.20% 07/25/37........ 3,025,006 374,717 /(g,o)/
6.34% 10/25/35........ 4,437,967 574,442 /(g,o)/
Federal National Mortgage Assoc.
REMIC (Series 2005) (Class SC)
6.33% 10/25/35........ 6,680,811 976,228 /(g,o)/
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
21
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
Government National Mortgage
Assoc.
6.15% 04/20/40...... $ 9,364,609 $ 1,464,497 /(d,g)/
6.15% 05/20/40...... 7,879,058 1,141,361 /(g,o)/
Greenwich Capital Commercial
Funding Corp.
6.09% 07/10/38...... 3,880,000 4,055,698 /(i)/
Greenwich Capital Commercial
Funding Corp. (Class A2)
5.60% 12/10/49...... 1,110,000 1,155,560
Greenwich Capital Commercial
Funding Corp. (Class A4)
5.74% 12/10/49...... 3,798,000 3,735,654
Greenwich Capital Commercial
Funding Corp. (Class AM)
6.09% 07/10/38...... 1,905,000 1,639,476
Impac CMB Trust (Class 1A1)
18.54% 04/25/35...... 229,905 164,916 /(d,h,i)/
Indymac INDA Mortgage Loan
Trust (Class B1)
5.12% 01/25/36...... 107,126 4,192 /(h,i,n)/
Indymac INDA Mortgage Loan
Trust (Class B2)
5.12% 01/25/36...... 73,162 563 /(h,i,n)/
JP Morgan Chase Commercial
Mortgage Securities Corp.
5.41% 05/15/47...... 1,030,000 550,590
6.06% 04/15/45...... 860,000 753,954
JP Morgan Chase Commercial
Mortgage Securities Corp.
(Class A4)
5.34% 08/12/37...... 2,860,000 3,066,390 /(i)/
5.44% 06/12/47...... 1,950,000 1,947,501
5.79% 02/12/51...... 3,460,000 3,500,504 /(i)/
6.07% 02/12/51...... 420,000 405,760
JP Morgan Chase Commercial
Mortgage Securities Corp.
(Class AJ)
5.50% 06/12/47...... 350,000 205,395 /(i)/
JP Morgan Chase Commercial
Mortgage Securities Corp.
(Class AM)
6.10% 02/12/51...... 1,410,000 1,201,638 /(i)/
LB-UBS Commercial Mortgage
Trust (Class A4)
4.95% 09/15/30...... 630,000 665,255
5.16% 02/15/31...... 860,000 894,614
5.66% 03/15/39...... 3,987,000 4,121,963 /(h,i)/
LB-UBS Commercial Mortgage
Trust (Class AJ)
6.32% 04/15/41...... 320,000 207,061 /(i)/
LB-UBS Commercial Mortgage
Trust (Class F)
6.45% 07/15/40...... 475,000 71,245 /(i,n)/
MASTR Alternative Loans Trust
(Series 2003) (Class 15X)
5.00% 08/25/18...... 30,629 3,190 /(g,h,n,o)/
Medallion Trust (Series 2005)
(Class A)
5.23% 08/22/36...... 740,748 718,782 /(d,i)/
PRINCIPAL
AMOUNT VALUE
Merrill Lynch Mortgage Trust
(Series 2006) (Class B)
5.84% 05/12/39...... $ 768,000 $ 401,302
Morgan Stanley Capital I
5.16% 10/12/52...... 2,000,000 2,093,004 /(i)/
5.36% 11/12/41...... 1,765,000 1,492,605
5.94% 10/15/42...... 922,000 544,384
Morgan Stanley Capital I (Class A3)
5.71% 07/12/44...... 300,000 318,130 /(h)/
Morgan Stanley Capital I (Class A4)
5.45% 02/12/44...... 1,953,000 1,940,840 /(i)/
5.81% 12/12/49...... 4,878,970 5,052,229
Morgan Stanley Capital I (Class AJ)
5.39% 11/12/41...... 2,000,000 1,292,145 /(h,i)/
Morgan Stanley Capital I (Class AM)
5.98% 08/12/41...... 860,000 795,917 /(i)/
6.46% 01/11/43...... 910,000 818,483
Morgan Stanley Capital I (Class B)
5.94% 10/15/42...... 150,000 96,384
Morgan Stanley Capital I
(Series 2006) (Class A2)
5.28% 12/15/43...... 1,500,000 1,538,261 /(h)/
MortgageIT Trust (Class A1)
14.94% 08/25/35...... 1,580,430 1,136,705 /(d,i)/
OBP Depositor LLC Trust
4.65% 07/15/45...... 610,000 609,996 /(b)/
Opteum Mortgage Acceptance
Corp. (Class A1A)
15.85% 02/25/35...... 104,566 93,281 /(d,h,i)/
Residential Accredit Loans Inc.
6.00% 01/25/36...... 60,984 1 /(h,n)/
Residential Funding Mortgage
Securities I (Class M1)
5.75% 01/25/36...... 126,528 9,494 /(h,n)/
Residential Funding Mortgage
Securities I (Class M2)
5.75% 01/25/36...... 46,138 1,125 /(h,n)/
Wachovia Bank Commercial
Mortgage Trust
6.22% 06/15/45...... 780,000 351,005
Wachovia Bank Commercial
Mortgage Trust (Class A3)
5.25% 12/15/43...... 1,100,000 1,099,595
Wachovia Bank Commercial
Mortgage Trust (Class AJ)
5.52% 01/15/45...... 1,390,000 1,003,723 /(i)/
Wachovia Bank Commercial
Mortgage Trust (Class AM)
5.47% 01/15/45...... 860,000 741,138 /(i)/
Wachovia Bank Commercial
Mortgage Trust (Series 2006)
(Class AJ)
6.19% 06/15/45...... 350,000 240,386 /(i)/
WAMU Commercial Mortgage
Securities Trust (Series 2005)
(Class AJ)
3.52% 05/25/36...... 870,000 878,766 /(b,d)/
WaMu Mortgage Pass Through
Certificates (Class A2A1)
26.52% 01/25/45...... 88,717 62,835 /(d,i)/
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
22
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
Wells Fargo Mortgage Backed
Securities Trust (Class B1)
5.50% 01/25/36 - 03/25/36... $ 1,111,976 $ 220,425 /(h,n)/
Wells Fargo Mortgage Backed
Securities Trust (Class B2)
5.50% 01/25/36 - 03/25/36... 335,725 13,180 /(h,n)/
84,864,295
SOVEREIGN BONDS -- 1.0%
Banco Nacional de Desenvolvimento
Economico e Social
6.50% 06/10/19.............. 500,000 535,625 /(b)/
Democratic Socialist Republic of
Sri Lanka
7.40% 01/22/15.............. 100,000 103,000 /(b)/
8.25% 10/24/12.............. 100,000 106,558
Government of Belize
6.00% 02/20/29.............. 271,700 201,058 /(j)/
Government of Brazil
5.63% 01/07/41.............. 600,000 589,500
5.88% 01/15/19.............. 400,000 439,000
8.00% 01/15/18.............. 1,804,444 2,093,156 /(h)/
8.25% 01/20/34.............. 666,000 879,120
Government of Brazilian
4.88% 01/22/21.............. 492,000 492,738
Government of Colombia
6.13% 01/18/41.............. 1,800,000 1,822,500
7.38% 09/18/37.............. 100,000 117,500
Government of Costa Rica
10.00% 08/01/20.............. 275,000 369,875 /(b)/
Government of Egypt
5.75% 04/29/20.............. 300,000 302,625 /(b)/
Government of El Salvador
7.65% 06/15/35.............. 280,000 296,800 /(b)/
Government of Grenada
2.50% 09/15/25.............. 149,800 68,908 /(b,j)/
Government of Hungary
4.75% 02/03/15.............. 1,500,000 1,488,099
Government of Lebanon
6.38% 03/09/20.............. 436,000 436,013
Government of Lithuania
6.75% 01/15/15.............. 200,000 209,606 /(b)/
7.38% 02/11/20.............. 300,000 317,774 /(b)/
Government of Panama
5.20% 01/30/20.............. 400,000 416,000
Government of Peruvian
6.55% 03/14/37.............. 925,000 1,022,125
7.35% 07/21/25.............. 100,000 119,750
Government of Philippine
6.38% 10/23/34.............. 600,000 600,720
6.50% 01/20/20.............. 400,000 439,200
Government of Poland
6.38% 07/15/19.............. 74,000 81,861
Government of Qatar
4.00% 01/20/15.............. 100,000 102,750 /(b)/
5.25% 01/20/20.............. 400,000 418,000 /(b)/
6.40% 01/20/40.............. 200,000 212,500 /(b)/
Government of South Africa
5.50% 03/09/20.............. 100,000 103,375
PRINCIPAL
AMOUNT VALUE
Government of Turkey
5.63% 03/30/21..... $ 700,000 $ 693,000
6.75% 05/30/40..... 2,100,000 2,105,250
Government of Uruguay
6.88% 09/28/25..... 220,478 245,833
Government of Venezuela
1.31% 04/20/11..... 134,000 123,615 /(i)/
5.38% 08/07/10..... 680,000 674,900
10.75% 09/19/13..... 517,000 449,790
Korea Expressway Corp.
4.50% 03/23/15..... 400,000 409,443 /(b)/
Province of Manitoba Canada
4.90% 12/06/16..... 330,000 371,365 /(h)/
Province of Quebec Canada
7.50% 09/15/29..... 495,000 679,448
Republic of Dominican
7.50% 05/06/21..... 300,000 309,000 /(b)/
9.50% 09/27/11..... 171,264 178,971
Republic of Ghana
8.50% 10/04/17..... 200,000 210,500 /(b)/
Russian Foreign Bond -- Eurobond
3.63% 04/29/15..... 500,000 483,750 /(b)/
5.00% 04/29/20..... 500,000 482,500 /(b)/
7.50% 03/31/30..... 735,415 829,033 /(j)/
Socialist Republic of Vietnam
6.75% 01/29/20..... 100,000 103,000 /(b)/
United Mexican States
5.13% 01/15/20..... 399,000 414,960
6.05% 01/11/40..... 400,000 422,000
23,572,094
MUNICIPAL BONDS AND NOTES -- 0.1%
American Municipal Power-Ohio Inc.
6.05% 02/15/43..... 550,000 545,809
Municipal Electric Authority of
Georgia
6.64% 04/01/57..... 1,033,000 1,000,399
New Jersey State Turnpike Authority
7.41% 01/01/40..... 200,000 243,620
New Jersey Transportation Trust
Fund Authority
6.88% 12/15/39..... 620,000 653,840
2,443,668
TOTAL BONDS AND NOTES
(COST $644,103,386)............ 655,627,495
NUMBER OF
SHARES VALUE
------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 0.5%
------------------------------------------------------------------------
Financial Select Sector SPDR Fund 168,095 2,321,392 /(m)/
Industrial Select Sector SPDR Fund 330,636 9,075,958 /(m)
iShares MSCI Emerging Markets
Index Fund..................... 16,919 631,417
TOTAL EXCHANGE TRADED FUNDS
(COST $17,047,574)............. 12,028,767
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
23
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
---------------------------------------------------------------------
OTHER INVESTMENTS -- 0.2%
---------------------------------------------------------------------
GEI Investment Fund
(COST $6,322,320)............. $ 5,500,419 /(k)/
TOTAL INVESTMENTS IN SECURITIES
(COST $2,200,815,544)......... 2,102,723,070
---------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 15.2%
---------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 8.3%
GE Money Market Fund
Institutional Class
0.05%......................... 204,043,305 /(d,k)/
PRINCIPAL
AMOUNT VALUE
---------------------------------------------------------------------
TIME DEPOSIT -- 0 .0%*
State Street Corp.
0.01% 07/01/10 $ 444,268 444,268 /(e)/
U.S. TREASURIES -- 1.0%
U.S. Treasury Bill
0.02% 07/22/10 25,000,000 24,998,925 /(d)/
FEDERAL AGENCIES -- 5.9%
Federal Home Loan Bank
Discount Notes
0.07% 07/21/10..... 40,800,000 40,797,879 /(d)/
Federal Home Loan Mortgage
Corp. Discount Notes
0.02% 07/09/10..... 51,000,000 50,999,235 /(d)/
0.04% 08/10/10..... 5,000,000 4,999,430 /(d)/
Federal National Mortgage Assoc.
Discount Notes
0.05% 07/21/10..... 23,421,000 23,419,899 /(d)/
0.11% 08/04/10..... 23,040,000 23,037,765 /(d)/
143,254,208
TOTAL SHORT-TERM INVESTMENTS
(COST $372,736,979)........... 372,740,706
TOTAL INVESTMENTS
(COST $2,573,552,523)......... 2,475,463,776
LIABILITIES IN EXCESS OF OTHER
ASSETS, NET -- (1.1)%......... (26,369,887)
--------------
NET ASSETS -- 100.0%........... $2,449,093,889
==============
OTHER INFORMATION
-----------------------------
The Fund had the following long futures contracts open at June 30, 2010
(unaudited)
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
--------------------------------------------------------------------
DJ Euro Stoxx
50 Index
Futures September 2010 96 $ 3,019,722 $ (188,223)
FTSE 100 Index
Futures September 2010 20 1,460,342 (102,706)
Russell 2000
Mini Index
Futures September 2010 826 50,204,280 (3,524,158)
S&P 500 EMini
Index
Futures September 2010 19 975,270 (31,312)
S&P Midcap
400 Emini
Index
Futures September 2010 44 3,124,000 (216,992)
Topix Index
Futures September 2010 13 1,231,834 (15,009)
2 Yr.
U.S.Treasury
Notes
Futures September 2010 479 104,818,672 166,902
5 Yr.
U.S.Treasury
Notes
Futures September 2010 411 48,642,492 808,563
The Fund had the following short futures contracts open at June 30, 2010
(unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
---------------------------------------------------------------------
S&P 500
E Mini Index
Futures September 2010 4 $ (205,320) $ 15,471
Ultra Long
U.S.Treasury
Bond
Futures September 2010 57 (7,741,313) (400,376)
10 Yr.
U.S.Treasury
Notes
Futures September 2010 1136 (139,213,250) (3,106,968)
-----------
$(6,594,808)
===========
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
24
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
The Fund was invested in the following countries at June 30, 2010 (unaudited):
PERCENTAGE (BASED
COUNTRY ON MARKET VALUE)
---------------------------------------------------
United States 70.78%
United Kingdom 4.48%
Japan 3.09%
Germany 2.90%
France 2.54%
Canada 2.30%
Switzerland 2.13%
Brazil 1.47%
China 1.44%
South Korea 1.10%
Taiwan 0.99%
Netherlands 0.73%
Spain 0.66%
Russian Federation 0.60%
Italy 0.50%
India 0.50%
South Africa 0.41%
Australia 0.39%
Mexico 0.34%
Sweden 0.23%
Denmark 0.20%
Hong Kong 0.20%
Philippines 0.19%
Turkey 0.18%
Chile 0.17%
Ireland 0.17%
Indonesia 0.14%
Supranationals 0.11%
Colombia 0.09%
Kazakhstan 0.07%
United Arab Emirates 0.07%
Peru 0.07%
Finland 0.07%
Malaysia 0.06%
Hungary 0.06%
Egypt 0.06%
Bermuda 0.06%
Qatar 0.05%
Bolivarian Republic of Venezuela 0.05%
Trinidad And Tobago 0.05%
Czech Republic 0.05%
Thailand 0.04%
Ukraine 0.03%
Panama 0.03%
El Salvador 0.02%
Lithuania 0.02%
Dominican Republic 0.02%
Lebanon 0.02%
Costa Rica 0.01%
Jamaica 0.01%
Austria 0.01%
Uruguay 0.01%
Ghana 0.01%
Sri Lanka 0.01%
Belize 0.01%
------
100.00%
======
The Fund was invested in the following categories at June 30, 2010 (unaudited):
DOMESTIC FOREIGN
PERCENTAGE PERCENTAGE TOTAL PERCENTAGE
(BASED ON (BASED ON (BASED ON MARKET
INDUSTRY MARKET VALUE) MARKET VALUE) VALUE)
----------------------------------------------------------------------
Oil, Gas & Consumable
Fuels 1.61% 2.07% 3.68%
Commercial Banks 0.32% 3.22% 3.54%
Capital Markets 1.73% 0.76% 2.49%
Communications
Equipment 1.40% 0.94% 2.34%
Metals & Mining 0.48% 1.83% 2.31%
Insurance 1.10% 1.10% 2.20%
Chemicals 0.83% 1.34% 2.17%
Software 1.78% 0.34% 2.12%
Wireless
Telecommunication
Services 1.08% 0.80% 1.88%
Semiconductors &
Semiconductor
Equipment 0.88% 0.99% 1.87%
Media 1.66% 0.21% 1.87%
Healthcare Equipment &
Supplies 1.37% 0.50% 1.87%
Diversified Financial
Services 1.33% 0.32% 1.65%
Biotechnology 1.63% 0.00% 1.63%
Food Products 0.60% 0.97% 1.57%
IT Services 1.22% 0.31% 1.53%
Pharmaceuticals 0.52% 0.93% 1.45%
Specialty Retail 0.98% 0.33% 1.31%
Aerospace & Defense 0.70% 0.49% 1.19%
Beverages 0.99% 0.15% 1.14%
Household Products 0.47% 0.64% 1.11%
Energy Equipment &
Services 1.07% 0.00% 1.07%
Industrial
Conglomerates 0.09% 0.96% 1.05%
Real Estate Investment
Trusts (REIT's) 1.05% 0.00% 1.05%
Internet Software &
Services 0.50% 0.51% 1.01%
Healthcare Providers &
Services 0.87% 0.08% 0.95%
Commercial Services &
Supplies 0.56% 0.32% 0.88%
Automobiles 0.00% 0.87% 0.87%
Life Sciences Tools &
Services 0.81% 0.00% 0.81%
Electric Utilities 0.68% 0.12% 0.80%
Food & Staples Retailing 0.13% 0.65% 0.78%
Machinery 0.42% 0.35% 0.77%
Computers &
Peripherals 0.73% 0.00% 0.73%
Multi-Utilities 0.15% 0.41% 0.56%
Real Estate
Management &
Development 0.30% 0.25% 0.55%
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
25
TOTAL RETURN FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
DOMESTIC FOREIGN
PERCENTAGE PERCENTAGE TOTAL PERCENTAGE
(BASED ON (BASED ON (BASED ON MARKET
INDUSTRY MARKET VALUE) MARKET VALUE) VALUE)
---------------------------------------------------------------------
Electronic Equipment,
Instruments &
Components 0.13% 0.39% 0.52%
Exchange Traded Fund 0.46% 0.03% 0.49%
Construction &
Engineering 0.00% 0.47% 0.47%
Multiline Retail 0.40% 0.00% 0.40%
Textiles, Apparel &
Luxury Goods 0.16% 0.22% 0.38%
Professional Services 0.14% 0.22% 0.36%
Diversified
Telecommunication
Services 0.21% 0.15% 0.36%
Electrical Equipment 0.00% 0.34% 0.34%
Hotels, Restaurants &
Leisure 0.33% 0.00% 0.33%
Trading Companies &
Distributors 0.07% 0.17% 0.24%
Marine 0.00% 0.20% 0.20%
Construction Materials 0.00% 0.17% 0.17%
Tobacco 0.15% 0.00% 0.15%
Personal Products 0.14% 0.00% 0.14%
Thrifts & Mortgage
Finance 0.13% 0.00% 0.13%
Road & Rail 0.13% 0.00% 0.13%
Household Durables 0.05% 0.06% 0.11%
Water Utilities 0.11% 0.00% 0.11%
Building Products 0.00% 0.08% 0.08%
Healthcare Technology 0.06% 0.00% 0.06%
Gas Utilities 0.06% 0.00% 0.06%
Independent Power
Producers & Energy
Traders 0.03% 0.02% 0.05%
Air Freight & Logistics 0.04% 0.00% 0.04%
Banking 0.03% 0.00% 0.03%
Paper & Forest Products 0.03% 0.00% 0.03%
Diversified Consumer
Services 0.00% 0.02% 0.02%
Transportation
Infrastructure 0.00% 0.02% 0.02%
Financials 0.01% 0.00% 0.01%
-----
58.23%
=====
TOTAL PERCENTAGE
(BASED ON MARKET
SECTOR VALUE)
----------------------------------------------------------------
Corporate Notes 10.73%
Agency Mortgage Backed 6.53%
U.S. Treasuries 4.10%
Non-Agency Collateralized Mortgage Obligations 3.43%
Sovereign Bonds 0.95%
Agency Collateralized Mortgage Obligations 0.35%
Asset Backed 0.30%
Municipal Bonds and Notes 0.10%
-----
26.49%
=====
SHORT TERM AND OTHER INVESTMENTS
-----------------------------------------
Short-Term 15.06%
Other Investments 0.22%
------
15.28%
------
100.00%
======
See Notes to Schedule of Investments on page 27 and Notes to Financial
Statements on page 34.
26
Notes to Schedule of Investments June 30, 2010 (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
information regarding holdings, allocations and other characteristics are
presented to illustrate examples of securities that the Fund has bought and the
diversity of areas in which the Fund may invest as of a particular date. It may
not be representative of the Fund's current or future investments and should
not be construed as a recommendation to purchase or sell a particular security.
Please see the Fund's prospectus for complete descriptions of investment
objective, 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, 2010, these securities amounted to
$76,082,781 or 3.11% of the net assets of the Fund. These securities have
been determined to be liquid using procedures established by the Board of
Directors of the 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, 2010, 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, 2010.
(j)Step coupon bond. Security becomes interest bearing at a future date.
(k)GE Asset Management, the investment adviser of the Fund, also serves as
investment adviser of the GEI Investment Fund and the GE Funds-GE Money
Market Fund
(l)Securities in default.
(m)Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank
& Trust Co., the Fund's custodian and accounting agent.
(n)Illiquid securities. At June 30, 2010, these securities amounted to $461,394
or 0.02% of net assets for the Fund. These securities have been determined
to be illiquid using procedures established by the Board of Directors of GE
Investments Funds, Inc.
(o)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, 2010.
Abbreviations:
ADR American Depository Receipt
GDR Global 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
27
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
TOTAL RETURN FUND
------------------------------------------------------------------------
CLASS 1
------------------------------------------------------------------------
6/30/10+ 12/31/09 12/31/08/(D)/ 12/31/07
-------------------------------------------------------------------------
INCEPTION DATE
Net asset value, beginning of period............. $15.18 $12.75 $18.61 $17.69
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income.......................... 0.12** 0.20** 0.35** 0.35
Net realized and unrealized gains/(losses) on
investments................................... (1.04) 2.45 (5.80) 1.71
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS... (0.92) 2.65 (5.45) 2.06
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.......................... -- 0.19 0.34 0.35
Net realized gains............................. -- -- 0.07 0.79
Return of capital.............................. -- 0.03 -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS.............................. -- 0.22 0.41 1.14
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period................... $14.26 $15.18 $12.75 $18.61
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/(A)/................................ (6.06)% 20.81% (29.28)% 11.68%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)....... $1,025,644 $1,131,038 $989,975 $1,525,002
Ratios to average net assets:
Net investment income*....................... 1.56% 1.47% 2.16% 2.20%
Net Expenses*................................ 0.72%/(b)(c)/ 0.67%/(b)(c)/ 0.51%/(b)(c)/ 0.52%/(c)/
Gross Expenses*.............................. 0.75% 0.70% 0.55% 0.56%
Portfolio turnover rate...................... 75% 174% 203% 176%
-------------------------
-------------------------
12/31/06 12/31/05
------------------------
INCEPTION DATE 7/1/85
Net asset value, beginning of period............. $16.04 $15.97
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income.......................... 0.36 0.23
Net realized and unrealized gains/(losses) on
investments................................... 1.84 0.36
- --------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS... 2.20 0.59
- --------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.......................... 0.31 0.23
Net realized gains............................. 0.24 0.29
Return of capital.............................. -- --
- --------------------------------------------------------------------------
TOTAL DISTRIBUTIONS.............................. 0.55 0.52
- --------------------------------------------------------------------------
Net asset value, end of period................... $17.69 $16.04
- --------------------------------------------------------------------------
TOTAL RETURN/(A)/................................ 13.75% 3.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)....... $1,390,230 $959,531
Ratios to average net assets:
Net investment income*....................... 2.33% 1.89%
Net Expenses*................................ 0.48%/(c)/ 0.45%
Gross Expenses*.............................. 0.53% 0.45%
Portfolio turnover rate...................... 138% 146%
---------------------------------------------------------------
CLASS 2
---------------------------------------------------------------
6/30/10+ 12/31/09 12/31/08/(D)/ 12/31/07
----------------------------------------------------------------
INCEPTION DATE
Net asset value, beginning of period........................ $15.13 $12.71 $18.56 $17.68
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income..................................... 0.11** 0.19** 0.35** 0.38
Net realized and unrealized gains/(losses) on investments. (1.03) 2.45 (5.80) 1.67
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS.............. (0.92) 2.64 (5.45) 2.05
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income..................................... -- 0.19 0.33 0.38
Net realized gains........................................ -- -- 0.07 0.79
Return of capital......................................... -- 0.03 -- --
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS......................................... -- 0.22 0.40 1.17
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period.............................. $14.21 $15.13 $12.71 $18.56
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/(A)/........................................... (6.08)% 20.76% (29.33)% 11.63%/(B)/
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................. $17,757 $18,140 $12,830 $15,281
Ratios to average net assets:
Net investment income*.................................. 1.53% 1.41% 2.11% 1.75%
Net Expenses*........................................... 0.77%/(b)(c)/ 0.72%/(b)(c)/ 0.56%/(b)(c)/ 0.56%/(c)/
Gross Expenses*......................................... 0.80% 0.75% 0.60% 0.59%
Portfolio turnover rate................................. 75% 174% 203% 176%
-------------
-------------
12/31/06
------------
INCEPTION DATE 5/1/06
Net asset value, beginning of period........................ $17.03
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income..................................... 0.26
Net realized and unrealized gains/(losses) on investments. 0.94
- -------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS.............. 1.20
- -------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income..................................... 0.31
Net realized gains........................................ 0.24
Return of capital......................................... --
- -------------------------------------------------------------------------
TOTAL DISTRIBUTIONS......................................... 0.55
- -------------------------------------------------------------------------
Net asset value, end of period.............................. $17.68
- -------------------------------------------------------------------------
TOTAL RETURN/(A)/........................................... 7.05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................. $1
Ratios to average net assets:
Net investment income*.................................. 2.33%
Net Expenses*........................................... 0.57%/(c)/
Gross Expenses*......................................... 0.64%
Portfolio turnover rate................................. 138%
See Notes to Financial Statements.
28
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
---------------------------------------------------------
CLASS 3
---------------------------------------------------------
6/30/10+ 12/31/09 12/31/08/(D)/
----------------------------------------------------------
INCEPTION DATE
Net asset value, beginning of period........................ $15.15 $12.73 $18.59
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income..................................... 0.10** 0.17** 0.34**
Net realized and unrealized gains/(losses) on investments. (0.84) 2.45 (5.80)
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS.............. (0.74) 2.62 (5.46)
- -----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income..................................... 0.20 0.17 0.33
Net realized gains........................................ 0.00 -- 0.07
Return of capital......................................... -- 0.03 --
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS......................................... 0.20 0.20 0.40
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period.............................. $14.21 $15.15 $12.73
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/(A)/........................................... (6.20)% 20.57% (29.37)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................. $1,405,693 $1,421,191 $1,110,117
Ratios to average net assets:
Net investment income*.................................. 1.32% 1.26% 2.05%
Net Expenses*........................................... 0.97%/(b)(c)/ 0.87%/(b)(c)/ 0.61%/(b)(c)/
Gross Expenses*......................................... 1.00% 0.91% 0.65%
Portfolio turnover rate................................. 75% 174% 203%
------------------------------
------------------------------
12/31/07 12/31/06
-----------------------------
INCEPTION DATE 5/1/06
Net asset value, beginning of period........................ $17.69 $17.03
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income..................................... 0.35 0.12
Net realized and unrealized gains/(losses) on investments. 1.69 1.10
- ------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS.............. 2.04 1.22
- ------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income..................................... 0.35 0.32
Net realized gains........................................ 0.79 0.24
Return of capital......................................... -- --
- ------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS......................................... 1.14 0.56
- ------------------------------------------------------------------------------------------
Net asset value, end of period.............................. $18.59 $17.69
- ------------------------------------------------------------------------------------------
TOTAL RETURN/(A)/........................................... 11.56%/(B)/ 7.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................. $1,173,708 $396,349
Ratios to average net assets:
Net investment income*.................................. 2.04% 2.09%
Net Expenses*........................................... 0.61%/(c)/ 0.62%/(c)/
Gross Expenses*......................................... 0.65% 0.69%
Portfolio turnover rate................................. 176% 138%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a)Total returns are historical and assume changes in share price, reinvestment
of dividends and capital gains distributions and do not include the effect
of insurance contract charges. Past performance does not guarantee future
results.
(b)Reflects GE Asset Management's waiver of a portion of the Fund's management
fee in an amount equal to the management fee earned by GE Asset Management
with respect to the Fund's investment in the GE Funds -- GE Money Market
Fund ("GE Money Market Fund").
(c)Reflects GE Asset Management'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 6 of the Notes to Financial Statements for further details.
(d)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.
29
Statement of TOTAL
Assets and Liabilities JUNE 30, 2010 (UNAUDITED) RETURN
FUND
- ------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $2,194,493,224)........ $2,097,222,651
Investments in affiliated securities, at market (cost $6,322,320). 5,500,419
Short-term Investments at market (cost $168,249,406).............. 168,253,133
Short-term affiliated investments (at amortized cost)............. 204,487,573
Foreign cash (cost $526,195)...................................... 525,324
Receivable for investments sold................................... 34,947,819
Income receivables................................................ 9,763,854
Receivable for fund shares sold................................... 200,761
Variation margin receivable....................................... 1,843
Other assets...................................................... 4,843,895
- ------------------------------------------------------------------------------------
TOTAL ASSETS.................................................... 2,525,747,272
- ------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased................................. 72,595,809
Payable for fund shares redeemed.................................. 465,877
Payable to GEAM................................................... 1,463,912
Accrued other expenses............................................ 1,352,127
Variation margin payable.......................................... 775,658
- ------------------------------------------------------------------------------------
TOTAL LIABILITIES............................................... 76,653,383
- ------------------------------------------------------------------------------------
NET ASSETS.......................................................... $2,449,093,889
- ------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in................................................... 2,881,489,110
Undistributed (distribution in excess of) net investment income... 17,858,341
Accumulated net realized gain (loss).............................. (345,567,410)
Net unrealized appreciation/ (depreciation) on:
Investments..................................................... (98,088,747)
Futures......................................................... (6,594,808)
Foreign currency related transactions........................... (2,597)
- ------------------------------------------------------------------------------------
NET ASSETS.......................................................... $2,449,093,889
- ------------------------------------------------------------------------------------
CLASS 1:
NET ASSETS.......................................................... $1,025,643,972
Shares outstanding ($0.01 par value; unlimited shares authorized)... 71,920,606
Net asset value per share........................................... $14.26
CLASS 2:
NET ASSETS.......................................................... $ 17,756,551
Shares outstanding ($0.01 par value; unlimited shares authorized)... 1,249,445
Net asset value per share........................................... $14.21
CLASS 3:
NET ASSETS.......................................................... $1,405,693,366
Shares outstanding ($0.01 par value; unlimited shares authorized)... 98,890,720
Net asset value per share........................................... $14.21
See Notes to Financial Statements.
30
Statement of Operations TOTAL
FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED) RETURN
FUND
- ----------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend............................................................. $ 17,420,085
Interest............................................................. 13,032,317
Interest from affiliated investments................................. 2,546
Less: Foreign taxes withheld......................................... (1,254,278)
- ----------------------------------------------------------------------------------------
TOTAL INCOME........................................................... 29,200,670
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees..................................... 6,443,138
Distributors Fees (Note 6)
Class 1............................................................ 1,102,099
Class 2............................................................ 23,030
Class 3............................................................ 3,236,546
Transfer agent....................................................... 17,919
Director's fees...................................................... 40,905
Custody and accounting expenses...................................... 275,020
Professional fees.................................................... 95,542
Registration expenses................................................ 22,746
Other expenses....................................................... 166,311
- ----------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT......................... 11,423,256
- ----------------------------------------------------------------------------------------
Less : Expenses waived or borne by the adviser....................... (255,901)
Less: Expenses reimbursed by the adviser............................. (213,466)
- ----------------------------------------------------------------------------------------
Net expenses......................................................... 10,953,889
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME.................................................. 18,246,781
- ----------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments........................................................ (12,799,217)
Futures............................................................ 8,803,659
Foreign currency transactions...................................... (397,255)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON:
Investments........................................................ (162,102,753)
Futures............................................................ (10,039,443)
Foreign currency transactions...................................... (4,487)
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments............... (176,539,496)
- ----------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........ $(158,292,715)
- ----------------------------------------------------------------------------------------
See Notes to Financial Statements.
31
Statements of TOTAL
Changes in Net Assets RETURN
FUND
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED JUNE 30, YEAR ENDED
2010 DECEMBER 31,
(UNAUDITED) 2009
- --------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss)......................................................... $ 18,246,781 $ 30,584,208
Net realized gain (loss) on investments, futures, and foreign currency transactions... (4,392,813) (210,288,844)
Net increase (decrease) in unrealized appreciation / (depreciation) on investments,
futures and foreign currency transactions........................................... (172,146,683) 613,358,473
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations............................................... (158,292,715) 433,653,837
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1............................................................................. -- (14,381,282)
Class 2............................................................................. -- (226,665)
Class 3............................................................................. -- (16,093,364)
Return of Capital
Class 1............................................................................. -- (2,092,585)
Class 2............................................................................. -- (32,981)
Class 3............................................................................. -- (2,341,706)
- --------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS..................................................................... -- (35,168,583)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions..................... (158,292,715) 398,485,254
- --------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1............................................................................. 5,084,754 14,984,009
Class 2............................................................................. 1,811,422 3,853,694
Class 3............................................................................. 101,317,634 129,173,281
Class 4............................................................................. -- 51,043,749
Value of distributions reinvested
Class 1............................................................................. -- 16,473,867
Class 2............................................................................. -- 259,646
Class 3............................................................................. -- 18,435,070
Cost of shares redeemed
Class 1............................................................................. (44,974,541) (70,379,890)
Class 2............................................................................. (1,043,775) (1,548,125)
Class 3............................................................................. (25,178,344) (46,736,037)
Class 4............................................................................. -- (55,604,507)
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions....................................... 37,017,150 59,954,757
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................................................. (121,275,565) 458,440,011
NET ASSETS
Beginning of period..................................................................... 2,570,369,454 2,111,929,443
- --------------------------------------------------------------------------------------------------------------------------
End of period........................................................................... $2,449,093,889 $2,570,369,454
- --------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD............ $ 17,858,341 $ (388,440)
- --------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
32
Statements of Changes in Net Assets (continued) TOTAL
Changes in Fund Shares RETURN
FUND
----------------------------------------------------------------------------
SIX MONTHS
ENDED JUNE 30, YEAR ENDED
2010 DECEMBER 31,
(UNAUDITED) 2009
----------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold..................................... 334,987 1,110,679
Issued for distributions reinvested............. -- 1,079,530
Shares redeemed................................. (2,940,767) (5,243,835)
----------------------------------------------------------------------------
Net increase (decrease) in fund shares.......... (2,605,780) (3,053,626)
----------------------------------------------------------------------------
CLASS 2
Shares sold..................................... 120,375 288,188
Issued for distributions reinvested............. -- 17,071
Shares redeemed................................. (70,070) (115,478)
----------------------------------------------------------------------------
Net increase (decrease) in fund shares.......... 50,305 189,781
----------------------------------------------------------------------------
CLASS 3
Shares sold..................................... 6,721,349 9,005,295
Issued for distributions reinvested............. -- 1,210,423
Shares redeemed................................. (1,663,661) (3,600,902)
----------------------------------------------------------------------------
Net increase (decrease) in fund shares.......... 5,057,688 6,614,816
----------------------------------------------------------------------------
CLASS 4
Shares sold..................................... -- 3,713,857
Issued for distributions reinvested............. -- --
Shares redeemed................................. -- (3,714,451)
----------------------------------------------------------------------------
Net increase (decrease) in fund shares.......... -- (594)
----------------------------------------------------------------------------
See Notes to Financial Statements.
33
Notes to Financial Statements June 30, 2010 (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
three classes of shares (Classes 1, 2 & 3). Shares of Class 4 were fully
redeemed on November 30, 2009.
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 three share classes of the Fund as investment options for
variable life insurance and variable annuity contracts -- Class 1, Class 2 and
Class 3. Classes 2 and 3 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
References to Level 1, Level 2 and Level 3 below are the level classifications
in the fair value hierarchy and are described in the Fair Value Measurement
section.
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 the NASDAQ are valued using the NASDAQ Official Closing Price, Level
1 securities primarily include publicly-traded equity securities 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. In those circumstances the Fund classifies the investment
securities in Level 2.
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. These securities are included in Level 2. In the absence of
a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations and would be classified in
Level 3.
Short-term investments of sufficient credit quality 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 and these are included in Level
2. 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 and those are
also included in Level 2.
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. These securities
would be classified in Level 3. 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 of
any Fund in the appropriate circumstances.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances
34
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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. In these circumstances the
Fund classifies the investment securities in Level 2. 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. In those circumstances the Fund
classifies the investment securities in Level 3. 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.
Portfolio securities may be valued using techniques other than market
quotations, under the circumstances described under above. The value
established for a portfolio security may be different than what would be
produced through the use of another methodology or if it had been priced using
market quotations. Portfolio securities that are valued using techniques other
than market quotations, including "fair valued" securities, may be subject to
greater fluctuation in their value from one day to the next than would be the
case if market quotations were used. In addition, there is no assurance that
the Fund could sell a portfolio security for the value established for it at
any time and it is possible that the Fund would incur a loss because a
portfolio security is sold at a discount to its established 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. 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. The Fund's income, expenses (other than distribution
fees) and realized and unrealized gains and losses are allocated proportionally
each day among each the Fund's respective share classes based upon the relative
net assets of each share class.
FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 1, 2008 for all financial instruments accounted for at fair value.
For financial assets and liabilities, fair value is the price the Fund would
receive 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 or 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 inputs are observable or whose
significant value drivers are observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
Policies and procedures are maintained to value investments using the best and
most relevant data available. In addition, GEAM performs periodic reviews of
the methodologies used by independent pricing services including price
validation of individual securities.
The following section describes the valuation methodologies the Fund uses to
measure different financial investments at fair value.
When available, the Fund uses quoted market prices to determine the 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, pricing information is obtained
from an independent pricing
35
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
vendor. The pricing vendor uses various pricing models for each asset class
that are consistent with what other market participants would use. The inputs
and assumptions to the model of the pricing vendor are derived from market
observable sources including: benchmark yields, reported trades, broker/dealer
quotes, issuer spreads, benchmark securities, bids, offers, and other
market-related data. Since many fixed income securities do not trade on a daily
basis, the methodology of the pricing vendor uses available information as
applicable such as benchmark curves, benchmarking of like securities, sector
groupings, and matrix pricing. The pricing vendor considers all available
market observable inputs in determining the evaluation for a security. Thus,
certain securities may not be priced using quoted prices, but rather determined
from market observable information. These investments are included in Level 2
and primarily comprise our portfolio of corporate fixed income, government,
mortgage and asset-backed securities. In infrequent circumstances, pricing
vendors may provide the Fund with valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
included in Level 3.
The Fund uses non-binding broker quotes as the primary basis for valuation when
there is limited, or no, relevant market activity for a specific investment or
for other investments that share similar characteristics. The Fund has not
adjusted the prices obtained. Investment securities priced using non-binding
broker quotes are included in Level 3. As is the case with the primary pricing
vendor, third-party brokers do not provide access to their proprietary
valuation models, inputs and assumptions. Accordingly, GEAM conducts internal
reviews of pricing for all such investment securities periodically to ensure
reasonableness of valuations used in our financial statements. These reviews
are designed to identify prices that appear stale, those that have changed
significantly from prior valuations, and other anomalies that may indicate that
a price may not be accurate. Based on the information available, GEAM believes
that the fair values provided by the brokers are representative of prices that
would be received to sell the assets at the measurement date (exit prices).
Other financial investments are derivative investments 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.
The Fund uses closing prices for derivatives included in Level 1, which are
traded either on exchanges or liquid over-the counter markets. Derivative
assets and liabilities included in Level 2 primarily represent interest rate
swaps, cross-currency swaps and foreign currency and commodity forward and
option contracts. Derivative assets and liabilities included in Level 3
primarily represent interest rate products that contain embedded optionality or
prepayment features.
Transfers in and out of Level 3 are considered to occur at the beginning of the
period.
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. For example, money
market securities are valued using amortized cost, in accordance with the
Investment Company Act of 1940. Generally, amortized cost reflects the current
fair value of a security, but since the value is not obtained from a quoted
price in an active market, such securities are reflected as Level 2. Fair value
determinations are required for securities whose value is affected by a
significant event that will materially affect the value of a domestic or
foreign security and which occurs subsequent to the time of the close of the
principal market on which such domestic or foreign security trades but prior to
the calculation of the Fund's NAV.
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
36
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 of foreign denominated securities from
the fluctuations arising from changes in the market prices of those 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.
DERIVATIVES 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 objective. The Fund may enter into derivative transactions for the
purpose of hedging against the effects of changes in the value of portfolio
securities due to anticipated changes in market conditions, to gain market
exposure for residual and accumulating cash positions, and for managing the
duration of fixed-income investments. 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 and 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.
FUTURES CONTRACTS The Fund may invest in interest rate, financial, stock and
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
37
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
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.
38
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
The Fund is subject to ASC 740, INCOME TAXES. ASC 740 provides guidance for
financial accounting and reporting for the effects of income taxes that result
from an entity's activities during the year. ASC 740 also provides guidance
regarding how certain uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements. ASC 740 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.
There are no adjustments to the Fund's net assets required under ASC 740. The
Fund's 2006, 2007, 2008 and 2009 fiscal years tax returns are still open to
examination by the Federal and applicable state tax authorities.
At June 30, 2010, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation) on
Tax Purposes Appreciation Depreciation Investments
-----------------------------------------------------------------------
$2,626,453,281 $99,877,993 $(250,867,499) $(150,989,506)
As of December 31, 2009, the Fund has capital loss carryovers, as indicated
below.
Amount Expires
-----------------------
$ 21,723,574 12/31/2016
253,063,614 12/31/2017
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, 2009 as follows:
Capital Currency
--------------------
$12,452,340 $401,209
The tax composition of distributions paid during the years ended December 31,
2009 and December 31, 2008 were as follows:
Long-Term
Ordinary Capital Return of
Income Gains Capital Total
----------------------------------------------------
2009 $30,701,311 $ -- $4,467,272 $35,168,583
2008 53,455,875 11,362,592 122,643 64,941,110
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays any dividends from net
investment income annually. The Fund also declares and pays any 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 transactions, and
losses deferred due to wash sale transactions. Reclassifications due to
permanent book/tax differences are made to the
39
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
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.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued FASB Accounting
Standards Codification (ASC) effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The ASC is an
aggregation of previously issued authoritative U.S. generally accepted
accounting principles (GAAP) in one comprehensive set of guidance organized by
subject area. In accordance with the ASC, references to previously issued
accounting standards have been replaced by ASC references. Subsequent revisions
to GAAP will be incorporated into the ASC through Accounting Standards Updates
(ASU).
The Fund adopted ASC 855, SUBSEQUENT EVENTS effective October 2009. ASC 855
establishes principles and requirements for subsequent events, in particular
(a) the period after the balance sheet date during which management of a
reporting entity shall evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; (b) the
circumstances under which an entity shall recognize events or transactions
occurring after the balance sheet date in its financial statements; and (c) the
disclosures that an entity shall make about events or transactions that
occurred after the balance sheet date.
In January 2010, FASB issued ASU 2010-06, IMPROVING DISCLOSURES ABOUT FAIR
VALUE MEASUREMENTS. ASU 2010-06 requires reporting entities to make new
disclosures about the amounts and reasons for significant transfers in and out
of Level 1 and Level 2 fair value measurements and inputs and valuation
techniques used to measure fair value for both recurring and nonrecurring fair
value measurements that fall in either Level 2 or Level 3, and information on
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new disclosures are effective for interim and
annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures will
be effective for fiscal years beginning after December 15, 2010, and for
interim periods within those fiscal years. GEAM does not believe the adoption
of ASU 2010-06 will materially impact the financial statement amounts.
3. FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 2008. This guidance establishes a new framework for measuring fair
value and expands related disclosures. Broadly, the 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. It also establishes a three-level valuation
hierarchy based upon observable and non-observable inputs.
40
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
The following table present the Fund's investments measured at fair value on a
recurring basis at June 30, 2010:
Level 1 Level 2 Level 3 Total
- ----------------------------------------------------------------------------------------------------------------------------
Investments in Securities
Domestic Equity $ 802,313,033 $ -- $ -- $ 802,313,033
Foreign Equity 104,924,433 506,715,187+ -- 611,639,620
Bonds and Notes -- U.S. Treasuries -- 101,460,854 -- 101,460,854
Bonds and Notes -- Agency Mortgage Backed -- 161,648,103 -- 161,648,103
Bonds and Notes -- Agency Collateralized Mortgage Obligations -- 6,850,681 1,858,079 8,708,760
Bonds and Notes -- Asset Backed -- 7,167,793 236,919 7,404,712
Bonds and Notes -- Corporate Notes -- 264,811,509 713,500 265,525,009
Bonds and Notes -- Non-Agency Collateralized Mortgage
Obligations -- 84,863,171 1,124 84,864,295
Bonds and Notes -- Sovereign Bonds -- 23,572,094 -- 23,572,094
Bonds and Notes Municipal Notes and Bonds -- 2,443,668 -- 2,443,668
Exchange Traded Funds 12,028,767 -- -- 12,028,767
Preferred Stock 7,801,192 7,705,600+ -- 15,506,792
Rights -- 106,944+ -- 106,944
Other Investments -- 5,500,419 -- 5,500,419
Short-Term Investments 204,043,305 168,697,401 -- 372,740,706
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES $1,131,110,730 $1,341,543,424 $2,809,622 $2,475,463,776
- ----------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL INSTRUMENTS
Futures Contracts -- Unrealized Appreciation $ 990,936 $ -- $ -- $ 990,936
Futures Contracts -- Unrealized Depreciation (7,585,744) -- -- (7,585,744)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER FINANCIAL INSTRUMENTS $ (6,594,808) $ -- $ -- $ (6,594,808)
- ----------------------------------------------------------------------------------------------------------------------------
+AT JUNE 30, 2010, THE FOREIGN EQUITY SECURITIES WERE VALUED WITH THE
ASSISTANCE OF AN INDEPENDENT FAIR VALUE PRICING SERVICE, CAUSING SECURITIES TO
MOVE FROM LEVEL 1 TO LEVEL 2.
The following table presents the changes in Level 3 investments measured on a
recurring basis for the period ended June 30, 2010:
Bonds and
Bonds and Notes --
Notes -- Agency Bonds and Bonds and Non-Agency
Bonds and Collateralized Notes -- Notes -- Collateralized
Notes -- Agency Mortgage Asset Corporate Mortgage
Mortgage Backed Obligations Backed Notes Obligations Total
- -------------------------------------------------------------------------------------------------------------------------------
Balance at 12/31/09 $ 26,508,818 $1,747,109 $ 317,855 $ 1,180,014 $ 125,462 $ 29,879,258
Accrued discounts/premiums -- (191,044) -- (498) -- (191,542)
Realized gain (loss) 91,655 85,976 -- -- (478,880) (301,249)
Change in unrealized gain (loss) (64,872) (308,005) 51,940 (1,632) 615,741 293,173
Net purchases (sales) (19,172,663) (547,675) (132,876) 715,630 (169,023) (19,306,607)
Net transfers in and out of Level 3 (7,362,938) 1,071,718 -- (1,180,014) (92,176) (7,563,410)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at 06/30/10 $ -- $1,858,079 $ 236,919 $ 713,500 $ 1,124 $ 2,809,622
- -------------------------------------------------------------------------------------------------------------------------------
Change in unrealized gain (loss) relating
to securities still held at 06/30/10 $ -- $ (199,391) $ 51,940 $ (1,632) $ 24,835 $ (124,248)
41
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
4. DERIVATIVES TRANSACTIONS
Shown below are the derivative contracts entered into by the Fund, summarized
by primary risk exposure.
Asset Derivatives June 30, 2010 Liability Derivatives June 30, 2010
------------------------------------- --------------------------------------
Derivatives not Location in the Location in
accounted for as Statements the Statements
hedging instruments of Assets Fair of Assets Fair
under ASC 815 and Liabilities Value ($) and Liabilities Value ($)
- ------------------------ ---------------------------- --------- -------------------------- -----------
Equity Contracts Receivables, Net Assets -- Liabilities, Net Assets --
Net unrealized Net unrealized
appreciation/(depreciation) appreciation/
on Futures 15,323* (depreciation) on Futures (4,078,400)*
- -------------------------------------------------------------------------------------------------------
Interest Rate Contracts Receivables, Net Assets -- Liabilities, Net Assets --
Net unrealized Net unrealized
appreciation/(depreciation) appreciation/
on Futures 975,465* (depreciation) on Futures (3,507,196)*
- -------------------------------------------------------------------------------------------------------
*INCLUDES CUMULATIVE APPRECIATION/DEPRECIATION OF FUTURES CONTRACTS AS REPORTED
IN THE SCHEDULE OF INVESTMENTS AND WITHIN THE COMPONENTS OF NET ASSETS SECTION
OF THE STATEMENTS OF ASSETS AND LIABILITIES. ONLY THE CURRENT DAY'S VARIATION
MARGIN IS REPORTED WITHIN THE RECEIVABLES AND/OR PAYABLES OF THE STATEMENTS OF
ASSETS AND LIABILITIES.
Refer to the Schedule of Investments.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Total Notional of
Derivatives not accounted Location in the Futures/Options Realized Gain or
for as hedging instruments Statements of Contracts (Loss) on Derivatives
under ASC 815 Operations Purchased/(Sold) ($) Recognized in Income ($)
- --------------------------------------------------------------------------------------------------------
Equity Contracts Realized gain/(loss) on
futures, Increase/(decrease)
in unrealized appreciation/ 179,136,649/
(depreciation) on Futures (174,801,926) 14,151,337
- --------------------------------------------------------------------------------------------------------
Interest Rate Contracts Realized gain/(loss) on
futures, Increase/(decrease)
in unrealized appreciation/ 955,030,599/
(depreciation) on Futures (946,519,112) (5,347,678)
- --------------------------------------------------------------------------------------------------------
Change in Unrealized
Derivatives not accounted Appreciation/(Depreciation)
for as hedging instruments on Derivatives
under ASC 815 Recognized in Income ($)
- -------------------------------------------------------
Equity Contracts
(7,199,943)
- -------------------------------------------------------
Interest Rate Contracts
(2,839,500)
- -------------------------------------------------------
5. 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 ("State Street"). The revolving credit facility
requires the payment of a commitment fee equal to 0.15% 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. Generally, borrowings under the credit facilities would accrue interest
at the Federal Funds Rate plus 50 basis points (0.50%) 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 six-month period
ended June 30, 2010.
6. FEES AND COMPENSATION PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION AND OTHER OPERATING FEES
GE Asset Management, a registered investment adviser, was retained by the
Company's Board of Directors effective May 1, 1997 to act as investment adviser
and
42
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 0.50%.
GEAM waives a portion of the Fund's management fee in the amount equal to the
management fee earned by GEAM with respect to the Fund's investment in the GE
Funds -- GE Money Market Fund.
For periods prior to May 1, 2010: Pursuant to an expense limitation agreement
with the Fund, GEAM had agreed 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. This agreement was terminated on April 30, 2010.
Effective May 1, 2010: GEAM has entered into contractual arrangement with the
Company to limit other expenses of each share class of the Fund (excluding
applicable Investor Service Plan fee of 0.20%) at or below 0.03% on an
annualized basis. Unless earlier terminated or cancelled, this agreement will
continue in effect until April 30, 2011. The agreement may be terminated or
amended by the mutual consent of the Company and GEAM.
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 0.20% of the average daily net assets of the
Total Return Fund attributable to each such class shares.
DISTRIBUTION AND 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 and Class 3 shares of the Total Return
Fund. Under the 12b-1 Plan for Class 1 shares, 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 and Class 3
shares, the Company, on behalf of the Fund, may compensate GE Investment
Distributors, Inc. (GEID), the distributor of the shares of the 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 and Class 3 shares, including services to owners or prospective owners
of variable contracts issued by insurance companies that offer Class 2 and
Class 3 shares as an investment option under such variable contracts. The
amount of compensation paid under the Class 2 and Class 3 12b-1 Plan may not
exceed 0.25% for Class 2 shares and 0.25% for Class 3 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 is 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.)
7. SUB-ADVISORY FEES
Pursuant to investment sub-advisory agreements with Urdang Securities
Management, Inc. (Urdang) and Palisade Capital Management, L.L.C. (Palisade),
GE Asset Management has allocated portions of the Fund's assets to Urdang and
Palisade to manage real-estate related investments and small-cap equity
investments, respectively. GE Asset Management, at its discretion, is
responsible for allocating portion(s) of the Fund's assets to these
sub-advisers (Allocated Assets), and managing the remaining assets of the Fund
that are allocated to other
43
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
asset classes as well as managing the Fund's cash position. Palisade and Urdang
are each responsible for the day-to-day management of their portion of the
Allocated Assets, under the general supervision and oversight of GE Asset
Management and the Board of Directors for the Fund.
For their services, GE Asset Management pays each sub-adviser an investment
sub-advisory fee, which is calculated as a percentage of the average daily net
assets of the respective portion of the Allocated Assets that they manage.
8. 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, 2010, were as follows:
U.S. Government Securities
--------------------------
Purchases Sales
--------------------------
$929,764,332 $881,191,038
Other Securities
-------------------------
Purchases Sales
-------------------------
$790,126,377 $720,656,380
SECURITY LENDING For the six-month period ended June 30, 2010 the Fund did not
participate in securities lending.
9. SUBSEQUENT EVENTS
Subsequent events after the balance sheet date through the date that the
financial statements were issued have been evaluated in the preparation of the
Financial Statements. There are no items to report.
44
Advisory and Administrative Agreement Approvals (unaudited)
- ---------------------------------------------------------------
At a regular meeting held on June 9, 2010, the Board of Directors of the GE
Investments Funds, Inc. (the "Board"), including the independent Board members,
considered and unanimously approved a proposal by GE Asset Management ("GEAM")
to engage Palisade Capital Management LLC ("Palisade") to provide sub-advisory
services with respect to a portion of the Total Return Fund's assets to be
invested in small-cap equity investments.
GEAM reminded the Board that GE Investment Funds, Inc. (the "Company") and GEAM
had received an exemptive order from the U.S. Securities and Exchange
Commission to permit GEAM and the Company to select and retain sub-advisers for
the Total Return Fund and to enter into sub-advisory agreements without
shareholder approval. Accordingly, GEAM would be able, subject to the approval
of the Board, to engage Palisade and enter into a sub-advisory agreement with
Palisade on behalf of the Total Return Fund without obtaining shareholder
approval, provided there is not an increase in the Total Return Fund's
management fee.
In considering the approval of Palisade as a sub-adviser to the Total Return
Fund, the Board members, including the independent Board members, considered
and discussed a substantial amount of information and analyses provided by GEAM
and Palisade. The Board reviewed Palisade's performance history as well as
detailed information about Palisade and its professional staff, including
Palisade's investment philosophy and expertise in small-cap equity investments.
The Board noted that Palisade serves as sub-adviser to the GE Funds - GE
Small-Cap Equity Fund, GE Institutional Funds - Small-Cap Equity Fund and GE
Investments Funds, Inc. - Small-Cap Equity Fund (collectively, the "Small-Cap
Equity Funds"), and that both GEAM and Palisade had provided the Board with a
substantial amount of information and analysis at prior Board meetings,
including the annual contract renewal meetings held on December 4, 2009 and
December 11, 2009. As such, the basis for the Board's December 2009 renewal of
the sub-advisory agreements with Palisade with respect to the Small-Cap Equity
Funds would continue to be relevant for the Board's approval of the proposed
sub-advisory agreement with Palisade with respect to the Total Return Fund.
The Board members had an opportunity to discuss this information with GEAM
managers and representatives of Palisade. The Board members posed questions to
these representatives and engaged in substantive discussions. The independent
Board members discussed the approval of Palisade as a sub-adviser to the Total
Return Fund in detail during a private session with their independent legal
counsel at which no representatives of GEAM or Palisade were present. In
reaching their determination relating to the proposed new 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 Total Return 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 expected to be provided to the Total Return
Fund by Palisade. The Board focused on its extensive past experiences with
Palisade in connection with its services as sub-adviser to the Small-Cap Equity
Funds. The Board considered Palisade's favorable attributes relating to its
investment philosophy oriented toward long-term performance, its process for
selecting investments, and its experienced professionals, including research
analysts and portfolio managers with a depth of experience involving small-cap
equity securities.
In light of the foregoing, the Board, including the independent Board members,
concluded that the services expected to be provided by Palisade would be
satisfactory and would have the potential to benefit the Total Return Fund.
INVESTMENT PERFORMANCE OF PALISADE
The Board members considered the investment performance of Palisade for various
periods focusing on Palisade's investment performance with respect to the
Small-Cap Equity Funds and its long history of sub-advising those funds. The
Board members reviewed
45
Advisory and Administrative Agreement Approvals (unaudited)
- ---------------------------------------------------------------
detailed information provided by GEAM and Palisade comparing Palisade's
performance to that of relevant securities indices and peer groupings over
these periods. The Board members also engaged in discussions with GEAM and
Palisade about Palisade's investment process, focusing on the number and
experience of portfolio management and supporting research personnel and
Palisade's investment style and approach employed. The Board considered the
extent to which the expected investment style and approach would be consistent
with GEAM's articulated long-term approach and overall investment philosophy.
The Board members also considered GEAM's discussion of how the retention of
Palisade would fit within its management of the Total Return Fund's overall
allocation strategy.
Taking these factors into consideration, the Board, including the independent
Board members, found the investment performance of Palisade to be satisfactory.
COST OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED FROM THE
RELATIONSHIP WITH THE FUND
The Board considered that the proposed fees to be paid to Palisade by GEAM had
been negotiated at arm's-length, and that GEAM had used its influence with
respect to the total assets it proposes to be managed by Palisade to obtain
what it regards as the most favorable and reasonably available fee arrangement,
based on the expected relative allocation of the Total Return Fund's assets to
Palisade. The Board also noted that Palisade's subadvisory fee rate decreases
in amount as assets allocated to it grow. Given the arm's-length nature of the
arrangement, the Board did not examine the specific levels of profitability for
Palisade with respect to the Total Return Fund.
The Board then reviewed information regarding the expected impact on GEAM's
profitability in hiring Palisade, which was projected to be lower than current
profitability. The Board members reviewed GEAM's assumptions and the methods of
cost allocation used by GEAM in preparing the profitability data. The Board
members also discussed with GEAM the basis for its belief that the methods of
allocation used were reasonable. Based on their review, the Board members,
including the independent Board members, concluded that they were satisfied
that GEAM's expected level of profitability from its relationship with the Fund
following the hiring of Palisade would not be unreasonable or excessive.
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 Total Return Fund grows, and whether fee levels reflect these
economies of scale for the benefit of Fund investors. The Board recognized that
this consideration is less relevant with respect to the proposed sub-advisory
fees, because GEAM will pay Palisade out of its advisory fees received from the
Fund, and noted that the Board considered economies of scale for the Fund in
connection with annual contract renewals.
COMPARISON OF SERVICES TO BE RENDERED AND FEES TO BE PAID
The Board discussed the services expected to be provided to the Total Return
Fund by Palisade, 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. They also reviewed Palisade's fee rates for the Small-Cap
Equity Funds, which were the same at current asset levels and estimated
allocation. The Board also considered its favorable experience with Palisade as
sub-adviser to the Small-Cap Equity Funds.
The Board, including the independent Board members, concluded that, based on
this information, the proposed sub-advisory fees would be reasonable in
relation to the services expected to be provided to the Total Return Fund.
FALL-OUT BENEFITS
The Board considered that there may be financial benefits that Palisade derives
from its relationship with GEAM and 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 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 new
sub-advisory agreement with Palisade was in the best interests of the Fund and
its shareholders.
46
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 61
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 -- 13 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; 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;
Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993 and GE Institutional Funds since 1997; 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 2003;
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 49
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 GEAM from
February 1997 to July 2007; Vice President and Associate General Counsel of
GEAM from October 1992 to February 1997; Secretary of GE Funds from 1997 to
July 2007 and Vice President from September 2003 to June 2007; Secretary of GE
Institutional Funds and the fund from 1997 to July 2007, and Vice President
from September 2003 to July 2007; Vice President of Elfun Funds and GE
Savings & Security Funds from October 2003 to July 2007; Assistant Secretary of
Elfun Funds and GE Savings & Security Funds from 1998 to July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds and General Electric Pension
Trust, since July 2007.
47
Additional Information (unaudited)
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 44
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 5 years (Vice President); 2 years (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Commercial Administrative Officer
of GEAM since April 2010; Senior Vice President and Deputy General Counsel at
GE Asset Management from October 2007 to April 2010; 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
Secretary of GE Funds and GE Institutional Funds since July 2007; Vice
President and Assistant Secretary of GE Institutional Funds and GE Investments
Funds, Inc. from September 2003 to 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
- --------------------------------------------------------------------------------
ROBERT HERLIHY
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Chief Compliance Officer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 4 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Chief Compliance Officer of GEAM,
GE Funds, GE Institutional Funds, Elfun Funds, and GE Savings and Security
Funds since July 2005; Manager of Fund Administration at GEAM from 2002-2005.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
- --------------------------------------------------------------------------------
EUNICE TSANG
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 50
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- less than one year
PRINCIPAL OCCUPATIONS(S) DURING PAST 5 YEARS Treasurer of GE Funds, GE
Institutional Funds, Elfun Funds and GE Savings and Security Funds since
January 2010; GEAM Operational Controllership and Technical Accounting Manager
since December 2007; Financial Planning & Analysis Manager -- Performance
Leader from June 2005 to December 2007; GEAM Quality Black Belt from 2001 to
June 2005; Financial Planning & Analysis Manager from 2000 to 2001; and Mutual
Fund Assistant Controller from October 1997 to 2000.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
48
Additional Information (unaudited)
- ---------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 64
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Vice President of Walden Capital Management
since 1996.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since 1997; Trustee of Fordham University from 1989 to 1995
and 2001 to 2007 and Trustee Emeritus since 2007; Trustee of NeuroScience
Research Institute since 1986; Trustee of Gregorian University Foundation from
1992 to 2007; Director of Artes medical from 2006 to 2008.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since July 2007 from
Fairfield University. From 1983 to July 2007, Vice President and Treasurer of
Fairfield University.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 74
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997; 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 1-800-493-3042.
49
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
Kimberley Costello
Michelle Matzelle
TREASURER
Eunice Tsang
ASSISTANT TREASURER
Leslie Spadone
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
Cheryl H. Beacock, SENIOR VICE PRESIDENT, HUMAN RESOURCES
Daniel O. Colao, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER -- MUTUAL FUNDS &
INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT AND CHIEF INVESTMENT OFFICER -- FIXED INCOME
INVESTMENTS
Ralph R. Layman, PRESIDENT AND CHIEF INVESTMENT OFFICER -- PUBLIC EQUITY
INVESTMENTS
Maureen B. Mitchell, PRESIDENT -- INSTITUTIONAL SALES AND MARKETING
Matthew J. Simpson, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST
Don W. Torey, PRESIDENT -- ALTERNATIVE INVESTMENTS
John J. Walker, EXECUTIVE VICE PRESIDENT, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT AND CHIEF INVESTMENT OFFICER -- INVESTMENT
STRATEGIES
50
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 1-800-493-3042; (ii) on the Fund's
website at http://www.geam.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.geam.com; and (ii) on the Commission's website at
http://www.sec.gov.
[LOGO] GE
GE Investments Funds, Inc.
U.S. Equity Fund Letter from the Chairman
- ----------------------------------------------------------------------------
[PHOTO] 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, 2010. 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
The six-months ended June 30, 2010 presented investors with an extremely
challenging market environment after global equity markets tumbled in the
second half of the period due primarily to concerns about sovereign default
risk and slowing global growth. U.S. equities (S&P 500 Index) declined 6.7%
over the six-month period, while international stocks (MSCI EAFE Index) fell
13.2%.
At the start of 2010, equity markets experienced a selloff in January and early
February as investors reacted negatively to signs that there was a lower
probability of a V-shaped recovery. Concerns about new global financial
regulation, policy tightening in China, and high levels of U.S. and European
debt, especially Greek sovereign debt, further fueled the volatility. Stocks
reversed these losses in the second half of the first quarter, rising steadily
as optimism about corporate earnings changed the tone in the market. The S&P
500 Index advanced 5.4%, for the first quarter of 2010 and indexes tracking
smaller capitalization stocks enjoyed even greater advances. Gains were more
subdued in non-U.S. equity markets, with the MSCI EAFE Index advancing 0.9%
during the same quarter as fears of sovereign credit risk in Europe
overshadowed stronger earnings reports. Regionally, Japan took top honors in
the first quarter, rising 8.2% based on relatively attractive stock valuations.
Canada rose 6.0%, followed by the Pacific Rim (+3.1%), and Emerging Markets
(+2.4%). The U.K. fell 0.6% while Continental Europe dropped 2.4% as Greece's
budget deficit crisis raised concerns about other highly indebted Eurozone
countries, including Portugal, Italy, Ireland, Spain, and even the United
Kingdom. The U.S. bond market returned 1.8% (Barclays Capital U.S. Aggregate
Bond Index) in the first quarter helped by another solid performance by the
credit related sectors. Fixed income securities outside the U.S. performed
similarly, however the Barclays Global Aggregate Un-hedged Bond Index lost 0.3%
(in U.S. dollar terms) due primarily to the strengthening dollar versus other
major currencies.
Although the second quarter of 2010 started quietly, stocks plunged in May as
concerns about Europe's sovereign debt problems pressured equity markets and
many investors sought defensive investments such as gold and treasury bonds.
Adding to Greece's sovereign debt woes, anxieties around contagion grew as
Spain stepped further into the European debt crisis amid credit downgrades
driven by its deteriorating economy and public finances. In June, the 2010 G20
Toronto Summit confirmed that the industrialized world leaders were committed
to reducing budget deficits through austerity measures. Some investors,
however, worried that these measures could reduce global growth and slow the
economic recovery. Several other concerns fuelled greater risk aversion during
the second quarter including increased evidence of slower growth in China, a
new resource tax in Australia, an alarming May 6th "flash crash" which sent
U.S. stocks plummeting within minutes, impending U.S. financial reform
legislation, and the spreading impact of BP's massive oil spill in the Gulf of
Mexico. At quarter end, the S&P 500 Index and the MSCI EAFE Index had tumbled
11.4% and 14.0%, respectively, in the three months ended June 30. Regionally,
Emerging Markets fared best during the second quarter, down 8.4%, followed by
Japan (-10.1%), Canada (-10.5%) and the U.K. (-13.9%). The worst performing
regions were Europe (-15.8%) and the Pacific Rim (-14.3%). In this environment,
U.S. Treasuries were the "safe" investment of choice for many investors seeking
to avoid riskier asset classes. The "flight to quality" pulled treasury yields
down across all maturity periods. The Barclays Capital U.S.
[LOGO] GE
THIS DOES NOT CONSTITUTE A PART OF THE FUND'S SHAREHOLDER REPORT
GE Investments Funds, Inc.
U.S. Equity Fund
- ----------------------------------------------------
Aggregate Bond Index returned 3.49% in the second quarter, while the Barclays
Capital Global Aggregate Un-hedged Bond Index lost 0.04% over the same
three-month period owing mainly to widening spreads in European peripheral
countries and the declining euro.
Against a backdrop of weakening investor sentiment, financial markets posted
disparate results for the six- and twelve-month periods ended June 30, 2010.
TOTAL RETURNS AS OF JUNE 30, 2010 6-MONTH 12-MONTH
- -----------------------------------------------------------------------------
U.S. equities (S&P 500 Index) -6.7 14.4
Global equities (MSCI World Index) -9.8 10.2
International equities (MSCI EAFE Index) -13.2 5.9
Emerging Markets equities (MSCI EM Index) -6.2 23.2
Small-cap U.S. equities (Russell 2000 Index) -2.0 21.5
Mid-cap U.S. equities (Russell Mid Cap Index) -2.1 25.1
U.S. fixed income (Barclays Capital U.S. Aggregate Bond
Index) 5.3 9.5
U.S. short-term government fixed income (Barclays Capital
1-3 Year U.S. Government Bond Index) 1.9 2.9
U.S. tax-exempt income (Barclays Capital 10-Year U.S.
Municipal Bond Index) 4.1 9.6
- -----------------------------------------------------------------------------
OUTLOOK
In the face of the fiscal concerns throughout much of Europe and signs of
slowing economic activity around the globe, the wall of worry has become
exceedingly high for investors who want to see credible government budgets that
balance fiscal austerity and economic growth. At the core of the uncertainty,
in our view, is the issue of excessive borrowing, now afflicting sovereign
markets and reminding us that the financial crisis is not yet over. Our
economic view for the second half of 2010 still favors positive, albeit slow
growth which we believe should keep interest rates at record lows for months to
come. We also believe that the policy measures implemented in Europe will
improve sentiment towards sovereign and bank debt over the balance of the year.
But many challenges remain on the horizon, including the risk of fiscal policy,
taxation and regulation missteps that could hamper the recovery. As a result,
continued market volatility appears to be the one sure thing we can predict
with certainty.
At GE Investments Funds, we are fully committed to helping you achieve your
goals with smart proven strategies designed for long-term success. Today's
uncertain environment is why we believe it is important for long-term investors
to maintain a disciplined, diversified investment strategy consistent with
their goals, time horizon and risk tolerance. While diversified portfolios are
not immune to market downturns, history suggests they can put investors in a
position to benefit from a 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.
AUGUST 2010
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
GE Investments Funds, Inc.
U.S. Equity Fund
Semi-Annual Report
JUNE 30, 2010
[LOGO] GE
GE Investments Funds, Inc.
U.S. Equity Fund Contents
- ---------------------------------------------------
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...................................... 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, 2010 (unaudited)
- --------------------------------------------------------------------
Information on the following performance pages relating to the GE Investments
U.S. Equity Fund (the "Fund") total returns and Schedule of Investments is
unaudited. All other information, including the portfolio manager Q&A pages, is
also 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 fees and 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
800-493-3042 or visit the Fund's website at http://www.geam.com for the most
recent month-end performance data.
An investment in the 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 the Fund is subject to risk, including
possible loss of principal invested.
The S&P 500(R) 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. They do not reflect the
actual cost of investing in the instruments that comprise the Index.
The peer universe of the underlying annuity funds used for the peer group
average annual total return calculation is based on a blend of Morningstar peer
categories, as shown. Morningstar is an independent mutual fund rating service.
The 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 that of the Fund.
(C)2010 Morningstar, Inc. All Rights Reserved. The Morningstar information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not 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 of 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
U.S. Equity Fund
- --------------------------------------------------------------------------------
[PHOTO] George A. Bicher
GEORGE A. BICHER
[PHOTO] Stephen V. Gelhaus
STEPHEN V. GELHAUS
[PHOTO] Thomas R. Lincoln
THOMAS R. LINCOLN
[PHOTO] Paul C. Reinhardt
PAUL C. REINHARDT
THE U.S. EQUITY FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES
GEORGE A. BICHER, PAUL C. REINHARDT, STEPHEN V. GELHAUS AND THOMAS R. LINCOLN.
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 FUND, CAN BE CHANGED AT ANY TIME BUT GENERALLY REMAIN
STABLE FOR 18 TO 24 MONTHS.
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.
STEPHEN V. GELHAUS IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A
MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE 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.
THOMAS R. LINCOLN IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS
SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE 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.
PAUL C. REINHARDT IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS
BEEN A PORTFOLIO MANAGER FOR THE 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, 2010?
A. For the six-month period ended June 30, 2010, the U.S. Equity Fund returned
-9.58% for Class 1 shares and -9.74% for Class 4 shares. The S&P 500 Index,
the Fund's benchmark, returned -6.65%, and the Fund's Morningstar peer group
of 465 US Insurance Large Blend funds returned an average of -7.01% for the
same period.
Q. WHAT MARKET CONDITIONS IMPACTED THE FUND PERFORMANCE?
A. The six-months ended June 30, 2010 presented U.S. equity investors with an
extremely challenging market environment, as the investment climate changed
strikingly in the middle of the period. In the first three months, the U.S.
and global economies continued their gradual recovery, which was, for the
most part, reflected by further gains in U.S. stock prices. In this
environment, the S&P 500 advanced over 5%. However, beginning in April
concerns grew that Europe's debt crisis would halt the recovery, and the
markets witnessed a rise in risk aversion. Stocks tumbled after reaching a
peak in mid April, and defensively positioned sectors performed best. From
April through June the S&P 500 declined over 11%.
In the six-month period, telecommunication and utilities stocks went from
being the worst performers, to the best performing sectors in the S&P 500.
Similarly, the performance of financials stocks flip-flopped as the mood
turned from euphoria to fear: financials made double-digit gains (+11%) in
the first three months of the period, and double digit losses (-13%) from
April 1 through June 30. Concerns surrounding financial sector reform and
the Goldman Sachs civil fraud suit also pressured the sector. All the while,
U.S. central bank reassurances that interest rates would remain low and
improving corporate
2
- --------------------------------------------------------------------------------
[GRAPHIC]
earnings worked to pare U.S. equity losses in the second half of the period.
In the end, every single S&P 500 sector declined during the half-year
period, with the worst returns among the materials (-13%), energy (-12%) and
technology (-11%) sectors. Materials and energy were affected by growth
concerns, a strengthening dollar which weighed on commodities and the
catastrophic BP oil well explosion in the Gulf of Mexico. The industrials
(-1%), consumer discretionary (-2%) and consumer staples (-3%) sectors held
up the best in the schizophrenic market environment. In general, small cap
companies outperformed large caps, with S&P 500 stocks below $3 billion in
market cap returning -0.6% versus returns of -8% for stocks over $10 billion
in market cap.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. After last year's significant outperformance, an investment environment
largely favoring small cap, low quality companies challenged performance in
the first half of this year -- as the Fund remained focused on large cap,
high quality companies. Financials and technology were the key sectors which
caused the Fund to lag. In financials, 22% declines in both State Street and
Goldman Sachs weighed on returns. State Street rallied approximately 11%
through April 12/th/ this year, but suffered a significant decline on weak
first quarter earnings and guidance. Goldman Sachs plunged on news of the
SEC fraud allegations that emerged in April. We continued to hold Goldman at
the end of first half of 2010, although we trimmed the position, as we
believed that the next catalyst for Goldman could be a settlement, and that
its fundamentals and market leadership were not broken.
Amid fears that the economic recovery was losing steam, quality tech
companies lagged, including Qualcomm (-28% as it struggled with guidance
tied to the economy), Research in Motion (-27% on concern it would lose
share to Apple) and Microsoft (-24% as a tech bellwether vulnerable to
economic slowdown fears). A slight underweight position in Apple (+19% and
one of the period's top-performing S&P 500 stocks) also weighed on returns,
although we added to our position. We maintained our long-term conviction in
each of the companies mentioned, and took advantage of weakness to add to
our holdings in these quality tech stocks.
Two other individual holdings created significant performance drags:
Transocean (-30%) and Monsanto (-43%). Deepwater oil drilling contractor
Transocean declined after the accident in the Gulf of Mexico. While we do
not believe Transocean was responsible for the disaster, it leased the
Deepwater Horizon to BP and performed services on the rig. We sold our
position in Transocean, finding it difficult to quantify the risks going
forward. Monsanto endured weakness in its Round-Up herbicide business amid a
flood of cheap Chinese generics in the market. We continued to hold
Monsanto, however, for the impressive pipeline of technologies in its
genetically modified seeds/traits business -- historically a more
significant earnings driver.
On the positive side, the Fund's telecom, consumer staples and utilities
holdings added to relative returns, although the top-performing individual
Fund holding was a technology company, Baidu (+66%). The dominant Chinese
Internet search engine rallied as it took share from Google amid a tousle
with the Chinese government over censorship. In telecom, NII Holdings
rallied 38% intra-period as the company sold a 30% stake in its Mexican
wireless unit for $1.4 billion. Although regulatory headwinds sent Nextel
International down 3% for the period, it still contributed positively to
relative returns. PepsiCo (+2%) was the standout consumer staples performer,
and Dominion Resources (+2%) drove outperformance in utilities. Other key
contributors included Express Scripts (+9%) and Resmed (+16%).
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. No. Our process remained consistent as we continued to seek large cap, high
quality companies that we felt had the potential to survive and grow market
share during a slow, gradual recovery. We continued to emphasize companies
with strong balance sheets and earnings stability, over more cyclical or
leveraged opportunities. We added to consumer staples, initiating a position
in Kellogg, and increasing our holdings in Kraft, Archer Daniels Midland and
Clorox. We also added to health care, purchasing Omnicare, a leading
provider of pharmaceutical care for the elderly, and adding to our holdings
in Medtronic, Life Technologies and Johnson & Johnson. We increased our
underweight in consumer discretionary and became underweight in energy, due
to our
3
U.S. Equity Fund
- --------------------------------------------------------------------------------
[GRAPHIC]
Transocean elimination and trims of Marathon Oil and Chevron. At June 30,
2010, the Fund's largest overweights were in technology and health care, and
the largest underweights were in industrials, consumer discretionary and
consumer staples.
Valuations for many companies remain attractive, even after the strong
rebound that began a year ago in March 2009. As the slow growth recovery
continues, we believe that market share winners with strong balance sheets
and management teams can survive, and have the potential to outperform. Amid
changing market conditions in the past six months, we have maintained our
bottom-up stock selection approach with focus on a long-term investment
horizon.
4
U.S. Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund, you incur ongoing fees and 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,
2010.
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 $1,000 = 8.6), then multiply the result by the
number given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. You may use this information to compare the ongoing costs
of investing in the Fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholders reports of other funds.
Please note that the expenses shown in the table for both "Actual" and
"Hypothetical" do not reflect any transaction costs, such as sales charges or
redemption fees. Additionally, the expenses shown do not reflect the fees or
charges associated with variable contracts through which shares of the Fund are
offered.
JANUARY 1, 2010 - JUNE 30, 2010
- ----------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ----------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ----------------------------------------------------------------------------------------------
Class 1 1,000.00 904.21 3.82
Class 4 1,000.00 902.56 5.76
- ----------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ----------------------------------------------------------------------------------------------
Class 1 1,000.00 1,020.56 4.06
Class 4 1,000.00 1,018.57 6.11
- ----------------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.81% FOR CLASS
1 SHARES AND 1.22% FOR CLASS 4 SHARES (FOR THE PERIOD JANUARY 1, 2010 - JUNE
30, 2010), 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, 2010 WERE AS
FOLLOWS: -9.58% FOR CLASS 1 SHARES, AND -9.74% FOR CLASS 4 SHARES. PAST
PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
5
U.S. Equity Fund (unaudited)
- ---------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[CHART]
U.S. Equity Fund S&P 500 Index
--------------- -------------
Jun 1, 2000 10,000.00 10,000.00
Dec 1, 2000 9,917.45 9,123.06
Dec 1, 2001 9,077.14 8,036.32
Dec 1, 2002 7,328.63 6,260.14
Dec 1, 2003 9,034.41 8,058.57
Dec 1, 2004 9,772.19 8,935.45
Dec 1, 2005 10,017.37 9,374.94
Dec 1, 2006 11,632.35 10,855.47
Dec 1, 2007 12,564.10 11,452.03
Dec 1, 2008 8,034.19 7,215.03
Dec 1, 2009 10,575.13 9,124.45
Jun 1, 2010 9,562.12 8,517.29
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 1/3/95)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS+ YEAR YEAR YEAR $10,000 INVESTMENT/(A)/
----------------------------------------------------------------------------
U.S. Equity Fund -9.58% 7.82% -0.19% -0.45% 9,562
----------------------------------------------------------------------------
S&P 500 Index -6.65% 14.43% -0.79% -1.59% 8,517
----------------------------------------------------------------------------
Morningstar peer group
average* -7.01% 13.44% -0.98% -1.60%
----------------------------------------------------------------------------
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[CHART]
U.S. Equity Fund S&P 500 Index
--------------- -------------
May 1,2008 10,000.00 10,000.00
Jun 1,2008 9,303.51 9,275.57
Sep 1,2008 8,626.84 8,499.21
Dec 1,2008 6,574.78 6,634.20
Mar 1,2009 6,103.69 5,903.65
Jun 1,2009 7,241.92 6,844.05
Sep 1,2009 8,260.18 7,912.13
Dec 1,2009 8,616.08 8,389.91
Mar 1,2010 9,013.75 8,841.83
Jun 1,2010 7,776.57 7,831.63
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2010
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
SIX ONE SINCE ENDING VALUE OF A
MONTHS+ YEAR INCEPTION $10,000 INVESTMENT/(A)/
- ---------------------------------------------------------------------------------
U.S. Equity Fund -9.74% 7.38% -10.96% 7,777
- ---------------------------------------------------------------------------------
S&P 500 Index -6.65% 14.43% -10.68% 7,832
- ---------------------------------------------------------------------------------
Morningstar peer group average* -7.01% 13.44%
- ---------------------------------------------------------------------------------
INVESTMENT PROFILE [GRAPHIC]
A mutual fund designed for
investors who seek long-term
growth of capital by investing at
least 80% of its net assets under
normal circumstances in common and
preferred stocks and other types
of equity securities of issuers
that are tied economically to the
U.S.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $34,431 (in thousands)
[CHART]
Information Technology 21.4%
Financials 14.6%
Healthcare 13.8%
Energy 10.0%
Consumer Staples 9.6%
Consumer Discretionary 7.9%
Industrials 7.8%
Short-Term Investments 5.3%
Materials 4.1%
Telecommunication Services 3.0%
Utilities 2.5%
Other Investments 0.0%**
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2010++
as a % of Market Value
- --------------------------------------------------------------------------------
PepsiCo, Inc. 3.17%
-----------------------------------
Microsoft Corp. 3.04%
-----------------------------------
Amgen Inc. 2.68%
-----------------------------------
Cisco Systems, Inc. 2.30%
-----------------------------------
Exxon Mobil Corp. 2.27%
-----------------------------------
Schlumberger Ltd. 2.08%
-----------------------------------
QUALCOMM Inc. 1.98%
-----------------------------------
The Procter & Gamble Co. 1.92%
-----------------------------------
Bank of America Corp. 1.89%
-----------------------------------
The Goldman Sachs Group, Inc 1.87%
-----------------------------------
(A)ENDING VALUE OF A $10,000 INVESTMENT FOR THE TEN-YEAR PERIOD OR SINCE
INCEPTION, WHICHEVER IS LESS.
* 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
U.S. INSURANCE LARGE BLEND PEER GROUP CONSISTING OF 465,461,394 AND 298
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
**LESS THAN 0.05%.
+ TOTAL RETURNS FOR THE PERIOD ENDED JUNE 30, 2010 IS NOT ANNUALIZED.
++THE SECURITIES INFORMATION REGARDING HOLDINGS, ALLOCATIONS AND OTHER
CHARACTERISTICS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF SECURITIES THAT THE
FUND HAS BOUGHT AND THE DIVERSITY OF AREAS IN WHICH THE FUND MAY INVEST AS OF
A PARTICULAR DATE. IT MAY NOT BE REPRESENTATIVE OF THE FUND'S CURRENT OR
FUTURE INVESTMENTS AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL A PARTICULAR SECURITY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF MORNINGSTAR PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE. THE PERFORMANCE SHOWN IN
THE GRAPHS AND TABLES DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
6
U.S. EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- --------------------------------------------------------------------
U.S. EQUITY FUND
NUMBER
OF SHARES VALUE
COMMON STOCK -- 93.4% +
----------------------------------------------------------------
AEROSPACE & DEFENSE -- 3.0%
CAE Inc............................ 18,843 $ 163,667
Hexcel Corp........................ 6,183 95,898 /(a)/
Honeywell International Inc........ 10,079 393,383
ITT Corp........................... 2,018 90,649
Rockwell Collins Inc............... 2,394 127,193
United Technologies Corp........... 2,565 166,494
1,037,284
BEVERAGES -- 3.4%
Molson Coors Brewing Co............ 1,552 65,743
PepsiCo Inc........................ 17,880 1,089,786
1,155,529
BIOTECHNOLOGY -- 4.4%
Amgen Inc.......................... 17,537 922,446 /(a)/
Gilead Sciences Inc................ 17,044 584,268 /(a)/
1,506,714
CAPITAL MARKETS -- 5.1%
Ameriprise Financial Inc........... 4,347 157,057
Invesco Ltd........................ 2,717 45,727
Morgan Stanley..................... 3,415 79,262
State Street Corp.................. 16,933 572,674 /(c)/
The Bank of New York Mellon Corp... 7,606 187,792
The Charles Schwab Corp............ 5,410 76,714
The Goldman Sachs Group Inc........ 4,904 643,748
1,762,974
CHEMICALS -- 2.3%
Monsanto Co........................ 6,112 282,497
Potash Corp of Saskatchewan Inc.... 1,436 123,841
Praxair Inc........................ 4,721 358,749
The Mosaic Co...................... 942 36,719
801,806
COMMERCIAL BANKS -- 0.8%
Regions Financial Corp............. 14,768 97,173
US Bancorp......................... 4,269 95,412
Wells Fargo & Co................... 3,014 77,158
269,743
COMMERCIAL SERVICES & SUPPLIES -- 1.0%
Corrections Corporation of America. 7,093 135,334 /(a)/
Iron Mountain Inc.................. 8,647 194,212
329,546
NUMBER
OF SHARES VALUE
COMMUNICATIONS EQUIPMENT -- 5.4%
Cisco Systems Inc............... 37,197 $ 792,668 /(a)/
QUALCOMM Inc.................... 20,788 682,678
Research In Motion Ltd.......... 7,410 365,017 /(a)/
1,840,363
COMPUTERS & PERIPHERALS -- 2.9%
Apple Inc....................... 2,119 532,992 /(a)/
Hewlett-Packard Co.............. 10,515 455,089
988,081
CONSUMER FINANCE -- 0.3%
Capital One Financial Corp...... 2,894 116,628
DIVERSIFIED FINANCIAL SERVICES -- 5.1%
Bank of America Corp............ 45,238 650,070
CME Group Inc................... 1,784 502,285
JPMorgan Chase & Co............. 16,052 587,664
1,740,019
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.8%
AT&T Inc........................ 7,956 192,456
Verizon Communications Inc...... 3,493 97,874
290,330
ELECTRIC UTILITIES -- 1.7%
Edison International............ 4,657 147,720
Entergy Corp.................... 1,669 119,534
ITC Holdings Corp............... 617 32,645
NextEra Energy Inc.............. 2,726 132,920
Northeast Utilities............. 6,380 162,562
595,381
ELECTRICAL EQUIPMENT -- 0.2%
ABB Ltd. ADR.................... 3,709 64,092
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.2%
Corning Inc..................... 5,045 81,477
ENERGY EQUIPMENT & SERVICES -- 2.4%
Halliburton Co.................. 1,940 47,627
National Oilwell Varco Inc...... 1,109 36,675
Schlumberger Ltd................ 12,952 716,764
Weatherford International Ltd... 1,584 20,814 /(a)/
821,880
FOOD & STAPLES RETAILING -- 0.4%
Safeway Inc..................... 3,105 61,044
Sysco Corp...................... 2,364 67,539
128,583
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements on page 15.
7
U.S. EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- --------------------------------------------------------------------
NUMBER
OF SHARES VALUE
FOOD PRODUCTS -- 2.6%
Archer-Daniels-Midland Co...... 8,280 $ 213,790
Kellogg Co..................... 2,320 116,696
Kraft Foods Inc................ 13,185 369,180
McCormick & Company Inc........ 3,246 123,218
Nestle S.A. ADR................ 1,552 74,868
897,752
HEALTHCARE EQUIPMENT & SUPPLIES -- 3.8%
Baxter International Inc....... 3,291 133,746
Becton Dickinson and Co........ 1,863 125,976
Covidien PLC................... 11,945 479,950
Hologic Inc.................... 4,453 62,030 /(a)/
Medtronic Inc.................. 6,940 251,714
ResMed Inc..................... 4,250 258,442 /(a)/
1,311,858
HEALTHCARE PROVIDERS & SERVICES -- 2.2%
Cardinal Health Inc............ 3,338 112,190
Express Scripts Inc............ 9,857 463,476 /(a)/
McKesson Corp.................. 931 62,526
Omnicare Inc................... 4,657 110,371
748,563
HOTELS, RESTAURANTS & LEISURE -- 0.4%
Carnival Corp.................. 4,845 146,513
HOUSEHOLD DURABLES -- 0.1%
MDC Holdings Inc............... 860 23,177
HOUSEHOLD PRODUCTS -- 2.6%
Clorox Co...................... 3,532 219,549
The Procter & Gamble Co........ 11,017 660,800
880,349
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.1%
Calpine Corp................... 3,565 45,347 /(a)/
INDUSTRIAL CONGLOMERATES -- 0.2%
Siemens AG ADR................. 614 54,971
INSURANCE -- 2.7%
ACE Ltd........................ 3,881 199,794
Aflac Inc...................... 3,880 165,560
AON Corp....................... 2,173 80,662
PartnerRe Ltd.................. 1,098 77,014
Principal Financial Group Inc.. 5,123 120,083
Prudential Financial Inc....... 5,187 278,334
921,447
NUMBER
OF SHARES VALUE
INTERNET SOFTWARE & SERVICES -- 1.8%
Baidu Inc. ADR........................ 5,090 $ 346,527 /(a)/
Google Inc............................ 588 261,631 /(a)/
608,158
IT SERVICES -- 4.8%
Cognizant Technology Solutions Corp... 2,156 107,929 /(a)/
International Business Machines Corp.. 5,118 631,971
The Western Union Co.................. 30,228 450,699
Visa Inc.............................. 6,658 471,054
1,661,653
LIFE SCIENCES TOOLS & SERVICES -- 1.1%
Life Technologies Corp................ 3,919 185,173 /(a)/
Thermo Fisher Scientific Inc.......... 4,090 200,614 /(a)/
385,787
MACHINERY -- 1.3%
Cummins Inc........................... 1,140 74,248
Deere & Co............................ 3,027 168,543
Eaton Corp............................ 1,854 121,326
Navistar International Corp........... 1,429 70,307 /(a)/
434,424
MEDIA -- 4.2%
DIRECTV............................... 6,677 226,484 /(a)/
Liberty Global Inc.................... 5,300 137,747 /(a)/
News Corp............................. 4,265 51,009
Omnicom Group Inc..................... 14,292 490,216
The Walt Disney Co.................... 5,821 183,361
Time Warner Inc....................... 11,823 341,803
1,430,620
METALS & MINING -- 1.6%
Allegheny Technologies Inc............ 8,351 369,031
Barrick Gold Corp..................... 2,329 105,760
Freeport-McMoRan Copper & Gold Inc.... 1,475 87,217
562,008
MULTILINE RETAIL -- 1.1%
Kohl's Corp........................... 1,014 48,165 /(a)/
Target Corp........................... 6,607 324,866
373,031
MULTI-UTILITIES -- 0.6%
Dominion Resources Inc................ 5,433 210,474
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements on page 15.
8
U.S. EQUITY FUND
Schedule of Investments June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
OIL, GAS & CONSUMABLE FUELS -- 7.7%
Apache Corp........................ 2,926 $ 246,340
Chesapeake Energy Corp............. 1,783 37,354
Chevron Corp....................... 4,114 279,176
Devon Energy Corp.................. 2,445 148,949
El Paso Corp....................... 6,954 77,259
Exxon Mobil Corp................... 13,704 782,087 /(d)/
Marathon Oil Corp.................. 6,986 217,195
Occidental Petroleum Corp.......... 3,272 252,435
Southwestern Energy Co............. 4,963 191,770 /(a)/
Suncor Energy Inc.................. 13,633 401,356
2,633,921
PAPER & FOREST PRODUCTS -- 0.1%
Weyerhaeuser Co.................... 1,358 47,802
PERSONAL PRODUCTS -- 0.1%
Avon Products Inc.................. 928 24,592
PHARMACEUTICALS -- 2.3%
Abbott Laboratories................ 990 46,312
Bristol-Myers Squibb Co............ 11,617 289,728
Johnson & Johnson.................. 5,610 331,327
Pfizer Inc......................... 9,702 138,351
805,718
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.3%
CB Richard Ellis Group Inc......... 8,443 114,909 /(a)/
ROAD & RAIL -- 0.9%
Union Pacific Corp................. 4,325 300,631
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.7%
Intel Corp......................... 23,988 466,567
KLA-Tencor Corp.................... 2,523 70,341
Microchip Technology Inc........... 2,134 59,197
NVIDIA Corp........................ 1,552 15,846 /(a)/
Taiwan Semiconductor Manufacturing
Company Ltd. ADR.................. 8,926 87,118
Texas Instruments Inc.............. 9,390 218,599
917,668
SOFTWARE -- 3.7%
Microsoft Corp..................... 45,443 1,045,643 /(d)/
Oracle Corp........................ 9,811 210,544
1,256,187
SPECIALTY RETAIL -- 2.2%
Bed Bath & Beyond Inc.............. 4,977 184,547 /(a)/
Lowe's Companies Inc............... 27,545 562,469
747,016
NUMBER
OF SHARES VALUE
TOBACCO -- 0.6%
Altria Group Inc................... 1,188 $ 23,808
Philip Morris International Inc.... 4,075 186,798
210,606
WIRELESS TELECOMMUNICATION SERVICES -- 2.2%
American Tower Corp................ 4,707 209,461 /(a)/
NII Holdings Inc................... 16,689 542,726 /(a)/
752,187
TOTAL COMMON STOCK
(COST $32,829,396)................ 32,037,799
-------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 1.6%
-------------------------------------------------------------------
Financial Select Sector SPDR Fund.. 8,307 114,720 /(f)/
Industrial Select Sector SPDR Fund. 16,426 450,894 /(f)/
TOTAL EXCHANGE TRADED FUNDS
(COST $703,161)................... 565,614
-------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
-------------------------------------------------------------------
GEI Investment Fund
(COST $10,156).................... 8,836 /(e)/
TOTAL INVESTMENTS IN SECURITIES
(COST $33,542,713)................ 32,612,249
-------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 5.3%
-------------------------------------------------------------------
GE Money Market Fund Institutional
Class 0.05%
(COST $1,819,160)................. 1,819,160 /(b,e)/
TOTAL INVESTMENTS
(COST $35,361,873)................ 34,431,409
LIABILITIES IN EXCESS OF OTHER
ASSETS, NET -- (0.3)%............. (109,317)
-----------
NET ASSETS -- 100.0%............... $34,322,092
===========
--------------------------
OTHER INFORMATION
--------------------------
The Fund had the following long futures contracts open at June 30, 2010
(unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
----------------------------------------------------------------
S&P 500 EMini
Index Futures September 2010 13 $667,290 $(38,666)
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements on page 15.
9
Notes to Schedule of Investments June 30, 2010 (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
information regarding holdings, allocations and other characteristics are
presented to illustrate examples of securities that the Fund has bought and the
diversity of areas in which the Fund may invest as of a particular date. It may
not be representative of the Fund's current or future investments and should
not be construed as a recommendation to purchase or sell a particular security.
Please see the Fund's prospectus for complete descriptons of investment
objective, 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, 2010, 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)GE Asset Management, the investment adviser of the Fund, also serves as
investment adviser of the GEI Investment Fund and the GE Funds-GE Money
Market Fund
(f)Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank
& Trust Co., the Fund's custodian and accounting agent.
* Less than 0.05%.
+ Percentages are based on net assets as of June 30, 2010.
Abbreviations:
ADR American Depository Receipt
SPDR Standard & Poors Depository Receipts
TBA To be announced
10
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
U.S. EQUITY FUND
------------------------------------------------------------------- -------------------------
CLASS 1 CLASS 4
------------------------------------------------------------------- -------------------------
6/30/10+ 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05 6/30/10+ 12/31/09
------------------------------------------------------------------- --------------------------
INCEPTION DATE 1/3/95
Net asset value, beginning of
period.......................... $29.23 $22.44 $36.41 $39.02 $34.06 $33.61 $29.25 $22.47
INCOME/(LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income.......... 0.10 0.30 0.37 0.45 0.53 0.39 (0.12) 0.03
Net realized and unrealized
gains/(losses) on
investments................... (2.90) 6.80 (13.52) 2.70 4.96 0.46 (2.73) 6.95
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS........... (2.80) 7.10 (13.15) 3.15 5.49 0.85 (2.85) 6.98
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.......... -- 0.31 0.36 0.44 0.53 0.40 -- 0.20
Net realized gains............. -- 0.00 0.46 5.32 -- -- -- 0.00
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS.............. -- 0.31 0.82 5.76 0.53 0.40 -- 0.20
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period.......................... $26.43 $29.23 $22.44 $36.41 $39.02 $34.06 $26.40 $29.25
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN/(A)/................ (9.58)% 31.63% (36.05)% 8.01% 16.12% 2.51% (9.74)% 31.05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)................ $34,314 $41,792 $37,917 $77,777 $101,885 $98,883 $8 $9
Ratios to average net assets:
Net investment income*....... 0.68% 1.11% 1.03% 0.94% 1.43% 1.06% 0.27% 0.68%
Net Expenses*................ 0.81%/(b)/ 0.86%/(b)/ 0.72%/(b)/ 0.66% 0.63% 0.63% 1.22%/(b)/ 1.31%/(b)/
Gross Expenses*.............. 0.81% 0.86% 0.72% 0.66% 0.63% 0.63% 1.23% 1.31%
Portfolio turnover rate........ 20% 46% 56% 55% 45% 40% 20% 46%
--------------
--------------
12/31/08
-------------
INCEPTION DATE 5/1/08
Net asset value, beginning of
period.......................... $35.32
INCOME/(LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income.......... 0.15**
Net realized and unrealized
gains/(losses) on
investments................... (12.26)
- -----------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS........... (12.11)
- -----------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.......... 0.28
Net realized gains............. 0.46
- -----------------------------------------------
TOTAL DISTRIBUTIONS.............. 0.74
- -----------------------------------------------
Net asset value, end of
period.......................... $22.47
- -----------------------------------------------
TOTAL RETURN/(A)/................ (34.25)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)................ $7
Ratios to average net assets:
Net investment income*....... 0.74%
Net Expenses*................ 1.17%/(b)/
Gross Expenses*.............. 1.17%
Portfolio turnover rate........ 56%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a)Total returns are historical and assume changes in share price, reinvestment
of dividends and capital gains distributions and do not include the effect
of insurance contract charges. Past performance does not guarantee future
results.
(b)Reflects GE Asset Management's waiver of a portion of the Fund's management
fee in an amount equal to the management fee earned by GE Asset Management
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
Statement of Assets and Liabilities JUNE 30, 2010 (UNAUDITED) U.S.
EQUITY
FUND
- ------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $33,532,557)............. $ 32,603,413
Investments in affiliated securities, at market (cost $10,156)...... 8,836
Short-term affiliated investments (at amortized cost)............... 1,819,160
Foreign cash (cost $464)............................................ 459
Receivable for investments sold..................................... 14,116
Income receivables.................................................. 27,724
Receivable for fund shares sold..................................... 8,233
- ------------------------------------------------------------------------------------
TOTAL ASSETS...................................................... 34,481,941
- ------------------------------------------------------------------------------------
LIABILITIES
Payable to GEAM..................................................... 16,520
Accrued other expenses.............................................. 137,674
Variation margin payable............................................ 5,655
- ------------------------------------------------------------------------------------
TOTAL LIABILITIES................................................. 159,849
- ------------------------------------------------------------------------------------
NET ASSETS............................................................ $ 34,322,092
- ------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in..................................................... 46,167,352
Undistributed (distribution in excess of) net investment income..... 139,154
Accumulated net realized gain (loss)................................ (11,015,279)
Net unrealized appreciation/(depreciation) on:
Investments....................................................... (930,464)
Futures........................................................... (38,666)
Foreign currency related transactions............................. (5)
- ------------------------------------------------------------------------------------
NET ASSETS............................................................ $ 34,322,092
- ------------------------------------------------------------------------------------
CLASS 1:
NET ASSETS............................................................ $ 34,314,317
Shares outstanding ($0.01 par value; unlimited shares authorized)..... 1,298,208
Net asset value per share............................................. $26.43
CLASS 4:
NET ASSETS............................................................ $ 7,775
Shares outstanding ($0.01 par value; unlimited shares authorized)..... 295
Net asset value per share............................................. $26.40
See Notes to Financial Statements.
12
Statement of Operations U.S.
FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED) EQUITY
FUND
- -------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend............................................................ $ 290,521
Interest............................................................ 7,160
Interest from affiliated investments................................ 46
Less: Foreign taxes withheld........................................ (1,346)
- -------------------------------------------------------------------------------------
TOTAL INCOME.......................................................... 296,381
- -------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees.................................... 109,854
Distributors Fees (Note 6)
Class 4........................................................... 19
Transfer agent...................................................... 8,951
Director's fees..................................................... 692
Custody and accounting expenses..................................... 24,791
Professional fees................................................... 10,109
Registration expenses............................................... 1,174
Other expenses...................................................... 5,772
- -------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT........................ 161,362
- -------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser............................ (954)
- -------------------------------------------------------------------------------------
Net expenses........................................................ 160,408
- -------------------------------------------------------------------------------------
NET INVESTMENT INCOME................................................. 135,973
- -------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments....................................................... 211,440
Futures........................................................... 75,920
Foreign currency transactions..................................... (126)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON:
Investments....................................................... (3,964,893)
Futures........................................................... (39,128)
Foreign currency transactions..................................... (5)
- -------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments.............. (3,716,792)
- -------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... $(3,580,819)
- -------------------------------------------------------------------------------------
See Notes to Financial Statements.
13
Statements of U.S.
Changes in Net Assets EQUITY
FUND
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2010 DECEMBER 31,
(UNAUDITED) 2009
- ----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss)....................................................... $ 135,973 $ 423,730
Net realized gain (loss) on investments, futures and foreign currency transactions.. 287,234 (6,358,263)
Net increase (decrease) in unrealized appreciation/(depreciation) on investments,
futures and foreign currency transactions......................................... (4,004,026) 16,408,296
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations............................................. (3,580,819) 10,473,763
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1........................................................................... -- (439,224)
Class 4........................................................................... -- (58)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS................................................................... -- (439,282)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions................... (3,580,819) 10,034,481
- ----------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1........................................................................... 144,174 798,549
Class 4........................................................................... -- --
Value of distributions reinvested
Class 1........................................................................... -- 439,224
Class 4........................................................................... -- 58
Cost of shares redeemed
Class 1........................................................................... (4,041,480) (7,396,085)
Class 4........................................................................... -- --
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions..................................... (3,897,306) (6,158,254)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................................... (7,478,125) 3,876,227
NET ASSETS
Beginning of period................................................................... 41,800,217 37,923,990
- ----------------------------------------------------------------------------------------------------------------------
End of period......................................................................... $34,322,092 $41,800,217
- ----------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD.......... $ 139,154 $ 3,181
- ----------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold............................................................................. 4,856 30,844
Issued for distributions reinvested..................................................... -- 14,889
Shares redeemed......................................................................... (136,326) (305,851)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares.................................................. (131,470) (260,118)
- ----------------------------------------------------------------------------------------------------------------------
CLASS 4
Shares sold............................................................................. -- --
Issued for distributions reinvested..................................................... -- 2
Shares redeemed......................................................................... -- --
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares.................................................. -- 2
- ----------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
14
Notes to Financial Statements June 30, 2010 (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 Fund 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 the Fund.
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
References to Level 1, Level 2 and Level 3 below are the level classifications
in the fair value hierarchy and are described in the Fair Value Measurements
section.
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 the NASDAQ are valued using the NASDAQ Official Closing Price, which
may not necessarily represent the last sale price. Level 1 securities primarily
include exchange-traded equity securities. If no sales occurred on the exchange
or NASDAQ that day, the portfolio security generally is valued using the last
reported bid price. In those circumstances the Fund classifies the investment
securities in Level 2.
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. These securities are included in Level 2. In the absence of
a reliable price from such a pricing service, debt securities may be valued
based on dealer supplied valuations or quotations and would be classified in
Level 3.
Short-term investments of sufficient credit quality 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 and these would be classified
in Level 2.
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 and these are
also included in Level 2.
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. These securities
would be classified in Level 3. 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 of
the Fund in the appropriate circumstances.
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. In those
15
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
circumstances the Fund classifies the investment securities in Level 2. 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. In those circumstances the Fund
classifies the investment securities in Level 3. 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.
Portfolio securities may be valued using techniques other than market
quotations, under the circumstances described under above. The value
established for a portfolio security may be different than what would be
produced through the use of another methodology or if it had been priced using
market quotations. Portfolio securities that are valued using techniques other
than market quotations, including "fair valued" securities, may be subject to
greater fluctuation in their value from one day to the next than would be the
case if market quotations were used. In addition, there is no assurance that
the Fund could sell a portfolio security for the value established for it at
any time and it is possible that the Fund would incur a loss because a
portfolio security is sold at a discount to its established 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. 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. The Fund's income, expenses (other than distribution
fees) and realized and unrealized gains and losses are allocated proportionally
each day among each the Fund's respective share classes based upon the relative
net assets of each share class.
FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 1, 2008 for all financial instruments accounted for at fair value.
For financial assets and liabilities, fair value is the price the Fund would
receive 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 or 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 inputs are observable or whose
significant value drivers are observable.
Level 3 -- Significant inputs to the valuation model are unobservable.
Policies and procedures are maintained to value investments using the best and
most relevant data available. In addition, GEAM performs periodic reviews of
the methodologies used by independent pricing services including price
validation of individual securities.
The following section describes the valuation methodologies the Fund uses to
measure different financial investments at fair value.
When available, the Fund uses quoted market prices to determine the 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, pricing information is obtained
from an independent pricing vendor. The pricing vendor uses various pricing
models for each asset class that are consistent with what other market
participants would use. The inputs and
16
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
assumptions to the model of the pricing vendor are derived from market
observable sources including: benchmark yields, reported trades, broker/dealer
quotes, issuer spreads, benchmark securities, bids, offers, and other
market-related data. Since many fixed income securities do not trade on a daily
basis, the methodology of the pricing vendor uses available information as
applicable such as benchmark curves, benchmarking of like securities, sector
groupings, and matrix pricing. The pricing vendor considers all available
market observable inputs in determining the evaluation for a security. Thus,
certain securities may not be priced using quoted prices, but rather determined
from market observable information. These investments are included in Level 2
and primarily comprise our portfolio of corporate fixed income, and government,
mortgage and asset-backed securities. In infrequent circumstances, pricing
vendors may provide the Fund with valuations that are based on significant
unobservable inputs, and in those circumstances the investment securities are
included in Level 3.
The Fund uses non-binding broker quotes as the primary basis for valuation when
there is limited, or no, relevant market activity for a specific investment or
for other investments that share similar characteristics. The Fund has not
adjusted the prices obtained. Investment securities priced using non-binding
broker quotes are included in Level 3. As is the case with the primary pricing
vendor, third-party brokers do not provide access to their proprietary
valuation models, inputs and assumptions. Accordingly, GEAM conducts internal
reviews of pricing for all such investment securities periodically to ensure
reasonableness of valuations used in our financial statements. These reviews
are designed to identify prices that appear stale, those that have changed
significantly from prior valuations, and other anomalies that may indicate that
a price may not be accurate. Based on the information available, GEAM believes
that the fair values provided by the brokers are representative of prices that
would be received to sell the assets at the measurement date (exit prices).
Other financial investments are derivative investments 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.
The Fund uses closing prices for derivatives included in Level 1, which are
traded either on exchanges or liquid over-the counter markets. Derivative
assets and liabilities included in Level 2 primarily represent interest rate
swaps, cross-currency swaps and foreign currency and commodity forward and
option contracts. Derivative assets and liabilities included in Level 3
primarily represent interest rate products that contain embedded optionality or
prepayment features. Transfers in and out of Level 3 are considered to occur at
the beginning of the period.
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. For example, money
market securities are valued using amortized cost, in accordance with the
Investment Company Act of 1940. Generally, amortized cost reflects the current
fair value of a security, but since the value is not obtained from a quoted
price in an active market, such securities are reflected as Level 2. Fair value
determinations are required for securities whose value is affected by a
significant event that will materially affect the value of a domestic or
foreign security and which occurs subsequent to the time of the close of the
principal market on which such domestic of foreign security trades but prior to
the calculation of the Fund's NAV.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objective 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
17
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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 of foreign denominated securities from
the fluctuations arising from changes in the market prices of those 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.
DERIVATIVES The Fund is subject to equity price risk, and foreign currency
exchange rate risk in the normal course of pursuing its investment objective.
The Fund may enter into derivative transactions for the purpose of hedging
against the effects of changes in the value of portfolio securities due to
anticipated changes in market conditions and to gain market exposure for
residual and accumulating cash positions. 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 and 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.
FUTURES CONTRACTS The Fund may invest in interest rate, financial, stock and
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 investments. The
Fund will not enter into a transaction involving options for speculative
purposes. The Fund's
18
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
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.
The Fund is subject to ASC 740, INCOME TAXES. ASC 740 provides guidance for
financial accounting and reporting for the effects of income taxes that result
from an entity's activities during the year. ASC 740 also provides guidance
regarding how certain uncertain tax positions should be recognized, measured,
presented and disclosed in the financial statements. ASC 740 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.
There are no adjustments to the Fund's net assets required under ASC 740. The
Fund's 2006, 2007, 2008 and 2009 fiscal years tax returns are still open to
examination by the Federal and applicable state tax authorities.
At June 30, 2010, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation) on
Tax Purposes Appreciation Depreciation Investments
-------------------------------------------------------------------
$38,014,327 $1,875,945 $(5,458,404) $(3,582,459)
As of December 31, 2009, the Fund has capital loss carryovers as indicated
below.
Amount Expires
---------------------------------------------------
$ 805,607 12/31/2016
7,925,894 12/31/2017
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, 2009, 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.
19
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
The Fund elected to defer losses incurred after October 31, 2009 as follows:
Capital Currency
---------------------------------------------------
$88,668 $43
The tax composition of distributions paid during the years ended December 31,
2009 and December 31, 2008 were as follows:
Ordinary Long-Term
Income Capital Gains Total
---------------------------------------
2009 $439,282 $ -- $ 439,282
2008 943,520 408,176 1,351,696
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays any dividends from net
investment income annually. The Fund also declares and pays any 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.
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.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued FASB Accounting
Standards Codification (ASC) effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The ASC is an
aggregation of previously issued authoritative U.S. generally accepted
accounting principles (GAAP) in one comprehensive set of guidance organized by
subject area. In accordance with the ASC, references to previously issued
accounting standards have been replaced by ASC references. Subsequent revisions
to GAAP will be incorporated into the ASC through Accounting StandardsUpdates
(ASU).
The Fund adopted ASC 855, SUBSEQUENT EVENTS effective October 2009. ASC 855
establishes principles and requirements for subsequent events, in particular
(a) the period after the balance sheet date during which management of a
reporting entity shall evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; (b) the
circumstances under which an entity shall recognize events or transactions
occurring after the balance sheet date in its financial statements; and (c) the
disclosures that an entity shall make about events or transactions that
occurred after the balance sheet date.
In January 2010, FASB issued ASU 2010-06, IMPROVING DISCLOSURES ABOUT FAIR
VALUE MEASUREMENTS. ASU 2010-06 requires reporting entities to make new
disclosures about the amounts and reasons for significant transfers in and out
of Level 1 and Level 2 fair value measurements and inputs and valuation
techniques used to measure fair value for both recurring and nonrecurring fair
value measurements that fall in either Level 2 or Level 3, and information on
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measures. The new disclosures were effective for interim and
annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures will
be effective for fiscal years beginning after December 15, 2010, and for
interim periods within those fiscal years. GEAM does not believe the adoption
of ASU 2010-06 will materially impact the financial statement amounts.
3. FAIR VALUE MEASUREMENTS
The Fund adopted ASC 820, FAIR VALUATION MEASUREMENTS AND DISCLOSURES effective
October 2008. This guidance
20
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
establishes a new framework for measuring fair value and expands related
disclosures. Broadly, the 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. It
also establishes a three-level valuation hierarchy based upon observable and
non-observable inputs.
The following tables present the Fund's investments measured at fair value on a
recurring basis at June 30, 2010:
Level 1 Level 2 Level 3 Total
- ------------------------------------------------------------------------------------------
Investments in Securities
Common Stock $32,037,799 $ -- $-- $32,037,799
Exchange Traded Funds 565,614 -- -- 565,614
Other Investments -- 8,836 -- 8,836
Short-Term Investments 1,819,160 -- -- 1,819,160
- ------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES $34,422,573 $8,836 $-- $34,431,409
- ------------------------------------------------------------------------------------------
OTHER FINANCIAL INSTRUMENTS
Futures Contracts -- Unrealized Depreciation $ (38,666) $ -- $-- $ (38,666)
4. DERIVATIVES TRANSACTIONS
Shown below are the derivative contracts entered into by the Fund, summarized
by primary risk exposure.
Asset Derivatives June 30, 2010 Liability Derivatives June 30, 2010
----------------------------------- --------------------------------------
Derivatives not Location in the Location in
accounted for as Statements Fair the Statements Fair
hedging instruments of Assets Value of Assets Value
under ASC 815 and Liabilities ($) and Liabilities ($)
- - --------------------------------------------------------------------------
Equity Contracts Receivables, Net Assets -- Liabilities, Net Assets --
Net unrealized appreciation/ Net unrealized appreciation/
(depreciation) on Futures -- (depreciation) on Futures (38,666)*
- -----------------------------------------------------------------------------------------------
*INCLUDES CUMULATIVE APPRECIATION/DEPRECIATION OF FUTURES CONTRACTS AS REPORTED
IN THE SCHEDULE OF INVESTMENTS AND WITHIN THE COMPONENTS OF NET ASSETS SECTION
OF THE STATEMENTS OF ASSETS AND LIABILITIES. ONLY THE CURRENT DAY'S VARIATION
MARGIN IS REPORTED WITHIN THE RECEIVABLES AND/OR PAYABLES OF THE STATEMENTS OF
ASSETS AND LIABILITIES.
Refer to the Schedule of Investments for ending notional value.
Shown below are the effects of derivative instruments on the Fund's Statements
of Operations, summarized by primary risk exposure.
Total Notional of
Derivatives not accounted Location in the Futures/Options Realized Gain or
for as hedging instruments Statements of Contracts (Loss) on Derivatives
under ASC 815 Operations Purchased/(Sold) ($) Recognized in Income ($)
- ---------------------------------------------------------------------------------------------------------
Equity Contracts Realized gain/(loss) on
Futures, Increase/(decrease)
in unrealized appreciation/
(depreciation) on Futures 4,824,085/(4,138,051) 75,920
- ---------------------------------------------------------------------------------------------------------
Change in Unrealized
Derivatives not accounted Appreciation/(Depreciation)
for as hedging instruments on Derivatives
under ASC 815 Recognized in Income ($)
- -------------------------------------------------------
Equity Contracts
(39,128)
- -------------------------------------------------------
5. 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 ("State Street"). The revolving credit facility
requires the payment of a commitment fee equal to 0.15% 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.
21
Notes to Financial Statements June 30, 2010 (unaudited)
- -----------------------------------------------------------------------------
In addition, the Company has a $100 million uncommitted, unsecured line of
credit with State Street. Generally, borrowings under the credit facilities
would accrue interest at the Federal Funds Rate plus 50 basis points (0.50%)
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 six-month period ended June 30, 2010.
6. FEES AND COMPENSATION 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%.
GEAM waives a portion of the Fund's management fee in the amount equal to the
management fee earned by GEAM with respect to the Fund's investment in the GE
Funds -- GE Money Market 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 is 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.)
7. 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, 2010 were as follows:
Purchases Sales
----------------------
$7,693,696 $12,476,467
SECURITY LENDING For the six-month period ended June 30, 2010, the Fund did not
participate in securities lending.
8. SUBSEQUENT EVENTS
Subsequent events after the balance sheet date through the date that the
financial statements were issued have been evaluated in the preparation of the
Financial Statements. There are no items to report.
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 61
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 -- 13 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; 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;
Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993 and GE Institutional Funds since 1997; 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 2003;
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 49
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 GEAM from
February 1997 to July 2007; Vice President and Associate General Counsel of
GEAM from October 1992 to February 1997; Secretary of GE Funds from 1997 to
July 2007 and Vice President from September 2003 to June 2007; Secretary of GE
Institutional Funds and the fund from 1997 to July 2007, and Vice President
from September 2003 to July 2007; Vice President of Elfun Funds and GE Savings
& Security Funds from October 2003 to July 2007; Assistant Secretary of Elfun
Funds and GE Savings & Security Funds from 1998 to July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 49
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, Elfun Funds and GE Savings & Security Funds and General Electric Pension
Trust, since July 2007.
23
Additional Information (unaudited)
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 44
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 5 years (Vice President); 2 years (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Commercial Administrative Officer
of GEAM since April 2010; Senior Vice President and Deputy General Counsel at
GE Asset Management from October 2007 to April 2010; 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
Secretary of GE Funds and GE Institutional Funds since July 2007; Vice
President and Assistant Secretary of GE Institutional Funds and GE Investments
Funds, Inc. from September 2003 to 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
- --------------------------------------------------------------------------------
ROBERT HERLIHY
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Chief Compliance Officer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 4 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Chief Compliance Officer of GEAM,
GE Funds, GE Institutional Funds, Elfun Funds, and GE Savings and Security
Funds since July 2005; Manager of Fund Administration at GEAM from 2002-2005.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
- --------------------------------------------------------------------------------
EUNICE TSANG
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 50
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- less than one year
PRINCIPAL OCCUPATIONS(S) DURING PAST 5 YEARS Treasurer of GE Funds, GE
Institutional Funds, Elfun Funds and GE Savings and Security Funds since
January 2010; GEAM Operational Controllership and Technical Accounting Manager
since December 2007; Financial Planning & Analysis Manager -- Performance
Leader from June 2005 to December 2007; GEAM Quality Black Belt from 2001 to
June 2005; Financial Planning & Analysis Manager from 2000 to 2001; and Mutual
Fund Assistant Controller from October 1997 to 2000.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE N/A
OTHER DIRECTORSHIPS HELD BY TRUSTEE N/A
24
Additional Information (unaudited)
- ---------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 64
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Vice President of Walden Capital Management
since 1996.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds since 1997; Trustee of Fordham University from 1989 to 1995
and 2001 to 2007 and Trustee Emeritus since 2007; Trustee of Neuro Science
Research Institute since 1986; Trustee of Gregorian University Foundation from
1992 to 2007; Director of Artes Medical from 2006 to 2008.
- --------------------------------------------------------------------------------
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 -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since July 2007 from
Fairfield University. From 1983 to July 2007, Vice President and Treasurer of
Fairfield University.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 74
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified -- 13 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 41
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds since 1997. 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 1-800-493-3042.
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
Kimberley Costello
Michele Matzelle
TREASURER
Eunice Tsang
ASSISTANT TREASURER
Leslie Spadone
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
Cheryl H. Beacock, SENIOR VICE PRESIDENT, HUMAN RESOURCES
Daniel O. Colao, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
Michael J. Cosgrove, PRESIDENT AND CHIEF EXECUTIVE OFFICER -- MUTUAL FUNDS &
INTERMEDIARY BUSINESS
Paul M. Colonna, PRESIDENT AND CHIEF INVESTMENT OFFICER -- FIXED INCOME
INVESTMENTS
Ralph R. Layman, PRESIDENT AND CHIEF INVESTMENT OFFICER -- PUBLIC EQUITY
INVESTMENTS
Maureen B. Mitchell, PRESIDENT -- INSTITUTIONAL SALES AND MARKETING
Matthew J. Simpson, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, CHIEF MARKET STRATEGIST
Don W. Torey, PRESIDENT -- ALTERNATIVE INVESTMENTS
John J. Walker, EXECUTIVE VICE PRESIDENT, CHIEF OPERATING OFFICER
David Wiederecht, PRESIDENT AND CHIEF INVESTMENT OFFICER -- 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 1-800-493-3042; (ii) on the Fund's
website at http://www.geam.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.geam.com; and (ii) on the Commission's website at
http://www.sec.gov.
[LOGO] GE
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
The Registrant has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Exchange Act. The Registrant's
audit committee members are: John R. Costantino, William J. Lucas and Robert P.
Quinn.
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 Eunice Tsang 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: August 30, 2010
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: August 30, 2010
By: /s/ Eunice Tsang
-----------------------------------
Eunice Tsang
Treasurer, GE Investments Funds, Inc.
Date: August 30, 2010
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.