-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uznf/akoHUzCwP/Z0XzcYHM7GlYsjx36M8YouLXbEqLQK2yLNnCymKe7iG5x9eLb N9iu1aTfW9yUg69UjKBIjA== 0001193125-10-200271.txt : 20100830 0001193125-10-200271.hdr.sgml : 20100830 20100830131312 ACCESSION NUMBER: 0001193125-10-200271 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20100630 FILED AS OF DATE: 20100830 DATE AS OF CHANGE: 20100830 EFFECTIVENESS DATE: 20100830 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GE INVESTMENT FUNDS INC CENTRAL INDEX KEY: 0000746687 IRS NUMBER: 541278621 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04041 FILM NUMBER: 101046174 BUSINESS ADDRESS: STREET 1: 3001 SUMMER STREET CITY: STAMFORD STATE: CT ZIP: 06905 BUSINESS PHONE: 203-708-3133 MAIL ADDRESS: STREET 1: 3001 SUMMER STREET CITY: STAMFORD STATE: CT ZIP: 06905 FORMER COMPANY: FORMER CONFORMED NAME: LIFE OF VIRGINIA SERIES FUND INC DATE OF NAME CHANGE: 19920703 0000746687 S000001636 Small-Cap Equity Fund C000004438 Class 1 Shares C000063860 Class 4 Shares 0000746687 S000001637 Total Return Fund C000004439 Class 1 Shares C000033160 Class 2 Shares C000033161 Class 3 Shares 0000746687 S000001638 Real Estate Securities Fund C000004440 Class 1 Shares C000063861 Class 4 Shares 0000746687 S000001639 U.S. Equity Fund C000004441 Class 1 Shares C000063862 Class 4 Shares 0000746687 S000001640 Core Value Equity Fund C000004442 Class 1 Shares C000063863 Class 4 Shares 0000746687 S000001643 Income Fund C000004445 Class 1 Shares C000063864 Class 4 Shares 0000746687 S000001644 International Equity Fund C000004446 Class 1 Shares C000063865 Class 4 Shares 0000746687 S000001645 Mid-Cap Equity Fund C000004447 Class 1 Shares C000063866 Class 4 Shares 0000746687 S000001646 Money Market Fund C000004448 Money Market Fund 0000746687 S000001647 Premier Growth Equity Fund C000004449 Class 1 Shares C000063867 Class 4 Shares 0000746687 S000001648 S&P 500 Index Fund C000004450 S&P 500 Index Fund N-CSRS 1 dncsrs.txt GE INVESTMENTS - CERTIFIED SHAREHOLDER REPORT 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 ---------- GE INVESTMENTS FUNDS, INC. (Exact name of registrant as specified in charter) ---------- 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 - ---------------------------------------------------------------------------- [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 - ---------------------------------------------------- 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. Income Fund Semi-Annual Report JUNE 30, 2010 [LOGO] GE GE Investments Funds, Inc. Income Fund Contents - ------------------------------------------------------------ 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) - ----------------------------------------------------------------------------- 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. - -------------- 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 - -------------------------------------------------------------------------------- [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 - -------------------------------------------------------------------------------- [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 - -------------------------------------------------------------------------------- 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** - ---------------------------------------------------------------------------------------- Class 1 1,000.00 1,039.55 4.05 Class 4 1,000.00 1,037.66 6.21 - ---------------------------------------------------------------------------------------- HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD) - ---------------------------------------------------------------------------------------- Class 1 1,000.00 1,020.61 4.01 Class 4 1,000.00 1,018.52 6.16 - ----------------------------------------------------------------------------------------
*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 - -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT CLASS 1 SHARES - -------------------------------------------------------------------------------- [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 - -------------------------------------------------------------------------------- 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)/ - ----------------------------------------------------------------------------------- GEI Income 3.95% 11.39% 3.09% 4.87% 16,094 - ----------------------------------------------------------------------------------- Barclays Capital U.S. Aggregate Bond Index 5.33% 9.50% 5.54% 6.47% 18,714 - ----------------------------------------------------------------------------------- Morningstar peer group average* 5.48% 13.35% 4.66% 5.48% - -----------------------------------------------------------------------------------
CLASS 4 SHARES - -------------------------------------------------------------------------------- [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 - -------------------------------------------------------------------------------- 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)/ - --------------------------------------------------------------------------------- GEI Income 3.77% 10.94% 2.24% 10,492 - --------------------------------------------------------------------------------- Barclays Capital U.S. Aggregate Bond Index 5.33% 9.50% 6.75% 11,517 - --------------------------------------------------------------------------------- Morningstar peer group average* 5.48% 13.35% - ---------------------------------------------------------------------------------
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 - -------------------------------------------------------------------------------- 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) - ----------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- [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 - -------------------------------------------------------------------------------- [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
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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
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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. EX-99.CERT 2 dex99cert.txt SECTION 302 CERTIFICATIONS Exhibit (b)(1) SECTION 302 CERTIFICATIONS CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER I, Michael J. Cosgrove, certify that: 1. I have reviewed this report on Form N-CSR of GE Investments Funds, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a m aterial fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding reliability of financial reporting and pre paration of the financial statements for external purposes in accordance with generally accepted accounting principles. c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during second fiscal quarter of the period covered by this report that has materially effected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably, likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: August 30, 2010 /s/ Michael J. Cosgrove - --------------------------------------- Michael J. Cosgrove Chairman, GE Investments Funds, Inc. SECTION 302 CERTIFICATIONS CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER I, Eunice Tsang, certify that: 1. I have reviewed this report on Form N-CSR of GE Investments Funds, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding reliability of financial reporting and preparation of the financial statements for external purposes in accordance with generally accepted accounting principles. c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during second fiscal quarter of the period covered by this report that has materially effected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably, likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: August 30, 2010 /s/ Eunice Tsang - --------------------------------------- Eunice Tsang Treasurer, GE Investments Funds, Inc. EX-99.906CERT 3 dex99906cert.txt SECTION 906 CERTIFICATIONS Exhibit (b)(2) In connection with this report on Form N-CSR for the Registrant as furnished to the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Registrant. 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 [A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.] -----END PRIVACY-ENHANCED MESSAGE-----