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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file
number 811-04041
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GE INVESTMENTS FUNDS, INC.
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(Exact name of registrant as specified in charter)
3001, SUMMER STREET,STAMFORD, CONNECTICUT, 06905
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(Address of principal executive offices) (Zip code)
GE ASSET MANAGEMENT INC,3001, SUMMER STREET,STAMFORD,CONNECTICUT, 06905
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(Name and address of agent for service)
Registrant"s telephone number, including area code: 800-242-0134
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Date of fiscal year end: 12/31
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Date of reporting period: : 06/30/07
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<page>
ITEM 1. REPORTS TO STOCKHOLDERS.
GE Investments Funds, Inc.
Income Fund
Semi-Annual Report
JUNE 30, 2007
[GE logo omitted]
<page>
GE Investments Funds, Inc.
Income Fund Contents
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NOTES TO PERFORMANCE .................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS .............................. 2
NOTES TO SCHEDULE OF INVESTMENTS ........................................ 15
FINANCIAL STATEMENTS
Financial Highlights ............................................... 16
Statement of Assets and Liabilities ................................ 17
Statement of Operations ............................................ 18
Statements of Changes in Net Assets ................................ 19
Notes to Financial Statements ...................................... 20
ADDITIONAL INFORMATION .................................................. 26
INVESTMENT TEAM ......................................................... 29
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.
<page>
Notes to Performance June 30, 2007 (unaudited)
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Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains distributions, if any. Investment returns and net
asset value on an investment will fluctuate and you may have a gain or loss when
you sell your shares. Periods less than one year are not annualized.
Current performance may be lower or higher than that shown. You may call
toll-free (800) 242-0134 for performance information as of the most recent month
end.
Total returns do not reflect expenses associated with the separate account such
as administrative fees, account charges and surrender charges, which, if
reflected, would reduce the total returns for all periods shown.
Shares of the Fund are neither insured nor guaranteed by the U.S. Government,
and their prices will fluctuate with market conditions.
The Lehman Brothers Aggregate Bond Index (LB Aggregate) is an unmanaged index
and do not reflect the actual cost of investing in the instruments that comprise
the index.
The LB Aggregate Bond Index is a market value-weighted index of investment-grade
debt issues, including government, corporate, asset-backed and mortgage-backed
securities, with maturities of one year or more. The results shown for the
foregoing index assume the reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer ranking
calculation is based on the blend of Lipper peer categories, as shown. Lipper is
an independent mutual fund rating service. A Fund's performance may be compared
to or ranked within a universe of mutual funds with investment objectives and
policies similar but not necessarily identical to the Fund's. Such comparisons
or rankings are made on the basis of several factors, including the Fund's
objectives and policies, management style and strategy, and portfolio
composition, and may change over time if any of those factors change.
1
Income Fund
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THE INCOME FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES PAUL M.
COLONNA, MARK DELANEY, WILLIAM M. HEALEY, JAMES F. PALMIERI AND VITA MARIE PIKE.
AS LEAD PORTFOLIO MANAGER FOR THE INCOME FUND, MR. COLONNA (PICTURED BELOW) HAS
OVERSIGHT AUTHORITY BUT DOES NOT POSSESS THE POWER TO VETO THE INVESTMENT
DECISIONS OF HIS CO-MANAGERS.
PAUL M. COLONNA IS AN EXECUTIVE VICE PRESIDENT OF GE ASSET MANAGEMENT AND
PRESIDENT - FIXED INCOME AT GE ASSET MANAGEMENT. SINCE JANUARY 2005, HE HAS LED
THE TEAM OF PORTFOLIO MANAGERS FOR THE INCOME FUND. PRIOR TO JOINING GE ASSET
MANAGEMENT IN FEBRUARY 2000, MR. COLONNA WAS A SENIOR PORTFOLIO MANAGER WITH THE
FEDERAL HOME LOAN MORTGAGE CORPORATION, OVERSEEING THE MORTGAGE INVESTMENT
GROUP.
MARK DELANEY IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A MEMBER OF
THE PORTFOLIO MANAGEMENT TEAM FOR THE INCOME FUND SINCE JOINING GE ASSET
MANAGEMENT IN APRIL 2002. PRIOR TO JOINING GE ASSET MANAGEMENT, MR. DELANEY WAS
A SENIOR PORTFOLIO MANAGER AT SMITH GRAHAM SINCE AUGUST 1994.
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.
JAMES F. PALMIERI IS AN ASSISTANT PORTFOLIO MANAGER OF GEAM. SINCE MARCH 2006,
HE HAS MANAGED THE MORTGAGE-BACKED SECURITIES SECTOR FOR THE S&S INCOME FUND.
PRIOR TO JOINING GEAM, MR. PALMIERI WAS A DIRECTOR OF INVESTMENTS FOR
CONSTITUTION CORPORATE FEDERAL CREDIT UNION FROM FEBRUARY 2005 TO MARCH 2006 AND
A PORTFOLIO MANAGER FOR CIGNA INVESTMENT MANAGEMENT FROM JANUARY 2000 TO
FEBRUARY 2005.
VITA MARIE PIKE IS A 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 LIPPER
PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007?
A. For the six-month period ended June 30, 2007, the Income Fund returned
1.02%. The Lehman Brothers Aggregate Bond Index, the Fund's benchmark,
returned 0.98% and the Fund's Lipper peer group of 62 Intermediate
Investment Grade Debt Funds returned an average of 0.63% for the same
period.
[photo omitted]
2
Q&A
Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE SIX-MONTH PERIOD
ENDING JUNE 30, 2007.
A. After slumping to a 0.7% growth rate (annualized) in the first quarter, U.S.
GDP bounced back in the second quarter with a median estimate of 3.0%
(Bloomberg survey of leading economists' forecast). The soft housing market
weighed heavily on the economy and there was a curtailment in inventory
building in the first quarter of 2007. Employment growth remained healthy
through the first half. Monthly change in non-farm payrolls averaged 145,000
for the first six months. Inflation drifted lower but remains on the high
side of the Fed's 1-2% comfort zone. The latest reading for the year-over
year Personal Consumption Expenditure Core Price Index (the Fed's preferred
measure) was 1.9%.
The Federal Reserve maintained the fed funds target at 5.25% at each of its
first four meetings this year. Worries over the sub-prime loan market and a
mid-February drop in the Chinese stock market sent risk premiums higher.
Investors quickly started building in expectations for rate cuts from the
Fed. As GDP growth came back in the second quarter accompanied by the Fed's
stated emphasis on inflation risk, expectations for rate cuts disappeared.
By June end, market pricing implied no changes in fed funds through
year-end.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. Sector allocation was the most positive contributor to Fund performance. The
Fund's exposure to high yield, which in general outperformed the benchmark
by nearly 2%, was the main driver of positive relative return. Specific
security selection within BBB-rated corporate bonds also added value.
Duration positioning added slightly to relative performance.
3
Income Fund
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Understanding Your Fund's Expenses
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service 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,
2007.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007
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ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
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Actual Fund Return** 1,000.00 1,010.17 3.01
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Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,021.58 3.01
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* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.60% (FROM
PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 1.02%.
4
Income Fund (unaudited)
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CHANGE IN VALUE
OF A $10,000 INVESTMENT
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[Line chart omitted -- plot points are as follows:]
Income Fund LB Aggregate Bond Index
06/97 $10,000.00 $10,000.00
12/97 10,588.61 10,636.34
12/98 11,430.18 11,560.26
12/99 11,267.22 11,465.32
12/00 12,477.30 12,798.28
12/01 13,404.01 13,878.90
12/02 14,729.02 15,302.19
12/03 15,259.26 15,930.26
12/04 15,781.12 16,621.44
12/05 16,102.64 17,025.10
12/06 16,806.51 17,762.93
06/07 16,977.43 17,936.58
Income Fund (ending value $16,977)
LB Aggregate Bond Index (ending value $17,937)
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2007
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SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
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Income Fund 1.02% 5.88% 4.04% 5.44%
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LB Aggregate Bond Index 0.98% 6.12% 4.48% 6.02%
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Lipper peer group average* 0.63% 5.51% 4.43% 5.60%
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Inception date 1/3/95
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INVESTMENT PROFILE
A fund designed for investors who seek maximum income consistent with prudent
investment management and the preservation of capital by investing at least 80%
of its net assets in debt securities under normal circumstances.
QUALITY RATINGS
AS OF JUNE 30, 2007
as a % of Market Value
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MOODY'S/S&P/ PERCENTAGE OF
FITCH RATING** MARKET VALUE
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Aaa / AAA 77.54%
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Aa / AA 4.39%
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A / A 3.34%
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Baa / BBB 5.65%
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Ba / BB and lower 9.08%
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PORTFOLIO COMPOSITION
AS OF JUNE 30, 2007
as a % of Market Value
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Market Value of $186,200 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Mortgage-Backed 34.9%
Asset-Backed and Other 27.8%
Corporate Notes 21.0%
U.S. Treasuries 13.6%
Federal Agencies 2.7%
* LIPPER 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 INVESTMENT GRADE DEBT FUNDS PEER GROUP CONSISTING OF 62, 62, 45
AND 16 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** MOODY'S INVESTORS SERVICES INC., STANDARD & POOR'S AND FITCH ARE NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATIONS.
*** LESS THAN 0.01%
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE
DO NOT REFLECT THE DEDUCTION OF TAXES.
5
INCOME FUND
Schedule of Investments June 30, 2007 (unaudited)
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INCOME FUND
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PRINCIPAL
AMOUNT VALUE
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BONDS AND NOTES -- 106.9%+
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U.S. TREASURIES -- 18.6%
U.S. Treasury Bonds
4.50% 02/15/36 $ 135,000 $ 122,353(h)
4.75% 02/15/37 4,411,000 4,161,514(h)
U.S. Treasury Notes
4.50% 04/30/12 1,120,000 1,099,381(h)
4.63% 11/15/09 - 02/15/17 10,639,000 10,373,947(h)
4.75% 05/31/12 2,211,000 2,193,843(h)
4.88% 05/31/09 7,436,000 7,435,033(h)
25,386,071
FEDERAL AGENCIES -- 3.7%
Federal Home Loan Mortgage Corp.
4.75% 03/05/12 2,280,000 2,228,388(h)
4.88% 02/09/10 1,805,000 1,791,511(h)
5.00% 02/16/17 1,025,000 989,959(h)
5,009,858
AGENCY MORTGAGE BACKED -- 25.9%
Federal Home Loan Mortgage Corp.
4.50% 06/01/33 - 02/01/35 282,089 256,767(f)
5.00% 07/01/35 - 10/01/35 454,756 427,413(f)
5.50% 05/01/20 71,820 70,794(f)
6.00% 04/01/17 - 05/01/35 981,656 979,403(f)
6.50% 01/01/27 - 08/01/36 596,454 604,629(f)
7.00% 10/01/16 - 08/01/36 221,713 228,374(f)
7.50% 11/01/09 - 09/01/33 26,296 27,275(f)
8.00% 09/01/09 - 11/01/30 25,332 26,569(f)
8.50% 04/01/30 - 05/01/30 28,075 30,069(f)
Federal National Mortgage Assoc.
4.00% 05/01/19 - 06/01/19 276,365 256,114(f)
4.50% 05/01/18 - 12/01/34 1,600,884 1,511,901(f)
5.00% 03/01/34 - 01/01/37 597,332 561,490(f)
5.26% 04/01/37 159,115 157,184(g)
5.44% 04/01/37 14,332 14,244(g)
5.50% 12/01/13 - 12/01/35 751,285 736,148(f)
5.53% 04/01/37 200,647 199,786(g)
5.56% 03/01/37 13,715 13,667(g)
5.62% 04/01/37 356,223 355,374(g)
5.64% 06/01/37 264,736 264,328(g)
5.67% 05/01/37 99,732 99,580(g)
5.69% 04/01/37 129,612 129,557(g)
5.71% 04/01/37 512,492 512,447(g)
5.85% 06/01/37 319,990 320,970(g)
6.00% 06/01/14 - 07/01/35 1,755,565 1,744,384(f)
6.50% 07/01/17 - 02/01/37 2,109,889 2,140,418(f)
PRINCIPAL
AMOUNT VALUE
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7.00% 03/01/15 - 06/01/36 $ 728,979 $ 752,154 (f)
7.50% 12/01/09 - 03/01/34 189,950 197,740 (f)
8.00% 12/01/12 - 11/01/33 138,845 146,320 (f)
8.50% 05/01/31 6,142 6,593 (f)
9.00% 04/01/16 - 12/01/22 23,869 25,314 (f)
5.00% TBA 7,611,190 7,172,892 (b)
5.50% TBA 8,459,000 8,213,026 (b)
6.00% TBA 3,470,000 3,432,045 (b)
6.50% TBA 1,735,000 1,751,266 (b)
Government National Mortgage Assoc.
4.50% 08/15/33 - 09/15/34 508,903 469,252 (f)
6.00% 04/15/27 - 09/15/36 523,428 522,230 (f)
6.13% 11/20/22 - 12/20/24 7,578 7,662(f,g)
6.38% 02/20/23 - 02/20/26 16,253 16,401(f,g)
6.50% 04/15/19 - 08/15/36 464,263 472,538 (f)
7.00% 03/15/12 - 10/15/36 318,980 329,366 (f)
7.50% 11/15/31 - 10/15/33 10,768 11,261 (f)
8.00% 12/15/29 3,710 3,938 (f)
8.50% 10/15/17 23,184 24,668 (f)
9.00% 11/15/16 - 12/15/21 58,342 62,691 (f)
5.50% TBA 35,000 33,961 (b)
35,320,203
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 5.2%
Federal Home Loan Mortgage Corp.
1.13% 04/15/37 522,340 24,612(e,g)
1.33% 10/15/18 - 04/25/37 806,135 38,672(e,f,g)
1.43% 05/15/37 724,565 33,794(e,g)
1.83% 12/15/30 947,873 39,544(e,f,g)
1.88% 09/15/36 503,159 34,278(e,g)
2.46% 09/15/36 446,511 39,767(e,f,g)
3.98% 12/15/33 150,000 112,578(f,g)
4.50% 04/15/13 - 03/15/19 737,057 69,438(e,f)
5.00% 12/15/13 - 12/01/34 4,775,963 974,826(e,f)
5.50% 04/15/17 - 06/15/33 576,801 115,432(e,f)
5.50% 04/15/26 - 12/15/36 1,603,675 1,579,700
6.00% 03/15/28 457,928 461,097
7.50% 01/15/16 51,111 52,526 (f)
7.50% 07/15/27 14,779 3,091(e,f)
8.00% 02/01/23 - 07/01/24 7,349 1,869(e,f)
8.25% 06/01/26 60,000 74,895(f,i)
24.46% 09/25/43 1,750,891 19,365(c,e,f,g)
Federal Home Loan Mortgage
Corp. REMICS
6.00% 01/15/30 510,000 514,482
Federal Home Loan
Mortgage STRIPS
7.24% 08/01/27 1,791 1,397(c,d,f)
Federal National Mortgage Assoc
STRIPS (Class 1)
5.23% 11/01/34 378,839 266,586(c,d,f)
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements.
6
INCOME FUND
Schedule of Investments June 30, 2007 (unaudited)
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PRINCIPAL
AMOUNT VALUE
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Federal National Mortgage Assoc
STRIPS (Class 2)
7.50% 11/01/23 $ 45,065 $ 12,344(e,f)
8.00% 08/01/23 - 07/01/24 15,916 4,031(e,f)
8.50% 07/25/22 758 164(e,f)
9.00% 05/25/22 490 103(e,f)
Federal National Mortgage Assoc.
1.13% 05/25/37 - 06/25/37 6,167,938 305,976(e,g)
1.19% 12/25/42 117,841 3,903(e,f,g)
1.45% 03/25/37 411,897 25,661(e,g)
1.68% 10/25/29 500,325 24,734(e,f,g)
1.78% 12/25/30 480,189 21,983(e,f,g)
1.88% 06/25/36 - 07/25/37 5,893,352 392,332(e,f,g)
2.18% 05/25/18 839,808 50,565(e,f,g)
2.28% 09/25/42 1,227,180 65,194(e,f,g)
2.33% 04/25/17 - 10/25/17 1,062,926 59,944(e,f,g)
2.38% 08/25/16 308,962 12,266(e,f,g)
2.78% 06/25/42 422,925 25,965(e,f,g)
4.00% 02/25/28 25,111 24,593 (f)
4.50% 05/25/18 135,542 12,453(e,f)
4.75% 11/25/14 71,993 3,892(e,f)
5.00% 08/25/17 - 02/25/32 204,832 22,761(e,f)
5.50% 03/25/29 - 03/25/33 545,000 540,928
8.00% 07/25/14 119,839 121,130 (f)
Federal National Mortgage
Assoc. (Class 2)
5.50% 12/01/33 - 05/25/37 99,313 25,859 (e)
Federal National Mortgage
Assoc. (Class S)
1.78% 02/25/31 450,926 21,023(e,f,g)
Federal National Mortgage
Assoc. REMIC
1.88% 01/25/37 1,209,658 76,741(e,f,g)
4.50% 11/25/13 166,374 6,216(e,f)
4.91% 03/25/31 438,578 413,370(f,g)
5.00% 10/25/22 129,879 20,924(e,f)
7.00% 09/25/20 1,000 1,006 (f)
Federal National Mortgage
Assoc. REMIC (Class B)
6.13% 12/25/22 474 391(c,d,f)
Federal National Mortgage Assoc.
REMIC (Class J)
1080.91% 03/25/22 7 52(e,f)
Federal National Mortgage Assoc.
REMIC (Class K)
1008.00% 05/25/22 11 289(e,f)
Federal National Mortgage Assoc.
STRIPS (Class 2)
5.00% 08/01/34 1,296,348 337,456 (e)
7,092,198
PRINCIPAL
AMOUNT VALUE
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ASSET BACKED -- 12.3%
BA Credit Card Trust
5.32% 08/15/12 $3,500,000 $ 3,500,000(f,g)
Bank One Issuance Trust
3.59% 05/17/10 85,000 84,698(f)
Capital One Master Trust (Class C)
6.70% 06/15/11 200,000 202,348(a,f)
Carmax Auto Owner Trust
4.35% 03/15/10 131,000 129,678(f)
Chase Funding Mortgage Loan
Asset-Backed Certificates
5.60% 02/25/33 75,075 75,100(f,g)
5.75% 05/25/32 32,000 30,096(f)
Citibank Credit Card Issuance Trust
4.45% 04/07/10 274,000 271,656(f)
Countrywide Asset-Backed
Certificates
5.75% 05/25/33 18,750 18,759(f,g)
GSAA Trust
5.38% 10/25/36 1,460,213 1,460,209(f,g)
Honda Auto Receivables Owner
Trust (Class A)
4.15% 10/15/10 146,000 144,251(f)
JP Morgan Mortgage
Acquisition Corp.
5.47% 03/01/37 1,000,000 999,440(g)
Mid-State Trust
7.54% 07/01/35 2,634 2,779(f)
Option One Mortgage Loan Trust
5.45% 06/25/37 1,000,000 1,000,554(g)
Peco Energy Transition Trust
6.52% 12/31/10 192,000 197,625(f)
Residential Asset Securities Corp.
5.82% 07/25/32 9,155 9,157(f,g)
Superior Wholesale Inventory
Financing Trust (Class A)
5.50% 06/15/10 2,000,000 2,004,965(f,g)
Swift Master Auto Receivables
Trust (Class A)
5.42% 06/15/12 1,500,000 1,500,000(g)
Volkswagen Auto Lease
Trust (Class A)
3.94% 10/20/10 88,000 87,727(f)
Washington Mutual Master
Note Trust
5.35% 05/15/14 5,000,000 5,000,000(a,g)
Wells Fargo Home Equity Trust
3.97% 05/25/34 62,968 61,151(f,g)
16,780,193
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements.
7
INCOME FUND
Schedule of Investments June 30, 2007 (unaudited)
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PRINCIPAL
AMOUNT VALUE
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CORPORATE NOTES -- 27.3%
Abbey National PLC
7.95% 10/26/29 $200,000 $ 239,851(f)
AES Eastern Energy LP
9.67% 01/02/29 150,000 187,055(f)
AES Ironwood LLC
8.86% 11/30/25 260,071 288,679(f)
Air Jamaica Ltd.
9.38% 07/08/15 130,000 139,100(a,f)
Allied World Assurance Holdings Ltd.
7.50% 08/01/16 110,000 115,673(f)
American Electric Power
Company, Inc. (Series D)
5.25% 06/01/15 90,000 86,444(f)
American International Group, Inc.
6.25% 05/01/36 155,000 157,754(f)
American Railcar Industries, Inc.
7.50% 03/01/14 60,000 59,700(f)
Amgen Inc.
5.85% 06/01/17 165,000 162,307(a,f)
Aramark Corp.
8.50% 02/01/15 135,000 137,363(a,f)
Arizona Public Service Co.
6.25% 08/01/16 165,000 165,776(f)
BAC CAP TRUST V
5.63% 03/08/35 180,000 160,562(f)
Banco Santander Chile
5.38% 12/09/14 215,000 209,728(a,f)
BanColombia S.A.
6.88% 05/25/17 80,000 77,500(f)
Basell AF SCA
8.38% 08/15/15 375,000 359,063(a)
BellSouth Corp.
4.20% 09/15/09 100,000 97,321(f)
6.55% 06/15/34 185,000 184,358(f)
Bertin Ltd.
10.25% 10/05/16 100,000 109,500(a,f)
BJ Services Co.
5.75% 06/01/11 165,000 164,541(f)
Bristol-Myers Squibb Co.
5.88% 11/15/36 100,000 94,116(f)
British Telecommunications PLC
8.63% 12/15/10 65,000 71,048(f)
Cablevision Systems Corp.
8.00% 04/15/12 50,000 49,375(f)
Capital One Bank
6.50% 06/13/13 75,000 76,923(f)
Carolina Power & Light Co.
5.15% 04/01/15 80,000 76,715(f)
5.70% 04/01/35 45,000 41,904(f)
6.13% 09/15/33 235,000 232,615(f)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Chaoda Modern Agriculture
7.75% 02/08/10 $130,000 $ 120,900(a,f)
Chesapeake Energy Corp.
6.63% 01/15/16 180,000 173,250(a,f)
Chubb Corp.
6.00% 05/11/37 140,000 133,872(f)
CIT Group, Inc.
5.13% 09/30/14 50,000 46,866(f)
Citigroup, Inc.
5.13% 02/14/11 220,000 217,250(f)
Citizens Communications Co.
7.13% 03/15/19 450,000 425,250(f)
Clarendon Alumina Production Ltd.
8.50% 11/16/21 255,000 270,300(a,f)
Clear Channel Communications, Inc.
4.25% 05/15/09 90,000 86,984(f)
4.50% 01/15/10 390,000 372,661(f)
CMS Energy Corp.
7.75% 08/01/10 130,000 135,185(f)
Commonwealth Bank of Australia
6.02% 03/29/49 160,000 156,200(a,f,g)
Constellation Brands, Inc.
7.25% 05/15/17 275,000 268,125(a,f)
Consumers Energy Co.
5.15% 02/15/17 125,000 117,478(f)
Corrections Corp of America
7.50% 05/01/11 165,000 167,269(f)
COX Communications, Inc.
7.13% 10/01/12 220,000 232,204(f)
7.75% 11/01/10 130,000 138,202(f)
CRH America, Inc.
6.00% 09/30/16 110,000 108,762(f)
CSC Holdings, Inc. (Series B)
8.13% 07/15/09 205,000 209,100(f)
CSX Corp.
6.15% 05/01/37 165,000 158,095(f)
CSX Transportation, Inc.
9.75% 06/15/20 105,000 134,177(f)
DaimlerChrysler NA Holding Corp.
4.05% 06/04/08 110,000 108,567(f)
DBS Bank Ltd.
5.00% 11/15/19 235,000 221,096(a,f,g)
Deluxe Corp.
3.50% 10/01/07 300,000 297,000
Denny's Holdings Inc.
10.00% 10/01/12 300,000 316,500
Dex Media West LLC
8.50% 08/15/10 460,000 476,675
Dillard's, Inc.
6.63% 11/15/08 390,000 390,975
Dominion Resources, Inc. (Series B)
6.30% 09/30/66 395,000 395,552(f,g)
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements.
8
INCOME FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Dover Corp.
6.50% 02/15/11 $ 90,000 $ 92,589(f)
6.65% 06/01/28 60,000 63,645(f)
Duke Energy Corp.
5.38% 01/01/09 50,000 49,883(f)
Dynegy Holdings Inc.
7.75% 06/01/19 260,000 241,800(a)
Echostar DBS Corp.
7.00% 10/01/13 460,000 453,100(f)
Edison Mission Energy
7.00% 05/15/17 300,000 282,750(a)
EI Du Pont de Nemours & Co.
4.88% 04/30/14 110,000 104,376(f)
El Paso Electric Co.
6.00% 05/15/35 90,000 83,934
Embarq Corp.
7.08% 06/01/16 165,000 165,758(f)
Empresa Energetica de Sergipe and
Sociedade Anonima de Eletrificaao
da Paraiba
10.50% 07/19/13 115,000 128,225(a,f)
Equistar Chemicals LP
8.75% 02/15/09 260,000 269,100
Federated Retail Holdings Inc.
5.35% 03/15/12 220,000 215,963
FirstEnergy Corp. (Series B)
6.45% 11/15/11 225,000 230,718(f)
Freescale Semiconductor Inc.
8.88% 12/15/14 300,000 286,500(a)
Galaxy Entertainment Finance
Company Ltd.
9.88% 12/15/12 100,000 108,125(f)
Gaz Capital for Gazprom
6.51% 03/07/22 335,000 330,645(a)
Georgia Gulf Corp.
9.50% 10/15/14 115,000 114,425
Globo Comunicacoes e
Participacoes S.A.
7.25% 04/26/22 100,000 96,625(a)
GMAC LLC
5.13% 05/09/08 390,000 385,129
5.85% 01/14/09 160,000 157,686
Goldman Sachs Group, Inc.
6.60% 01/15/12 705,000 730,930(f)
6.88% 01/15/11 220,000 228,966
GTE Corp.
6.94% 04/15/28 240,000 245,636(f)
Harrah's Operating Company, Inc.
5.38% 12/15/13 220,000 186,450
HCA Inc.
9.13% 11/15/14 390,000 409,988(a,f)
Hexion US Finance Corp.
9.75% 11/15/14 260,000 269,100
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Hospira, Inc.
5.55% 03/30/12 $160,000 $ 158,155
HSBC Bank USA NA
4.63% 04/01/14 150,000 140,174
HSBC Capital Funding LP (Series 1)
9.55% 12/31/49 65,000 71,777(a,f,g)
HSBC Finance Corp.
6.75% 05/15/11 95,000 98,485
HSBC Holdings PLC
6.50% 05/02/36 100,000 102,669(f)
Hutchison Whampoa Finance CI Ltd.
(Series C)
7.50% 08/01/27 285,000 313,860(a,f)
Hydro Quebec
8.50% 12/01/29 75,000 100,712(f)
Idearc, Inc.
8.00% 11/15/16 260,000 262,600
IIRSA Norte Finance Ltd.
8.75% 05/30/24 149,868 173,847(a,f)
Industrias Unidas S.A.
11.50% 11/15/16 140,000 147,350(a,f)
ING Capital Funding TR III
8.44% 12/29/49 175,000 190,012(g)
ING Groep N.V.
5.78% 12/29/49 185,000 178,352(g)
Inmarsat Finance PLC
7.25% 11/15/12 335,000 319,506(c,i)
International Steel Group Inc.
6.50% 04/15/14 145,000 147,359
Interoceanica IV Finance Ltd.
4.19% 11/30/18 150,000 93,435(a,c)
4.23% 11/30/25 150,000 69,375(a,c)
IPSCO, Inc.
8.75% 06/01/13 120,000 127,125
iStar Financial, Inc. (REIT)
7.00% 03/15/08 40,000 40,324(f)
JBS S.A.
9.38% 02/07/11 140,000 144,900
JP Morgan Chase & Co.
7.00% 11/15/09 195,000 201,493(f)
JP Morgan Chase Bank
5.88% 06/13/16 275,000 274,506
Kansas Gas & Electric
5.65% 03/29/21 105,000 100,734(f)
Kazkommerts International BV
7.00% 11/03/09 170,000 170,646(a)
Landsbanki Islands
6.06% 08/25/09 170,000 171,766(a,f,g)
Libbey Glass Inc.
12.38% 06/01/11 145,000 160,225(g)
Lippo Karawaci Finance BV
8.88% 03/09/11 150,000 149,383
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements.
9
INCOME FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Lloyds TSB Group PLC
6.27% 12/31/49 $100,000 $ 94,868(a,f,g)
Lukoil International Finance BV
6.36% 06/07/17 110,000 106,370(a)
Majestic Star Casino LLC
9.50% 10/15/10 300,000 312,000(f)
Marfrig Overseas Ltd.
9.63% 11/16/16 140,000 146,300(a)
Markel Corp.
7.35% 08/15/34 60,000 61,986(f)
MBIA, Inc.
5.70% 12/01/34 90,000 82,689
Mediacom LLC
9.50% 01/15/13 230,000 235,175(f)
Merck & Company, Inc.
5.75% 11/15/36 70,000 65,349(f)
Metropolitan Life Global Funding I
4.25% 07/30/09 185,000 181,196(a,f)
MGM Mirage
7.50% 06/01/16 170,000 161,288
Midamerican Energy Holdings Co.
6.13% 04/01/36 115,000 111,102(f)
Mizuho Financial Group Cayman Ltd.
8.38% 12/29/49 75,000 78,314
Mohegan Tribal Gaming Authority
6.38% 07/15/09 20,000 19,800
8.00% 04/01/12 270,000 278,775(f)
MUFG Capital Finance 1 Ltd.
6.35% 07/29/49 100,000 98,145(f,g)
Munich Re America Corp. (Series B)
7.45% 12/15/26 105,000 116,822(f)
NAK Naftogaz Ukrainy
8.13% 09/30/09 100,000 99,969
Nakilat Inc.
6.07% 12/31/33 215,000 201,468(a,f)
6.27% 12/31/33 130,000 123,466(a,f)
Nelnet, Inc.
5.13% 06/01/10 205,000 197,643(f)
Nevada Power Co. (Series N)
6.65% 04/01/36 75,000 75,249(f)
Nexen Inc.
6.40% 05/15/37 230,000 220,610
Nisource Finance Corp.
5.45% 09/15/20 165,000 150,046(f)
7.88% 11/15/10 50,000 53,410(f)
Norfolk Southern Corp.
8.63% 05/15/10 155,000 167,294(f)
Norfolk Southern Railway Co.
9.75% 06/15/20 170,000 218,111(f)
Nortel Networks Ltd.
10.75% 07/15/16 130,000 143,650(a,f)
Northeast Utilities (Series B)
3.30% 06/01/08 235,000 229,840(f)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Northern States Power Co.
6.25% 06/01/36 $ 65,000 $ 66,248(f)
NorthWestern Corp.
5.88% 11/01/14 85,000 82,487(f)
Ohio Power Co. (Series E)
6.60% 02/15/33 65,000 67,264(f)
ONEOK Partners LP
5.90% 04/01/12 110,000 110,626(f)
OPTI Canada Inc.
8.25% 12/15/14 265,000 268,975(a,f)
Orion Power Holdings Inc.
12.00% 05/01/10 260,000 293,800
Owens Brockway Glass
Container Inc.
8.88% 02/15/09 210,000 213,675
Pacific Bell
7.13% 03/15/26 85,000 89,674(f)
Pacific Gas & Electric Co.
5.80% 03/01/37 105,000 98,017
PanAmSat Corp.
9.00% 08/15/14 240,000 250,200(f)
Pemex Finance Ltd.
9.03% 02/15/11 48,750 51,600(f)
Pemex Project Funding Master Trust
6.13% 08/15/08 265,000 266,031(f)
7.38% 12/15/14 30,000 32,540(f)
7.88% 02/01/09 65,000 67,204
Petrobras International Finance Co.
6.13% 10/06/16 110,000 107,800(f)
Playtex Products, Inc.
8.00% 03/01/11 130,000 133,900(f)
PNC Preferred Funding Trust I
6.52% 12/31/49 225,000 227,612(a,g)
Potomac Edison Co.
5.35% 11/15/14 95,000 91,991(f)
Prudential Financial, Inc.
5.70% 12/14/36 165,000 152,276(f)
6.10% 06/15/17 105,000 106,184
Puget Sound Energy, Inc.
3.36% 06/01/08 125,000 122,597(f)
5.48% 06/01/35 110,000 96,595(f)
Puget Sound Energy, Inc. (Series A)
6.97% 06/01/67 210,000 210,000(g)
Pulte Homes, Inc.
4.88% 07/15/09 130,000 126,039(f)
Quebecor World Capital Corp.
4.88% 11/15/08 390,000 378,300
Rabobank Capital Funding Trust
5.25% 12/29/49 130,000 121,721(a,f,g)
Rede Empresas de Energia
Eletrica S.A.
11.13% 04/02/49 150,000 155,625(a)
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements.
10
INCOME FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Reichhold Industries, Inc.
9.00% 08/15/14 $130,000 $ 132,600(a,f)
Reliant Energy, Inc.
7.88% 06/15/17 100,000 97,250
Residential Capital LLC
6.38% 06/30/10 220,000 216,959
6.46% 04/17/09 220,000 219,635 (g)
Resona Bank Ltd.
5.85% 09/29/49 215,000 205,566(a,f,g)
Rock-Tenn Co.
8.20% 08/15/11 285,000 293,550
Rouse Company LP (REIT)
6.75% 05/01/13 165,000 164,853(a,f)
Royal Bank of Scotland Group PLC
5.00% 10/01/14 115,000 110,062 (f)
RSHB Capital S.A.
6.30% 05/15/17 100,000 97,880 (a)
Sabine Pass LNG LP
7.25% 11/30/13 185,000 183,613 (a)
7.50% 11/30/16 265,000 263,675 (a)
Security Benefit Life Insurance
8.75% 05/15/16 120,000 137,651 (a)
Seitel, Inc.
9.75% 02/15/14 300,000 297,000 (a)
Sierra Pacific Resources
8.63% 03/15/14 450,000 482,990
Simon Property Group, L.P. (REIT)
4.60% 06/15/10 115,000 111,977 (f)
Skandinaviska Enskilda Banken AB
7.50% 03/29/49 250,000 259,108(a,f,g)
SLM Corp.
4.50% 07/26/10 390,000 360,750
5.66% 01/27/14 342,000 296,624 (g)
Southern Copper Corp.
7.50% 07/27/35 145,000 155,192
Southern Natural Gas Co.
5.90% 04/01/17 75,000 72,541 (a)
Sovereign Capital Trust VI
7.91% 06/13/36 320,000 341,946 (f)
Sprint Capital Corp.
7.63% 01/30/11 660,000 694,943
Stallion Oilfield Finance Corp.
9.75% 02/01/15 260,000 265,200 (a)
Standard Chartered Bank
Hong Kong Ltd.
4.38% 12/03/14 210,000 204,120 (g)
Station Casinos Inc.
7.75% 08/15/16 20,000 19,800 (f)
Stewart Enterprises, Inc.
6.25% 02/15/13 135,000 129,938 (f)
Swift Energy Co.
7.13% 06/01/17 300,000 285,750
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Telecom Italia Capital S.A.
6.20% 07/18/11 $195,000 $ 197,569
Telefonica Emisiones SAU
5.86% 02/04/13 150,000 149,674
Tennessee Gas Pipeline Co.
7.63% 04/01/37 85,000 92,991
8.38% 06/15/32 110,000 128,986
Tesoro Corp.
6.50% 06/01/17 80,000 78,200(a)
Titan Petrochemicals Group Ltd.
8.50% 03/18/12 100,000 95,250(a)
TNK-BP Finance S.A.
6.13% 03/20/12 200,000 195,400(a)
6.63% 03/20/17 100,000 96,880(a)
Tronox Worldwide LLC
9.50% 12/01/12 180,000 187,650(f)
UBS Preferred Funding Trust I
8.62% 10/29/49 125,000 135,761(g)
United Overseas Bank Ltd.
5.38% 09/03/19 185,000 178,281(a,g)
Valspar Corp.
5.63% 05/01/12 110,000 108,596
VeraSun Energy Corp.
9.38% 06/01/17 290,000 269,700(a)
Verizon Global Funding Corp.
7.25% 12/01/10 220,000 231,877
Verizon Pennsylvania, Inc.
8.35% 12/15/30 70,000 80,511(f)
8.75% 08/15/31 110,000 133,241(f)
Vitro S.A. de C.V.
8.63% 02/01/12 100,000 101,500(a)
VTB Capital S.A.
5.96% 08/01/08 115,000 115,115(a,f,g)
Weatherford International, Inc.
5.95% 06/15/12 170,000 171,526(a)
Westar Energy, Inc.
7.13% 08/01/09 60,000 61,366(f)
Westlake Chemical Corp.
6.63% 01/15/16 250,000 236,875(f)
Windstream Corp.
8.63% 08/01/16 285,000 301,388
Wisconsin Electric Power
5.70% 12/01/36 40,000 37,651(f)
37,171,359
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 13.5%
Banc of America Commercial
Mortgage Inc.
4.13% 07/10/42 200,000 194,681(f)
5.32% 10/10/11 148,000 145,958(f)
5.69% 03/10/17 800,000 791,530(f)
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements.
11
INCOME FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Banc of America Commercial
Mortgage Inc. (Class A)
5.79% 05/11/35 $ 289,169 $ 291,358 (f)
Banc of America Commercial
Mortgage Inc. (Class C)
5.70% 04/10/17 100,000 97,184 (f)
Banc of America Funding Corp.
5.74% 03/20/36 69,700 69,073(f,g)
5.84% 02/20/36 174,467 173,775(f,g)
Banc of America Mortgage
Securities (Class B)
5.38% 01/25/36 74,614 72,545(f,g)
Bank of America Alternative
Loan Trust
6.50% 07/25/35 74,733 75,094 (f)
Bear Stearns Commercial
Mortgage Securities
5.48% 10/12/41 245,000 243,005(f,g)
5.53% 10/12/41 245,000 241,418(f,g)
6.02% 02/14/31 300,000 301,597 (f)
Bear Stearns Commercial Mortgage
Securities (Class A)
5.66% 06/11/40 600,000 600,537 (g)
CalSTRS Trust
4.13% 11/20/12 529,000 526,175(a,f)
Countrywide Alternative Loan Trust
5.98% 05/25/36 24,689 21,380(f,g)
6.00% 03/25/36 - 08/25/36 132,399 93,597 (f)
Countrywide Alternative Loan
Trust (Class B)
6.00% 05/25/36 - 08/25/36 64,395 47,094 (f)
Countrywide Home Loan Mortgage
Pass Through Trust
5.47% 02/25/47 209,737 207,630(f,g)
Countrywide Home Loan Mortgage
Pass Through Trust (Class M)
5.50% 12/25/35 73,556 68,865 (f)
Credit Suisse Mortgage Capital
Certificates
5.47% 09/15/39 217,000 210,547 (f)
Credit Suisse Mortgage Capital
Certificates (Class C)
5.65% 02/25/36 39,396 37,516(f,g)
Crusade Global Trust (Class A)
5.55% 09/18/34 111,741 111,866(f,g)
CS First Boston Mortgage
Securities Corp.
1.56% 03/15/35 3,159,415 106,337(a,f,g)
5.25% 08/25/34 69,577 68,637 (f)
5.33% 10/25/35 74,047 68,443(f,g)
5.75% 07/15/37 2,378,726 58,712(a,c,f,g)
6.13% 04/15/37 175,000 178,026 (f)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CS First Boston Mortgage Securities
Corp. (Class A)
5.44% 09/15/34 $ 200,000 $ 198,574 (f)
6.53% 06/15/34 200,000 205,660 (f)
DLJ Commercial Mortgage
Corp. (Class A)
7.18% 11/10/33 184,733 192,172 (f)
First Union-Lehman Brothers-Bank
of America
6.56% 11/18/35 118,378 118,841 (f)
GMAC Commercial Mortgage
Securities, Inc.
6.42% 05/15/35 313,979 315,879 (f)
6.47% 04/15/34 159,000 162,728 (f)
GMAC Commercial Mortgage
Securities, Inc. (Class X)
5.71% 12/10/41 3,930,529 80,226(c,f,g)
Greenwich Capital Commercial
Funding Corp.
5.12% 04/10/37 301,000 297,657 (f)
Indymac INDA Mortgage Loan Trust
5.15% 01/25/36 99,828 95,975(f,g)
Indymac INDA Mortgage Loan
Trust (Class B)
5.15% 01/25/36 99,828 98,124(f,g)
Indymac Index Mortgage Loan Trust
5.36% 06/25/35 117,928 115,831(f,g)
JP Morgan Chase Commercial
Mortgage Securities Corp.
1.27% 01/12/39 2,509,194 78,981(a,f,g)
5.75% 02/12/49 1,100,000 1,089,858 (g)
6.47% 11/15/35 190,000 195,498 (f)
JP Morgan Mortgage Trust
5.87% 04/25/37 160,000 159,811 (g)
LB-UBS Commercial Mortgage Trust
4.06% 09/15/27 495,000 482,443(f,g)
5.26% 09/15/39 150,000 148,112 (f)
5.42% 02/15/40 800,000 773,365
5.64% 01/18/12 3,234,344 79,947(c,f,g)
6.23% 03/15/26 130,000 131,259 (f)
6.85% 10/15/35 791,165 32,438(a,c,f,g)
7.47% 03/15/36 3,189,295 88,277(a,c,f,g)
7.49% 02/15/40 2,709,764 57,183(a,c,f,g)
LB-UBS Commercial Mortgage
Trust (Class A)
6.13% 12/15/30 172,000 175,259 (f)
6.65% 11/15/27 144,000 148,575 (f)
LB-UBS Commercial Mortgage
Trust (Class B)
6.65% 07/14/16 34,000 35,262(a,f)
LB-UBS Commercial Mortgage
Trust (Class X)
5.76% 09/15/39 6,830,000 212,026(c,f,g)
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements.
12
INCOME FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Master Alternative Loans Trust
5.00% 08/25/18 $170,589 $ 27,454(e,f)
6.50% 08/25/34 - 05/25/35 471,096 473,881(f)
Master Alternative Loans
Trust (Class 3)
6.50% 01/25/35 129,378 129,984(f)
Merrill Lynch/Countrywide
Commercial Mortgage
Trust (Class A)
5.49% 03/12/51 800,000 775,051(g)
5.75% 06/12/50 500,000 494,781(g)
MLCC Mortgage Investors, Inc.
5.38% 02/25/36 59,995 58,778(f,g)
Morgan Stanley Capital I
5.28% 12/15/43 102,000 100,489(f,g)
5.33% 12/15/43 102,000 97,993(f,g)
5.39% 11/12/41 280,000 268,821(f,g)
5.44% 02/20/44 250,000 244,605(a,g)
5.45% 02/12/44 800,000 773,485(g)
5.69% 04/15/49 600,000 590,915(g)
5.71% 07/20/44 100,000 99,845(f)
7.11% 04/15/33 498,990 511,671(f)
Morgan Stanley Capital I (Class A)
5.36% 02/12/44 175,000 172,755(g)
Morgan Stanley Dean Witter
Capital I
7.20% 10/15/33 184,955 191,628(f)
Morgan Stanley Dean Witter
Capital I (Class A)
6.39% 10/15/35 150,000 153,996(f)
6.54% 02/15/31 21,752 22,130(f)
Nomura Asset Securities
Corp. (Class A)
6.59% 03/15/30 472,878 475,672(f)
PNC Mortgage Acceptance
Corp. (Class A)
6.36% 03/12/34 300,000 306,694
Residential Funding Mortgage
Security I
5.75% 01/25/36 196,918 186,961(f)
Wachovia Bank Commercial
Mortgage Trust
5.34% 12/15/43 800,000 766,349
5.42% 04/15/47 400,000 393,872
Wells Fargo Mortgage Backed
Securities Trust
5.39% 08/25/35 106,306 102,436(f,g)
5.50% 01/25/36 149,995 140,288(f)
18,433,075
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SOVEREIGN BONDS -- 0.4%
Government of Argentina
7.00% 04/17/17 $ 175,000 $ 153,125
Government of Bahamas
6.63% 05/15/33 125,000 133,761(a,f)
Government of Canada
7.50% 09/15/29 165,000 201,474
Government of Panama
6.70% 01/26/36 105,000 107,100
595,460
TOTAL BONDS AND NOTES
(COST $149,445,656) 145,788,417
- --------------------------------------------------------------------------------
SECURITIES PURCHASED WITH COLLATERAL
FROM SECURITIES ON LOAN -- 15.4%
- --------------------------------------------------------------------------------
ASSET BACKED -- 10.9%
Bear Stearns Asset Backed
Securities Inc.
5.54% 11/25/35 2,000,000 2,001,989(f,g)
Countrywide Asset-Backed
Certificates
5.43% 06/25/35 690,843 690,881(f,g)
Fleet Home Equity Loan
Trust (Class A)
5.57% 01/20/33 295,852 296,118(f,g)
Ford Credit Floorplan Master
Owner Trust (Class A)
5.36% 07/15/09 2,500,000 2,499,934(f,g)
RAAC Series (Class A)
5.49% 08/25/36 4,353,000 4,352,096(f,g)
Residential Asset Mortgage
Products, Inc.
5.52% 04/25/35 5,000,000 5,004,814(f,g)
5.65% 12/25/33 28,698 28,720(f,g)
Residential Asset Mortgage
Products, Inc. (Class A)
5.88% 06/25/32 37,035 37,047(f,g)
14,911,599
CORPORATE NOTES -- 1.5%
Morgan Stanley
5.41% 05/07/09 2,000,000 2,000,102(g)
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements.
13
INCOME FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.0%
Granite Mortgages PLC (Class 1)
5.54% 01/20/43 $ 478,261 $ 478,562(f,g)
JP Morgan Alternative Loan Trust
5.38% 08/25/36 1,278,524 1,278,569(f,g)
Puma Finance Ltd. (Class A)
5.54% 10/11/34 165,004 165,337(f,g)
Residential Accredit Loans, Inc.
5.50% 07/25/36 2,201,277 2,200,563(f,g)
4,123,031
TOTAL SECURITIES PURCHASED WITH COLLATERAL
FROM SECURITIES ON LOAN
(COST $21,028,605) 21,034,732
TOTAL INVESTMENT IN SECURITIES
(COST $170,474,261) 166,823,149
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 14.2%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 6.7%
GEI Short Term Investment Fund
5.55% 9,115,138 9,115,138(c,j)
SHORT-TERM SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN -- 7.5%
GEI Short Term Investment Fund
5.55% 10,261,338 10,261,338(c,j)
TOTAL SHORT-TERM INVESTMENTS
(COST $19,376,476) 19,376,476
TOTAL INVESTMENTS
(COST $189,850,737) 186,199,625
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (36.5)% (49,783,455)
------------
NET ASSETS-- 100.0% $136,416,170
============
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Income Fund had the following long futures contracts open at June 30,
2007 (unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------
90 Day Sterling
Future December 2007 25 $ 5,877,346 $(18,945)
Eurodollar
Futures September 2007 87 20,590,725 1,936
U.S. Treasury
Notes 10 Yr.
Futures September 2007 86 9,090,469 49,569
----------
$32,560
==========
See Notes to Schedule of Investments on page 15 and Notes to Financial
Statements.
14
Notes to Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Pursuant to Rule 144A of the Securities Act of 1933, these securities may be
resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 2007, these securities amounted to
$17,032,390, or 12.49% of net assets for the GE Investments Income 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, 2007, 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, 2007.
(h) All or a portion of the security is out on loan.
(i) Step coupon bond. Security becomes interest bearing at a future date.
(j) GEAM, the investment advisor of the fund, serves as investment advisor of
the GEI Short Term Investment Fund.
+ Percentages are based on net assets as of June 30, 2007.
Abbreviations:
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
6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 1/3/95
Net asset value, beginning of period ........ $11.80 $11.84 $12.25 $12.61 $12.93 $12.26
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .................... 0.31 0.56 0.61 0.55 0.51 0.37
Net realized and unrealized
gains/(losses) on investments ......... (0.19) (0.04) (0.36) (0.12) (0.04) 0.84
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS ..... 0.12 0.52 0.25 0.43 0.47 1.21
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .................... -- 0.56 0.61 0.57 0.56 0.38
Net realized gains ....................... -- -- 0.05 0.22 0.23 0.16
Return of capital ........................ -- -- 0.00(b) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ......................... -- 0.56 0.66 0.79 0.79 0.54
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD .............. $11.92 $11.80 $11.84 $12.25 $12.61 $12.93
====================================================================================================================================
TOTAL RETURN (A) ............................ 1.02% 4.37% 2.04% 3.42% 3.60% 9.89%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ........................ $136,416 $126,732 $116,558 $135,172 $189,318 $220,800
Ratios to average net assets:
Net investment income* ................ 5.29% 5.07% 4.49% 3.82% 3.24% 3.79%
Expenses* ............................. 0.60% 0.61% 0.60% 0.59% 0.55% 0.53%
Portfolio turnover rate .................. 227% 270% 311% 343% 419% 385%
NOTES TO FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
(b) Less than $0.01 per share.
* Annualized for periods less than one year.
+ Unaudited.
See Notes to Financial Statements.
16
Statement of Assets
and Liabilities JUNE 30, 2007 (UNAUDITED) INCOME
FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $170,474,261) .............................................. $166,823,149
Short-term affiliated investments (at amortized cost) .................................................. 19,376,476
Foreign cash (cost $464,834) ........................................................................... 442,648
Receivable for investments sold ........................................................................ 19,207,367
Income receivables ..................................................................................... 1,467,916
Receivable for fund shares sold ........................................................................ 17,705
Variation margin receivable ............................................................................ 45,175
Other assets ........................................................................................... 1,460
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ....................................................................................... 207,381,896
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned ............................................................... 31,296,070
Payable for investments purchased ...................................................................... 39,579,456
Payable for fund shares redeemed ....................................................................... 4,829
Payable to GEAM ........................................................................................ 82,683
Variation margin payable ............................................................................... 2,688
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES .................................................................................. 70,965,726
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................................................ $136,416,170
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in ........................................................................................ 140,201,497
Undistributed (distribution in excess of) net investment income ........................................ 3,588,763
Accumulated net realized gain (loss) ................................................................... (3,733,349)
Net unrealized appreciation/(depreciation) on:
Investments ........................................................................................ (3,651,112)
Futures ............................................................................................ 32,560
Foreign currency related transactions .............................................................. (22,189)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................................................ $136,416,170
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................................................ $136,416,170
Shares outstanding ($0.01 par value; unlimited shares authorized) ......................................... 11,446,197
Net asset value per share ................................................................................. $11.92
* Includes $30,395,929 of securities on loan.
See Notes to Financial Statements.
17
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) INCOME
FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Interest ................................................................................. $ 3,141,766
Interest from affliated investments* ..................................................... 769,630
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ............................................................................... 3,911,396
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ......................................................... 332,622
Transfer agent ........................................................................... 18
Trustee's fees ........................................................................... 1,855
Custody and accounting expenses .......................................................... 43,253
Professional fees ........................................................................ 10,955
Registration expenses .................................................................... 1,977
Other expenses ........................................................................... 6,736
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ............................................................................. 397,416
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ............................................................... 3,513,980
===========================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ........................................................................... (1,023,609)
Futures ............................................................................... (133,519)
Written options ....................................................................... (3,220)
Foreign currency transactions ......................................................... 22,537
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ........................................................................... (1,165,921)
Futures ............................................................................... 87,973
Foreign currency transactions ......................................................... (20,313)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ................................... (2,236,072)
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................ $1,277,908
===========================================================================================================================
* Income attributable to security lending, net of rebate expenses, was $72,283.
See Notes to Financial Statements.
18
Statements of
Changes in Net Assets
INCOME
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007 DECEMBER 31,
(UNAUDITED) 2006
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) .............................................................. $ 3,513,980 $ 5,771,592
Net realized gain (loss) on investments, futures, written options,
foreign currency transactions and swaps .................................................. (1,137,811) (1,197,380)
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation ................... (1,098,261) 326,388
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations .................................................... 1,277,908 4,900,600
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ...................................................................... -- (5,692,439)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .......................................................................... -- (5,692,439)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions .......................... 1,277,908 (791,839)
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ............................................................... 15,484,200 20,048,467
Value of distributions reinvested .......................................................... -- 5,692,439
Cost of shares redeemed .................................................................... (7,078,379) (14,774,800)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ........................................... 8,405,821 10,966,106
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ...................................................... 9,683,729 10,174,267
NET ASSETS
Beginning of period .......................................................................... 126,732,441 116,558,174
- ------------------------------------------------------------------------------------------------------------------------------------
End of period ............................................................................... $136,416,170 $126,732,441
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ................. $ 3,588,763 $ 74,783
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ................................................................................ 1,296,669 1,659,946
Issued for distributions reinvested ........................................................ -- 482,819
Shares redeemed ............................................................................ (593,097) (1,241,749)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .......................................................... 703,572 901,016
====================================================================================================================================
See Notes to Financial Statements.
19
Notes to Financial Statements June 30, 2007 (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 thirteen 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, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund, Total Return Fund, Income Fund (the "Fund"), Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions at the date of the financial statements. Actual
results may differ from those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sales occurred on
that day, at the last quoted bid price. Securities listed on the NASDAQ will be
valued at the NASDAQ's official close price. Certain fixed income securities are
valued by a dealer or by a pricing service based upon a matrix system, which
considers market transactions as well as dealer supplied valuations. Short-term
investments maturing within sixty days are valued at amortized cost. If
quotations are not readily available for a portfolio security, or if it is
believed that a quotation or other market 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 procedures require that the fair value of a security be
established by the valuation committee. The fair value committee follows
different protocols for different types of investments and 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. 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. GE Asset Management may also
separately monitor portfolio securities and, consistent with the Fund's fair
value procedures, apply a different value to a portfolio security than would be
applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which a Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
In September 2006, FASB issued Statement of Financial Accounting Standards No.
157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single
authoritative definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. FAS 157
applies to fair value measurements already required or permitted by existing
standards. The change to current generally accepted accounting principles from
the application of FAS 157 relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. Management of the Fund does not believe the adoption of FAS 157
will materially impact the financial statement amounts, however, additional
disclosures may be required about the inputs used to
20
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
develop the measurements and the effect of certain of the measurements on
changes in net assets for the period. FAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instuments that are consistent with the Fund's investment
objectives or policies. The Fund's 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 at
period end. Purchases and sales of securities, income receipts and expense
payments denominated in foreign currencies are translated into U.S. dollars at
the prevailing exchange rate on the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
21
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. The Fund will not enter
into a transaction involving options for speculative purposes. The Fund's risks
in using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Options
are valued at the last sale price, or if no sales occurred on that day, at the
last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
SWAP CONTRACTS As part of the investment strategy, the Fund may invest in swap
agreements, which are agreements to exchange the return generated by one
instrument for the return generated by another instrument. Total return swap
agreements involve commitments to pay interest in exchange for a market linked
return based upon a notional principal amount. To the extent the total return of
the security or index underlying the agreement exceeds or falls short of the
offsetting interest rate obligation, the Fund will receive a payment from or
make a payment to the counterparty. Swaps are marked to market daily based upon
the underlying security or index. Payments received or made are recorded as
realized gain or loss in the Statement of Operations. Entering into swap
agreements involves, to varying degrees, elements of credit and market risk in
excess of the amounts recognized on the Statement of Assets and Liabilities.
Such risks involve the possibility that there will be no liquid market for these
agreements, that the counterparty to the agreements may default on its
obligation to perform and that there may be unfavorable changes in the value of
the index or securities underlying the agreement. Notional principal amounts are
used to express the extent of involvement in these transactions, but the amounts
potentially subject to credit risk are much smaller.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The Fund may purchase or sell
securities on a when-issued or forward commitment basis. These transactions are
arrangements in which the Fund purchases and sells securities with payment and
delivery scheduled a month or more after entering into the transactions. The
price of the underlying securities and the date when these securities will be
delivered and paid for are fixed at the time the transaction is negotiated.
Losses may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contracts. In connection with
such purchases, the Fund maintains cash or liquid assets in an amount equal to
purchase commitments for such underlying securities until settlement date and
for sales commitments, the Fund maintains equivalent deliverable securities as
"cover" for the transaction. Unsettled commitments are valued at the current
market value of the underlying security. Daily fluctuations in the value of such
contracts are recorded as unrealized gains or losses. The Fund will not enter
into such commitments for the purpose of investment leverage.
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
22
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract. If the value of the segregated securities
declines, additional cash or securities is segregated so that the value of the
account will equal the amount of the Fund's commitment with respect to the
contract.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2007, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- ---------------------------------------------------------------------------------------------------------------------------
$189,934,018 $418,010 $(4,152,403) $(3,734,393)
As of December 31, 2006, 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
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, 2006 as follows:
Capital Currency
- --------------------------------------------------------------------------------
$196,033 $--
The tax composition of distributions paid during the year ended December 31,
2006 was as follows:
Long-Term
Ordinary Capital
Income Gains Total
- --------------------------------------------------------------------------------
$5,692,439 $-- $5,692,439
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures,
treatment of realized gains and losses on foreign currency contracts and losses
deferred due to wash sale transactions. Reclassifications due to permanent
book/tax differences are made to the Fund's capital accounts to reflect income
and gains available for distribution (or available capital loss carryovers)
under income tax regulations. These reclassifications have no impact on net
investment income, realized gains or losses, or the net
23
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
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, 2006 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated Paid in
Income Net Realized Gain Capital
- --------------------------------------------------------------------------------
$7,341 $(7,341) $--
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax return to determine whether the tax positions
are "more likely than not" of being sustained by the applicable tax authority.
The adoption of FIN48 did not have an impact on the Fund's net assets and
financial statements.
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 Expenses of the Company which are directly identifiable to one of the
Funds are allocated to that portfolio. Expenses which are not directly
identifiable to one of the Funds are allocated in such a manner as deemed
equitable, taking into consideration the nature and type of expenses and
relative sizes of the Funds. All expenses of the Fund are paid by GEAM and
reimbursed by the Fund.
3. LINE OF CREDIT
The Fund shares a revolving credit facility of up to $25 million with a number
of its affiliates. The credit facility is with its custodian bank, State Street
Bank and Trust Company. The revolving credit facility requires the payment of a
commitment fee equal to 0.09% per annum on the daily unused portion of the
credit facility, payable quarterly. The portion borne by the Funds generally is
borne proportionally based upon net assets. Generally, borrowings under the
credit facility would accrue interest at the Federal Funds Rate plus 50 basis
points and is borne by each of the borrowing Funds. The maximum amount allowed
to be borrowed by any one of the Funds is the lesser of its prospectus
limitation, 20% of its net assets, or $25 million. The credit facility was not
utilized by the Fund during the period ended June 30, 2007.
4. AMOUNTS PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was
retained by the Company's Board of Directors effective May 1, 1997 to act as
investment adviser and administrator of the Fund. Compensation of GEAM for
investment advisory and administrative services is paid monthly based on the
average daily net assets of the Fund at an annualized rate of .50%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ended June 30, 2007, $1,030 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
24
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$381,191,336 $353,645,308
SECURITY LENDING At June 30, 2007, the Fund participated in securities lending:
Loaned
securities at Cash
market value collateral
- --------------------------------------------------------------------------------
$30,395,929 $31,296,070
25
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 58
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 - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM
since February 1997; President and Chief Executive Officer - Mutual Funds at
GEAM since 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,
since March 1993; Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their
inception; Trustee of Elfun Funds, GE Savings & Security Funds and General
Electric Pension Trust since 1988; Trustee of Fordham University since 2003;
Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset
Management (Ireland) since February 1999; Director, GE Asset Management Funds
Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 46
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
26
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager
since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds
and GE Investments Funds since November 2005 and Elfun Funds and GE Savings &
Security Funds since September 2005; from August 2004 to September 2005 Vice
President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds,
Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January
2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from
December 1996 to November 2003, Controller - Mutual Funds, American Skandia
Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and
American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years (Vice President); less than one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General
Counsel - Marketing and Client Services (formerly Asset Management Services) at
GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE
Institutional Funds and GE LifeStyle Funds since September 2003; Vice President
and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since
October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary
since July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
27
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
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 - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds and GE LifeStyle Funds since their inception; Trustee of
Fordham University since 2002 and Marymount College from 2001 through 2002;
Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the
Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since
1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 71
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
28
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member NASD 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, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING
Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES
Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS
AND REAL ESTATE
John J. Walker, EVP, CHIEF FINANCIAL OFFICER
29
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[This page intentionally left blank.]
[This page intentionally left blank.]
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER NASD AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to
portfolio securities during the most recently disclosed 12-month period
ended June 30 is available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE logo omitted]
GE Investments Funds, Inc.
U.S. Equity Fund
Semi-Annual Report
JUNE 30, 2007
[GE logo omitted]
<page>
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 ................................................. 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.
<page>
Notes to Performance June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains distributions, if any. Investment returns and net
asset value on an investment will fluctuate and you may have a gain or loss when
you sell your shares. Periods less than one year are not annualized.
Current performance may be lower or higher than that shown. You may call
toll-free (800) 242-0134 for performance information as of the most recent month
end.
The performance data for the periods through December 12, 1997, reflect the
prior performance and expense ratios of the Variable Investment Trust GE U.S.
Equity Portfolio, the assets of which were transferred to the GE Investments
U.S. Equity Fund, Inc. pursuant to an exemptive order granted by the Securities
and Exchange Commission permitting a substitution of funds that occurred on
December 12, 1997.
Total returns do not reflect expenses associated with the separate account such
as administrative fees, account charges and surrender charges, which, if
reflected, would reduce the total returns for all periods shown.
Shares of the Fund are neither insured nor guaranteed by the U.S. Government,
and their prices will fluctuate with market conditions.
The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500) is
an unmanaged index and do not reflect the actual cost of investing in the
instruments that comprise the index.
The S&P 500 is a market capitalization-weighted index of stocks of 500 large
U.S. companies, which is widely used as a measure of large-cap stock market
performance. The results shown for the foregoing index assume the reinvestment
of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer ranking
calculation is based on the blend of Lipper peer categories, as shown. Lipper is
an independent mutual fund rating service. A Fund's performance may be compared
to or ranked within a universe of mutual funds with investment objectives and
policies similar but not necessarily identical to the Fund's. Such comparisons
or rankings are made on the basis of several factors, including the Fund's
objectives and policies, management style and strategy, and portfolio
composition, and may change over time if any of those factors change.
1
U.S. Equity Fund
- --------------------------------------------------------------------------------
THE U.S. EQUITY FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES
THOMAS R. LINCOLN, PAUL C. REINHARDT, STEPHEN V. GELHAUS AND GEORGE A. BICHER
(PICTURED BELOW LEFT TO RIGHT). EACH OF THE FOREGOING PORTFOLIO MANAGERS
CO-MANAGES ONE OF THREE SUB-PORTFOLIOS, WHICH COMPRISE THE FUND.
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.
THOMAS R. LINCOLN IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN
A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE U.S. EQUITY FUND SINCE MAY
2007. MR. LINCOLN JOINED GE ASSET MANAGEMENT IN 1994 AS A FINANCIAL ANALYST IN
DOMESTIC EQUITIES. MR. LINCOLN BECAME PART OF THE INVESTMENT MANAGEMENT TEAM IN
1997 AND A PORTFOLIO MANAGER FOR DOMESTIC EQUITIES IN 2003.
PAUL C. REINHARDT IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN
A PORTFOLIO MANAGER FOR THE U.S. EQUITY FUND SINCE JANUARY 2001. MR. REINHARDT
JOINED GE ASSET MANAGEMENT IN 1982 AS AN EQUITY ANALYST AND HAS BEEN A PORTFOLIO
MANAGER SINCE 1987.
STEPHEN V. GELHAUS IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A
MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE U.S. EQUITY FUND SINCE JANUARY
2002. MR. GELHAUS JOINED GE ASSET MANAGEMENT IN JUNE 1991 AND WAS A RESEARCH
ANALYST IN THE U.S. EQUITY DEPARTMENT FROM 1995 THROUGH 2001.
Q. HOW DID THE U.S. EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007?
A. For the six-month period ended June 30, 2007, the U.S. Equity Fund returned
6.87%. The S&P 500 Index, the Fund's benchmark, returned 6.96% and the
Fund's Lipper peer group of 205 Large-Cap Core funds returned an average of
7.21% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The period continued a rally that had propelled the U.S. equity markets
higher over the past year. While first-quarter `07 earnings growth moderated
into the single digit range for the first time in three years, corporate
profits did climb +9%, surprising market-watchers to the upside. Despite a
backdrop of slowing economic growth, a weakening dollar and rising oil
[photo omitted]
2
Q&A
prices, stocks rallied amid the strong corporate earnings, record M&A
activity, cooling inflation worries and the absence of Fed tightening. By
early June, several key U.S. equity indices reached new highs. However, the
period ended with a whimper -- during the month of June each broad measure
of U.S. equity market performance retreated. The S&P 500's June decline was
just its second in 13 months, and its second down month in 2007. The
pullback was brought on by renewed inflation fears, and concern that the Fed
might need to raise interest rates this year to keep inflation in check. New
liquidity and credit concerns also spooked the markets, amid the near
collapse of two large sub-prime hedge funds.
During the six-month period, S&P 500 sectors tilted toward global
infrastructure investment outperformed, including energy (+17%), materials
(+17%) and industrials (+11%). Telecom (+16%) also rallied on the strength
of continued restructuring improvements and sector consolidation. Financials
(-1%) offered the only negative sector return, facing credit cycle headwinds
and anxiety stemming from leveraged speculation in the debt market. Consumer
discretionary (+3%), consumer staples (+5%) and health care (+6%) also
lagged.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. A significant underweight in financials has helped the Fund on a
year-to-date basis. Also contributing to performance was strong stock
selection within consumer discretionary and utilities. Within financials,
underweighting commercial banks and REITs helped tremendously as the
sub-prime mortgage market deteriorated. We remain alert to the risks of an
aging credit cycle and have deliberately remained underweight in
credit-sensitive financials, preferring the less cyclical insurance
companies. Within consumer discretionary, emphasizing media companies has
benefited the Fund; Liberty Global (+40%) and Liberty Media Capital (+20%)
have shown particular strength. Avoiding lagging household durable companies
also helped our results in the consumer space -- our sole holding, Philips
Electronics, rallied approximately +15% during the period. Strong stock
selection across the board boosted returns within utilities, however, we
have taken some profits in holdings like Constellation (+28%) and Edison
International (+25%).
Offsetting these positives were health care and consumer staples stocks, as
well as our underweight in the outperforming telecommunications sector.
Biotechnology giant Amgen (-19%) was the portfolio's single largest
performance detractor, suffering amid safety concerns regarding its anemia
drugs, and increased FDA scrutiny. However, we continued to like the
strength in Amgen's pipeline of therapeutics, and its long-term prospects.
Commodity-cost pressures have weighed on consumer staples margins (E.G.,
Kimberly-Clark -0%, Clorox -2% and Colgate-Palmolive -0%), and overweighting
staples hurt relative performance. Our continued underweight in telecom was
another key detractor. While we have been building our position in AT&T
(+18%), our underweight versus the benchmark held back returns. We continue
to believe that the cable companies will be more successful taking share
from phone companies than vice versa, hence our larger relative weighting in
media.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. We have remained resolutely committed to investing in high quality large-cap
stocks with predictable and steady earnings growth at compelling valuations.
We continue to be relatively defensively positioned, although at June 30th,
our largest overweight was in technology -- an area that we believe could
benefit from multiple expansion and productivity investment in the months to
come. We initiated a position in Qualcomm, and added to Intel, Cisco and
Paychex. Our tech holdings tend to be less economically sensitive, with high
recurring revenues and ample free cash flow. Our second-largest overweight
remained in health care, a traditionally defensive area with relatively
steady growth and attractive dividend yields.
3
U.S. Equity Fund
- --------------------------------------------------------------------------------
Q&A
We also added to our overweight in consumer staples, initiating a position
in Nestle, and increasing our weighting in Proctor & Gamble. Our largest
underweight remained in financials, reflecting headwinds from a higher
interest rate environment and concerns about the credit cycle -- although we
bolstered our defensive insurance holdings, adding to AIG and initiating a
position in Hartford Financial.
The U.S. has experienced economic growth that we believe is below potential
so far in 2007, and earnings growth has slowed. We are constructive on our
positioning in this environment, and with the high quality of our holdings.
We have expected our companies to demonstrate the financial flexibility and
balance sheet strength to weather a mid-cycle slowdown, and to be bolstered
by a flight to quality in skittish markets. Valuations of larger,
high-quality companies sold at little or no premium in the past six months.
We believe that many of our stock selections will benefit from improving
valuations and superior relative earnings growth. In addition, many of our
multinationals will likely benefit from strong growth outside of North
America. We remain focused on a long-term investment horizon and continue to
utilize a bottom-up, research-driven, fundamental approach to stock
selection.
4
U.S. Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service 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, 2007.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,068.68 3.37
- ------------------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,021.29 3.31
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.66% (FROM
PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 6.87%.
5
U.S. Equity Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
U.S. Equity Fund S&P 500 Index
06/97 $10,000.00 $10,000.00
12/97 11,126.27 11,057.91
12/98 13,731.10 14,231.31
12/99 16,423.33 17,229.53
12/00 16,326.44 15,647.27
12/01 14,943.08 13,783.37
12/02 12,064.63 10,736.98
12/03 14,872.75 13,821.52
12/04 16,087.31 15,325.48
12/05 16,490.92 16,079.27
12/06 19,149.57 18,618.57
06/07 20,464.81 19,914.71
U.S. Equity Fund (ending value $20,465)
S&P 500 Index (ending value $19,915)
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2007
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
- --------------------------------------------------------------------------------
U.S. Equity Fund 6.87% 20.08% 8.95% 7.42%
- --------------------------------------------------------------------------------
S&P 500 Index 6.96% 20.59% 10.72% 7.13%
- --------------------------------------------------------------------------------
Lipper peer group average* 7.21% 19.79% 9.92% 6.00%
- --------------------------------------------------------------------------------
Inception date 1/3/95
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital by investing
at least 80% of its net assets in equity securities of issuers that are tied
economically to the U.S. under normal circumstances.
TOP TEN EQUITY HOLDINGS
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 3.30%
- --------------------------------------------------------------------------------
American International Group, Inc. 3.26%
- --------------------------------------------------------------------------------
PepsiCo, Inc. 2.82%
- --------------------------------------------------------------------------------
Citigroup, Inc. 2.55%
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 2.49%
- --------------------------------------------------------------------------------
Procter & Gamble Co. 2.38%
- --------------------------------------------------------------------------------
Industrial Select Sector SPDR Fund 2.12%
- --------------------------------------------------------------------------------
Wyeth 2.08%
- --------------------------------------------------------------------------------
Microsoft Corp. 2.04%
- --------------------------------------------------------------------------------
Oracle Corp. 1.91%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $92,559 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Information Technology 19.2%
Financials 14.5%
Healthcare 13.7%
Consumer Staples 11.1%
Consumer Discretionary 10.3%
Industrials 9.1%
Energy 8.7%
Short-Term 8.0%
Materials 1.9%
Utilities 1.9%
Telecommunication Services 1.6%
* LIPPER 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-CAP CORE FUNDS PEER GROUP CONSISTING OF 205, 199, 152 AND 64 UNDERLYING
ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
6
U.S. EQUITY FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
U.S. EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 95.0%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 10.9%
Bed Bath & Beyond, Inc. 27,152 $ 977,200(a,e)
Carnival Corp. 11,986 584,557
Comcast Corp. (Class A) 58,515 1,636,079(a,d,e)
General Motors Corp. 4,259 160,990(e)
Home Depot, Inc. 10,708 421,360
Koninklijke Philips Electronics
N.V. ADR 7,749 327,938
Liberty Global, Inc. (Series C) 8,885 349,181(a)
Liberty Media Holding Corp -
Capital (Series A) 4,084 480,605(a)
Lowe's Companies, Inc. 22,944 704,151
News Corp. (Class A) 12,777 271,000
Omnicom Group, Inc. 28,570 1,511,924
Staples, Inc. 19,028 451,534
Starwood Hotels & Resorts
Worldwide, Inc. 1,825 122,403
Target Corp. 11,882 755,695
The Cheesecake Factory 6,456 158,301(a,e)
Time Warner, Inc. 29,205 614,473
9,527,391
CONSUMER STAPLES -- 11.8%
Alberto-Culver Co. 1,218 28,891
Clorox Co. 13,213 820,527
Colgate-Palmolive Co. 11,317 733,907
Diageo PLC ADR 1,460 121,633
General Mills, Inc. 13,036 761,563
Kellogg Co. 2,556 132,375
Kimberly-Clark Corp. 14,665 980,942
Nestle S.A. ADR 1,649 157,727
PepsiCo, Inc. 40,271 2,611,574(d)
Procter & Gamble Co. 36,044 2,205,532
Sara Lee Corp. 8,701 151,397
The Coca-Cola Co. 23,199 1,213,540
Wal-Mart Stores, Inc. 6,632 319,066
10,238,674
ENERGY -- 9.2%
Apache Corp. 2,555 208,462
Devon Energy Corp. 2,030 158,929
EOG Resources, Inc. 3,651 266,742
Exxon Mobil Corp. 36,463 3,058,516(d)
Halliburton Co. 10,343 356,833
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Hess Corp. 10,668 $ 628,985
Occidental Petroleum Corp. 9,341 540,657
Schlumberger Ltd. 19,411 1,648,770
Suncor Energy, Inc. 3,419 307,436
Transocean Inc. 8,019 849,854(a)
8,025,184
FINANCIALS -- 14.9%
ACE Ltd. 6,780 423,886
Allstate Corp. 7,605 467,784
American International Group, Inc. 43,055 3,015,142
AON Corp. 5,902 251,484
Bank of America Corp. 12,169 594,942
Berkshire Hathaway, Inc. (Class B) 186 4,890(a)
BlackRock Inc. (Class A) 973 152,362(e)
CB Richard Ellis Group, Inc.
(Class A) 730 26,645(a,e)
Chubb Corp. 7,119 385,423
Citigroup, Inc. 46,018 2,360,263
Federal Home Loan
Mortgage Corp. 11,884 721,359
Federal National Mortgage Assoc. 11,255 735,289
Hartford Financial Services
Group, Inc. 3,103 305,677
HCC Insurance Holdings, Inc. 4,648 155,290(e)
Mellon Financial Corp. 11,134 489,896
Merrill Lynch & Company, Inc. 304 25,408
Metlife, Inc. 13,312 858,358
Nuveen Investments, Inc. (Class A) 634 39,403(e)
Prudential Financial, Inc. 669 65,047
State Street Corp. 18,347 1,254,935(c)
SunTrust Banks, Inc. 6,265 537,161
The Bank of New York
Company, Inc. 1,034 42,849
12,973,493
HEALTHCARE -- 14.6%
Abbott Laboratories 11,439 612,558(d)
Aetna, Inc. 21,226 1,048,564
Amgen, Inc. 29,549 1,633,764(a)
Baxter International, Inc. 11,302 636,755
Boston Scientific Corp. 13,942 213,870(a)
Bristol-Myers Squibb Co. 6,510 205,456
DaVita, Inc. 5,050 272,094(a)
Gilead Sciences, Inc. 14,940 579,224(a)
GlaxoSmithKline PLC ADR 4,272 223,725(e)
Johnson & Johnson 4,198 258,681
Lincare Holdings Inc. 5,049 201,203(a)
McKesson Corp. 2,738 163,294
Medco Health Solutions, Inc. 4,016 313,208(a)
Medtronic Inc. 16,169 838,524
Novartis AG ADR 4,867 272,893
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements.
7
U.S. EQUITY FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Pfizer Inc. 59,270 $ 1,515,534(d)
Resmed, Inc. 8,183 337,631(a,e)
Thermo Electron Corp. 3,468 179,365(a)
UnitedHealth Group, Inc. 24,997 1,278,347
Wyeth 33,556 1,924,101
12,708,791
INDUSTRIALS -- 7.4%
ABB Ltd. ADR 15,211 343,769
Cooper Industries Ltd. 5,050 288,304
Deere & Co. 3,286 396,752
Dover Corp. 15,322 783,720(d)
Eaton Corp. 2,495 232,035
Emerson Electric Co. 8,082 378,238
General Dynamics Corp. 2,799 218,938
Hexcel Corp. 2,188 46,101(a,e)
ITT Corp. 1,339 91,427
Northrop Grumman Corp. 5,537 431,166
Pitney Bowes Inc. 1,521 71,213(e)
Rockwell Collins, Inc. 1,156 81,660
Southwest Airlines Co. 33,464 498,948(e)
Textron Inc. 8,132 895,415
3M Co. 5,233 454,172
United Technologies Corp. 15,246 1,081,399
Waste Management, Inc. 1,399 54,631
WESCO International, Inc. 1,582 95,632(a)
6,443,520
INFORMATION TECHNOLOGY -- 20.4%
Activision, Inc. 7,301 136,310(a)
Analog Devices, Inc. 15,941 600,019
Automatic Data Processing, Inc. 8,791 426,100
Cisco Systems, Inc. 82,634 2,301,357(a)
Corning Incorporated 4,746 121,260(a)
Dell, Inc. 2,738 78,170(a)
eBay, Inc. 7,385 237,649(a)
EMC Corp. 9,437 170,810(a)
First Data Corp. 9,735 318,042(d)
Hewlett-Packard Co. 10,587 472,392
Intel Corp. 68,007 1,615,846
International Business
Machines Corp. 6,571 691,598(e)
Intuit Inc. 18,253 549,050(a)
Lam Research Corp. 1,947 100,076(a)
Maxim Integrated Products, Inc. 16,012 534,961
Microchip Technology Inc. 8,153 301,987(e)
Microsoft Corp. 63,947 1,884,518(d)
Molex, Inc. (Class A) 16,063 426,473(e)
National Semiconductor Corp. 10,769 304,440(e)
NAVTEQ Corp. 608 25,743(a)
Oracle Corp. 89,549 1,765,011(a)
Paychex, Inc. 25,920 1,013,990
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 23,400 $ 1,015,326
Salesforce.com, Inc. 1,231 52,761(a,e)
Sun Microsystems, Inc. 12,169 64,009(a)
Taiwan Semiconductor
Manufacturing Company
Ltd. ADR 12,499 139,111
Texas Instruments Incorporated 14,737 554,553
Western Union Co. 58,347 1,215,368
Yahoo! Inc. 22,876 620,626(a)
17,737,556
MATERIALS -- 2.0%
Barrick Gold Corp. 19,877 577,824
Freeport-McMoRan Copper &
Gold Inc. (Class B) 3,042 251,938
Monsanto Co. 7,391 499,188
PAN American Silver Corp. 2,738 72,092(a,e)
Praxair, Inc. 5,135 369,669
1,770,711
TELECOMMUNICATION SERVICES -- 1.8%
AT&T, Inc. 12,921 536,222
NII Holdings Inc. (Class B) 3,264 263,535(a)
Sprint Nextel Corp. (Series 1) 6,997 144,908
Verizon Communications Inc. 10,526 433,355(d)
Vodafone Group, PLC ADR 4,137 139,127
1,517,147
UTILITIES -- 2.0%
Constellation Energy Group, Inc. 3,651 318,258
Dominion Resources, Inc. 9,946 858,439
Edison International 4,198 235,592
FPL Group, Inc. 3,424 194,278
PG&E Corp. 3,519 159,411(e)
1,765,978
TOTAL COMMON STOCK
(COST $72,700,405) 82,708,445
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 2.8%
- --------------------------------------------------------------------------------
Financial Select Sector
SPDR Fund 13,493 488,177(g)
Industrial Select Sector
SPDR Fund 50,192 1,959,496(g)
TOTAL EXCHANGE TRADED FUNDS
(COST $1,792,003) 2,447,673
TOTAL INVESTMENTS IN SECURITIES
(COST $74,492,408) 85,156,118
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements.
8
U.S. EQUITY FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 8.5%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.9%
GEI Short Term Investment Fund
5.55% 1,680,179 $ 1,680,179(b,f)
SHORT-TERM SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN -- 6.6%
State Street Navigator Securities
Lending Prime Portfolio
5.36% 5,723,563 5,723,562(b,c)
TOTAL SHORT-TERM INVESTMENTS
(COST $7,403,741) 7,403,741
TOTAL INVESTMENTS
(COST $81,896,149) 92,559,859
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (6.3)% (5,483,808)
-----------
NET ASSETS-- 100.0% $87,076,051
===========
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI U.S. Equity had the following long futures contracts open at
June 30, 2007 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE APPRECIATION
- --------------------------------------------------------------------------------
S&P 500 Index
Futures September 2007 2 $757,700 $2,705
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements.
9
Notes to Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(d) At June 30, 2007, 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) All or a portion of the security is out on loan.
(f) GEAM, the investment advisor of the fund, serves as investment advisor of
the GEI Short Term Investment Fund.
(g) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank
& Trust Co., the Fund's custodian and accounting agent.
+ Percentages are based on net assets as of June 30, 2007.
Abbreviations:
ADR American Depository Receipt
SPDR Standard & Poors Depository Receipts
10
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUND
6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 1/3/95
Net asset value, beginning of period ............... $39.02 $34.06 $33.61 $31.48 $25.75 $32.21
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.21 0.53 0.39 0.44 0.26 0.24
Net realized and unrealized
gains/(losses) on investments ................ 2.47 4.96 0.46 2.13 5.73 (6.45)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ..... 2.68 5.49 0.85 2.57 5.99 (6.21)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................... -- 0.53 0.40 0.44 0.26 0.25
Net realized gains .............................. -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................ -- 0.53 0.40 0.44 0.26 0.25
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ..................... $41.70 $39.02 $34.06 $33.61 $31.48 $25.75
====================================================================================================================================
TOTAL RETURN (A) ................................... 6.87% 16.12% 2.51% 8.17% 23.28% (19.26)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ........ $87,076 $101,885 $98,883 $112,545 $114,123 $102,112
Ratios to average net assets:
Net investment income* ....................... 0.94% 1.43% 1.06% 1.30% 0.95% 0.87%
Expenses* .................................... 0.66% 0.63% 0.63% 0.63% 0.61% 0.58%
Portfolio turnover rate ......................... 30% 45% 40% 30% 39% 37%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited
See Notes to Financial Statements.
11
Statement of Assets
and Liabilities JUNE 30, 2007 (UNAUDITED)
U.S.
EQUITY
FUND
- -------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $74,492,408) ........................ $85,156,118
Short-term Investments (at amortized cost) ..................................... 5,723,562
Short-term affiliated investments (at amortized cost) ........................... 1,680,179
Receivable for investments sold ................................................. 734,740
Income receivables .............................................................. 72,037
Other assets .................................................................... 1,414
- -------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ................................................................ 93,368,050
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned ........................................ 5,723,562
Payable for investments purchased ............................................... 456,604
Payable for fund shares redeemed ................................................ 30,491
Payable to GEAM ................................................................. 80,442
Variation margin payable ........................................................ 900
- -------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................................... 6,291,999
- -------------------------------------------------------------------------------------------------------------
NET ASSETS ......................................................................... $87,076,051
=============================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ................................................................. 69,939,190
Undistributed (distribution in excess of) net investment income ................. 438,193
Accumulated net realized gain (loss) ............................................ 6,032,253
Net unrealized appreciation/(depreciation) on:
Investments ................................................................. 10,663,710
Futures ..................................................................... 2,705
- -------------------------------------------------------------------------------------------------------------
NET ASSETS ......................................................................... $87,076,051
=============================================================================================================
NET ASSETS ......................................................................... 87,076,051
Shares outstanding ($0.01 par value; unlimited shares authorized) .................. 2,088,009
Net asset value per share .......................................................... $41.70
* Includes $5,578,448 of securities on loan.
See Notes to Financial Statements.
12
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)
U.S.
EQUITY
FUND
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ................................................................................... $ 716,382
Interest* .................................................................................. 2,869
Interest from affliated investments ........................................................ 25,505
Less: Foreign taxes withheld ............................................................... (3,967)
- -------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ................................................................................. 740,789
- -------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ........................................................... 256,649
Transfer agent ............................................................................. 24
Trustee's fees ............................................................................. 1,258
Custody and accounting expenses ............................................................ 25,902
Professional fees .......................................................................... 9,945
Registration expenses ...................................................................... 1,805
Other expenses ............................................................................. 9,830
- -------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ............................................................................... 305,413
- -------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ................................................................. 435,376
===================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ............................................................................. 8,690,975
Futures ................................................................................. 19,025
Foreign currency transactions ........................................................... 50
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ............................................................................. (3,005,085)
Futures ................................................................................. 1,235
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ..................................... 5,706,200
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............................. $6,141,576
===================================================================================================================
* Income attributable to security lending activity, net of rebate expenses, was
$2,869.
See Notes to Financial Statements.
13
Statements of
Changes in Net Assets
U.S.
EQUITY
FUND
- ---------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007 DECEMBER 31,
(UNAUDITED) 2006
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) .......................................................... $ 435,376 $ 1,379,790
Net realized gain (loss) on investments, futures, written options,
foreign currency transactions and swaps .............................................. 8,710,050 8,114,057
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation ............... (3,003,850) 5,009,082
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ................................................ 6,141,576 14,502,929
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................................................................. -- (1,376,973)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ...................................................................... -- (1,376,973)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ...................... 6,141,576 13,125,956
- ---------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ........................................................... 543,716 10,918,601
Value of distributions reinvested ...................................................... -- 1,376,973
Cost of shares redeemed ................................................................ (21,493,745) (22,419,927)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ....................................... (20,950,029) (10,124,353)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................................................. (14,808,453) 3,001,603
NET ASSETS
Beginning of period ...................................................................... 101,884,504 98,882,901
- ---------------------------------------------------------------------------------------------------------------------------------
End of period ............................................................................ $ 87,076,051 $101,884,504
=================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD .............. $ 438,193 $ 2,817
- ---------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ............................................................................ 13,423 296,918
Issued for distributions reinvested .................................................... -- 35,118
Shares redeemed ........................................................................ (536,406) (624,307)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ...................................................... (522,983) (292,271)
=================================================================================================================================
See Notes to Financial Statements.
14
Notes to Financial Statements June 30, 2007 (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 thirteen 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, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap
Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions at the date of the financial statements. Actual
results may differ from those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS for which exchange quotations are readily
available are valued at the last sale price, or if no sales occurred on that
day, at the last quoted bid price. Securities listed on the NASDAQ will be
valued at the NASDAQ's official close price. Certain fixed income securities are
valued by a dealer or by a pricing service based upon a matrix system, which
considers market transactions as well as dealer supplied valuations. Short-term
investments maturing within sixty days are valued at amortized cost. If
quotations are not readily available for a portfolio security, or if it is
believed that a quotation or other market 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 procedures require that the fair value of a security be
established by the valuation committee. The fair value committee follows
different protocols for different types of investments and 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. 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. GE Asset Management may also
separately monitor portfolio securities and, consistent with the Fund's fair
value procedures, apply a different value to a portfolio security than would be
applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which a Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
In September 2006, FASB issued Statement of Financial Accounting Standards No.
157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single
authoritative definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. FAS 157
applies to fair value measurements already required or permitted by existing
standards. The change to current generally accepted accounting principles from
the application of FAS 157 relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. Management of the Fund does not believe the adoption of FAS 157
will materially impact the financial statement amounts, however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the
15
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
measurements on changes in net assets for the period. FAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007
and interim periods within those fiscal years.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's or a third party custodian takes possession
of the collateral pledged for investments in repurchase agreements on behalf of
the Fund. The Fund values the underlying collateral daily on a mark-to-market
basis to determine that the value, including accrued interest, is at least equal
to 102% of the repurchase price. In the event the seller defaults and the value
of the security declines, or if the seller enters an insolvency proceeding,
realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange at
period end. Purchases and sales of securities, income receipts and expense
payments denominated in foreign currencies are translated into U.S. dollars at
the prevailing exchange rate on the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
16
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
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.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2007, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- -----------------------------------------------------------------------------------------------------------------------------
$83,784,136 $11,629,351 $(2,853,628) $8,775,723
As of December 31, 2006, 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
- --------------------------------------------------------------------------------
$788,340 12/31/2011
During the year ended December 31, 2006, the Fund utilized approximately
$6,561,486 of capital loss carryovers.
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, 2006.
17
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The tax composition of distributions paid (other than return of capital
distributions for the year) during the year ended December 31, 2006 was as
follows:
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
$1,376,973 $-- $1,376,973
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures and
losses deferred due to wash sale transactions. Reclassifications due to
permanent book/tax differences are made to the Fund's capital accounts to
reflect income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. These reclassifications have no impact
on net investment income, realized gains or losses, or the net asset value of
the Fund. The calculation of net investment income per share in the Financial
Highlights table excludes these adjustments.
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax return to determine whether the tax positions
are "more likely than not" of being sustained by the applicable tax authority.
The adoption of FIN48 did not have an impact on the Fund's net assets and
financial statements.
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 Expenses of the Company which are directly identifiable to one of the
Funds are allocated to that portfolio. Expenses which are not directly
identifiable to one of the Funds are allocated in such a manner as deemed
equitable, taking into consideration the nature and type of expenses and
relative sizes of the Funds. All expenses of the Fund are paid by GEAM and
reimbursed by the Fund.
3. LINE OF CREDIT
The Fund shares a revolving credit facility of up to $25 million with a number
of its affiliates. The credit facility is with its custodian bank, State Street
Bank and Trust Company. The revolving credit facility requires the payment of a
commitment fee equal to 0.09% per annum on the daily unused portion of the
credit facility, payable quarterly. The portion borne by the Funds generally is
borne proportionally based upon net assets. Generally, borrowings under the
credit facility would accrue interest at the Federal Funds Rate plus 50 basis
points and is borne by each of the borrowing Funds. The maximum amount allowed
to be borrowed by any one of the Funds is the lesser of its prospectus
limitation, 20% of its net assets, or $25 million. The credit facility was not
utilized by the Fund during the period ended June 30, 2007.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund at an
annualized rate of .55%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2007, $725 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each Fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
18
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$27,475,934 $46,998,354
SECURITY LENDING At June 30, 2007, the Fund participated in securities lending:
Loaned
securities at Cash
market value collateral*
- --------------------------------------------------------------------------------
$5,578,448 $5,723,562
* COLLATERAL OF $5,733,327 DECREASED BY $9,765 ON JULY 1, 2007 TO REFLECT THE
JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN.
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 58
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 - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM
since February 1997; President and Chief Executive Officer - Mutual Funds at
GEAM since 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,
since March 1993; Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their
inception; Trustee of Elfun Funds, GE Savings & Security Funds and General
Electric Pension Trust since 1988; Trustee of Fordham University since 2003;
Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset
Management (Ireland) since February 1999; Director, GE Asset Management Funds
Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 46
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
20
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years (Vice President); less than one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General
Counsel - Marketing and Client Services (formerly Asset Management Services) at
GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE
Institutional Funds and GE LifeStyle Funds since September 2003; Vice President
and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since
October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary
since July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
21
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds and GE LifeStyle Funds since their inception; Trustee of
Fordham University since 2002 and Marymount College from 2001 through 2002;
Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the
Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since
1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 71
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
22
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member NASD 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, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING
Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES
Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS
AND REAL ESTATE
John J. Walker, EVP, CHIEF FINANCIAL OFFICER
23
[This page intentionally left blank.]
[This page intentionally left blank.]
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER NASD AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to
portfolio securities during the most recently disclosed 12-month period
ended June 30 is available without charge (i) through the Fund's website
at http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE logo omitted]
GE Investments Funds, Inc.
Value Equity Fund
Semi-Annual Report
JUNE 30, 2007
[GE logo omitted]
GE Investments Funds, Inc.
Value 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 ................................................... 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, 2007 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains distributions, if any. Investment returns and net
asset value on an investment will fluctuate and you may have a gain or loss when
you sell your shares. Periods less than one year are not annualized.
Current performance may be lower or higher than that shown. You may call
toll-free (800) 242-0134 for performance information as of the most recent month
end.
Total returns do not reflect expenses associated with the separate account such
as administrative fees, account charges and surrender charges, which, if
reflected, would reduce the total returns for all periods shown.
Shares of the Fund are neither insured nor guaranteed by the U.S. Government,
and their prices will fluctuate with market conditions.
The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500) and
Russell 1000 Value Index (Russell 1000 Value) are unmanaged indices and do not
reflect the actual cost of investing in the instruments that comprise each
index.
The S&P 500 is an unmanaged, market capitalization-weighted index of stocks of
500 large U.S. companies, which is widely used as a measure of large-cap stock
market performance. The results shown for the foregoing index assume the
reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer ranking
calculation is based on the blend of Lipper peer categories, as shown. Lipper is
an independent mutual fund rating service. A Fund's performance may be compared
to or ranked within a universe of mutual funds with investment objectives and
policies similar but not necessarily identical to the Fund's. Such comparisons
or rankings are made on the basis of several factors, including the Fund's
objectives and policies, management style and strategy, and portfolio
composition, and may change over time if any of those factors change.
1
Value Equity Fund
- --------------------------------------------------------------------------------
THE 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 (PICTURED BELOW) IS A SENIOR VICE PRESIDENT OF GE ASSET
MANAGEMENT AND LEAD PORTFOLIO MANAGER OF THE VALUE EQUITY FUND. HE HAS SERVED IN
THIS CAPACITY SINCE APRIL 2002. MR. REINHARDT JOINED GE ASSET MANAGEMENT IN 1982
AS AN EQUITY ANALYST AND HAS BEEN A PORTFOLIO MANAGER SINCE 1987.
STEPHEN V. GELHAUS IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A
MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE VALUE EQUITY FUND SINCE JANUARY
2002. MR. GELHAUS JOINED GE ASSET MANAGEMENT IN JUNE 1991 AND WAS A RESEARCH
ANALYST IN THE U.S. EQUITY DEPARTMENT FROM 1995 THROUGH 2001 AND BECAME AN
ASSOCIATE PORTFOLIO MANAGER FOR THE VALUE EQUITY FUND IN AUGUST 1999.
Q. HOW DID THE VALUE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007?
A. For the six-month period ended June 30, 2007, the Value Equity Fund returned
7.85%. The S&P 500 Index, the Fund's benchmark, returned 6.96% and the
Fund's Lipper peer group of 205 Large-Cap Core funds returned an average of
7.21% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The period continued a rally that had propelled the U.S. equity markets
higher over the past year. While first-quarter `07 earnings growth moderated
into the single digit range for the first time in three years,
corporate profits did climb +9%, surprising market-watchers to the upside.
Despite a backdrop of slowing economic growth, a weakening dollar and rising
oil prices, stocks rallied amid the strong corporate earnings, record M&A
activity, cooling inflation worries and the absence of Fed tightening. By
early June, several key U.S. equity indices reached new highs. However, the
period ended with a whimper -- during the month of June each broad measure
of U.S. equity market performance retreated. The S&P 500's June decline was
just its second in 13 months, and its second down month in 2007. The
pullback was brought on by renewed inflation fears, and concern that the Fed
might need to raise interest rates this year to keep inflation in check. New
liquidity and credit concerns also spooked the markets, amid the near
collapse of two large sub-prime hedge funds.
During the six-month period, S&P 500 sectors tilted toward global
infrastructure investment outperformed, including energy (+17%), materials
(+17%) and industrials (+11%). Telecom (+16%) also rallied on the strength
of continued restructuring improvements and sector consolidation. Financials
(-1%) offered the only negative sector return, facing credit cycle
[PHOTO OMITTED]
2
- --------------------------------------------------------------------------------
Q&A
headwinds and anxiety stemming from leveraged speculation in the debt
market. Consumer discretionary (+3%), consumer staples (+5%) and health care
(+6%) also lagged.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The primary sectors contributing to performance were industrials, utilities,
information technology, and financials. Within industrials, strength in ABB
(+27%), Cooper Industries (+27%), Deere (+28%), and Eaton (+25%) drove
performance. The industrials rallied amid strong demand for global
infrastructure investments, as did Freeport-McMoran (+50%), a leading global
gold and copper miner. Within utilities, Constellation Energy Group (+28%)
and Edison International (+25%) contributed most. Shares of Constellation
Energy Group took off early in the year upon the announcement of the
record-breaking $45 billion TXU Corp. leveraged buyout. Strong stock
selection within information technology also aided returns, with Texas
Instruments (+31%), Oracle (+15%) and First Data (+28%) all contributing to
outperformance in this sector. Within financials, minimally weighting the
commercial banks and avoiding poorly performing REITs were the primary
drivers of performance.
On the other hand, consumer staples, energy, and telecom services negatively
impacted performance during the period. Consumer staples companies Clorox
(-2%) and Kimberly-Clark (0%) lagged amid rising commodity cost pressures.
Within energy, despite strong performance from our energy equipment
holdings, most notably Transocean (+31%), and solid results from our oil and
gas picks, underperformance in this sector was primarily a result of "not
owning enough", as virtually all names in this space performed well. Our
continued underweight in telecommunications was another key detractor. While
we have been building our position in AT&T (+18%), our underweight versus
the benchmark hampered returns.
We continued to prefer the secular growth offered by media companies versus
telecom. Biotechnology giant Amgen (-19%) was the single largest detractor
from Fund performance. The stock suffered amid safety concerns regarding its
anemia drugs, and increased FDA scrutiny. However, we continue to like the
strength in Amgen's pipeline of therapeutics, and its long-term prospects.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. There were no significant changes to the Fund over the period. Our process
has remained consistent, and we continued to employ a bottom-up relative
value process to seek out underappreciated stocks with catalysts for growth
or improving fundamentals. The Fund is positioned for a moderate slowdown in
economic growth. The case for slowing growth was bolstered during the period
as rising delinquencies in sub-prime mortgages and higher interest rates
have dampened the outlook for home-price appreciation and consumer spending.
Our bottom-up process has led us to high quality companies with financial
flexibility. Our primary sector overweights include technology, consumer
staples and health care -- areas that we believe can put up consistent
earnings in a slowing economy. We are also overweight the insurance
industry, while underweighting the commercial banks and REITs. Our largest
underweights include the financial, energy and telecommunications sectors.
We believe that the GE Value Equity Fund is appropriately positioned with
high-quality, fundamentally strong holdings with attractive relative
valuations.
3
Value Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service 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,
2007.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007
- ----------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ----------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,078.50 4.16
- ----------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,020.56 4.06
- ----------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.81% (FROM
PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 7.85%.
4
Value Equity Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
Value Equity Fund S&P 500 Index
04/28/00 $10,000.00 $10,000.00
06/00 9,970.00 10,035.00
12/00 9,978.58 9,154.99
06/01 9,486.19 8,542.89
12/01 9,105.15 8,064.45
06/02 8,357.33 7,003.61
12/02 7,505.72 6,282.05
06/03 8,219.58 7,021.98
12/03 9,310.98 8,086.77
06/04 9,517.43 8,364.94
12/04 10,202.11 8,966.72
06/05 10,181.23 8,894.16
12/05 10,616.27 9,407.74
06/06 11,019.29 9,662.05
12/06 12,511.37 10,893.45
06/07 13,493.57 11,651.80
- ----------------------------------------
Value Equity Fund (ending value $13,494)
S&P 500 Index (ending value $11,727)
- ----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2007
- --------------------------------------------------------------------------------
SIX ONE FIVE SINCE
MONTHS YEAR YEAR INCEPTION
- --------------------------------------------------------------------------------
Value Equity Fund 7.85% 22.45% 10.06% 4.26%
- --------------------------------------------------------------------------------
S&P 500 Index 6.96% 20.59% 10.72% 2.16%
- --------------------------------------------------------------------------------
Lipper peer group average* 7.21% 19.79% 9.92% N/A
- --------------------------------------------------------------------------------
Inception date 4/28/00
================================================================================
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital and future
income by investing at least 80% of its net assets in equity securities under
normal circumstances. The Fund invests primarily in U.S. companies that the
portfolio manager believes are undervalued by the market but have solid growth
prospects.
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 4.04%
- --------------------------------------------------------------------------------
American International Group, Inc. 2.83%
- --------------------------------------------------------------------------------
Microsoft Corp. 2.50%
- --------------------------------------------------------------------------------
PepsiCo, Inc. 2.33%
- --------------------------------------------------------------------------------
Citigroup, Inc. 2.30%
- --------------------------------------------------------------------------------
Oracle Corp. 2.16%
- --------------------------------------------------------------------------------
Procter & Gamble Co. 2.05%
- --------------------------------------------------------------------------------
Industrial Select Sector SPDR Fund 1.99%
- --------------------------------------------------------------------------------
Amgen, Inc. 1.92%
- --------------------------------------------------------------------------------
Omnicom Group, Inc. 1.89%
================================================================================
PORTFOLIO COMPOSITION
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $44,227 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Information Technology 18.0%
Financials 15.7%
Healthcare 12.2%
Consumer Staples 11.3%
Short Term 10.7%
Industrials 9.2%
Energy 8.8%
Consumer Discretionary 6.8%
Utilities 3.1%
Telecommunication Services 2.2%
Materials 2.0%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR, AND FIVE-YEAR PERIODS INDICATED IN THE LARGE-CAP
CORE FUNDS PEER GROUP CONSISTING OF 205, 199 AND 152 UNDERLYING ANNUITY
FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
5
VALUE EQUITY FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
VALUE EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 95.9%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 7.5%
Bed Bath & Beyond, Inc. 4,095 $ 147,379(a,e)
Comcast Corp. (Class A) 12,285 343,489(a,e)
General Motors Corp. 4,778 180,608(e)
Koninklijke Philips
Electronics N.V. ADR 8,831 373,728
News Corp. (Class A) 14,333 304,003
Omnicom Group, Inc. 15,834 837,935
Starwood Hotels & Resorts
Worldwide, Inc. 2,048 137,359
Time Warner, Inc. 32,761 689,291(d)
3,013,792
CONSUMER STAPLES -- 12.5%
Clorox Co. 11,125 690,862
Diageo PLC ADR 1,638 136,462
General Mills, Inc. 10,715 625,970
Kellogg Co. 2,867 148,482
Kimberly-Clark Corp. 9,555 639,134
Nestle S.A. ADR 1,843 176,283
PepsiCo, Inc. 15,903 1,031,310
Procter & Gamble Co. 14,811 906,285
Sara Lee Corp. 9,760 169,824(e)
The Coca-Cola Co. 4,095 214,209
Wal-Mart Stores, Inc. 5,119 246,275
4,985,096
ENERGY -- 9.7%
Apache Corp. 2,867 233,919
Exxon Mobil Corp. 21,294 1,786,141(d)
Halliburton Co. 5,460 188,370
Hess Corp. 6,825 402,402
Occidental Petroleum Corp. 6,006 347,627
Schlumberger Ltd. 3,140 266,712
Suncor Energy, Inc. 1,024 92,078
Transocean Inc. 5,392 571,444(a,e)
3,888,693
FINANCIALS -- 16.8%
ACE Ltd. 4,641 290,155
Allstate Corp. 8,531 524,742
American International
Group, Inc. 17,882 1,252,276
AON Corp. 6,620 282,078(e)
Bank of America Corp. 13,650 667,348(d)
BlackRock Inc. (Class A) 1,092 170,996(e)
CB Richard Ellis Group, Inc.
(Class A) 839 30,623(a,e)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Chubb Corp. 7,985 $ 432,308
Citigroup, Inc. 19,793 1,015,183
Federal Home Loan
Mortgage Corp. 9,350 567,545
Federal National Mortgage Assoc. 1,638 107,011
Hartford Financial Services
Group, Inc. 683 67,282
Mellon Financial Corp. 12,490 549,560
Merrill Lynch & Company, Inc. 341 28,501
Metlife, Inc. 6,962 448,910
Prudential Financial, Inc. 751 73,020
State Street Corp. 2,731 186,800(c)
The Bank of New York
Company, Inc. 1,160 48,070
6,742,408
HEALTHCARE -- 13.5%
Aetna, Inc. 8,941 441,685
Amgen, Inc. 15,357 849,089(a,e)
Baxter International, Inc. 7,985 449,875
Bristol-Myers Squibb Co. 7,303 230,483
DaVita, Inc. 5,665 305,230(a,e)
GlaxoSmithKline PLC ADR 4,785 250,590(e)
Johnson & Johnson 4,709 290,169
McKesson Corp. 3,071 183,154
Medco Health Solutions, Inc. 4,505 351,345(a)
Novartis AG ADR 5,460 306,142
Pfizer Inc. 21,158 541,010(d)
Thermo Electron Corp. 3,890 201,191(a,e)
UnitedHealth Group, Inc. 3,413 174,541
Wyeth 14,196 813,999
5,388,503
INDUSTRIALS -- 8.0%
ABB Ltd. ADR 17,063 385,624
Cooper Industries Ltd. 5,665 323,415(e)
Deere & Co. 3,686 445,048
Eaton Corp. 2,798 260,214
General Dynamics Corp. 3,140 245,611
ITT Corp. 1,502 102,557
Northrop Grumman Corp. 6,211 483,651
Pitney Bowes Inc. 1,706 79,875(e)
Rockwell Collins, Inc. 1,297 91,620
3M Co. 5,870 509,457
United Technologies Corp. 1,706 121,007
Waste Management, Inc. 1,570 61,309
WESCO International, Inc. 1,775 107,299(a)
3,216,687
INFORMATION TECHNOLOGY -- 19.9%
Analog Devices, Inc. 11,261 423,864(d)
Cisco Systems, Inc. 25,936 722,318(a,d)
Corning Incorporated 5,324 136,028(a)
Dell, Inc. 3,071 87,677(a)
EMC Corp. 2,097 37,956(a)
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
VALUE EQUITY FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
First Data Corp. 10,920 $ 356,756
Hewlett-Packard Co. 11,876 529,907
Intel Corp. 29,348 697,308
International Business
Machines Corp. 7,371 775,798(e)
Lam Research Corp. 2,184 112,258(a)
Maxim Integrated Products, Inc. 11,603 387,656
Microchip Technology Inc. 6,347 235,093(e)
Microsoft Corp. 37,538 1,106,245(d)
National Semiconductor Corp. 12,080 341,502(e)
Oracle Corp. 48,458 955,107(a,d)
Sun Microsystems, Inc. 13,650 71,799(a)
Taiwan Semiconductor
Manufacturing Company
Ltd. ADR 10,580 117,755
Texas Instruments Incorporated 12,354 464,881
Western Union Co. 18,974 395,228
7,955,136
MATERIALS -- 2.2%
Barrick Gold Corp. 12,968 376,980
Freeport-McMoRan Copper &
Gold Inc. (Class B) 3,413 282,665(e)
PAN American Silver Corp. 3,071 80,859(a,e)
Praxair, Inc. 2,048 147,436
887,940
TELECOMMUNICATION SERVICES -- 2.4%
AT&T, Inc. 4,095 169,942
Sprint Nextel Corp. (Series 1) 7,849 162,553
Verizon Communications Inc. 11,807 486,094
Vodafone Group, PLC ADR 4,641 156,077(e)
974,666
UTILITIES -- 3.4%
Constellation Energy Group, Inc. 4,095 356,961
Dominion Resources, Inc. 8,600 742,266(e)
Edison International 4,709 264,269
1,363,496
TOTAL COMMON STOCK
(COST $31,729,060) 38,416,417
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 2.7%
- --------------------------------------------------------------------------------
Financial Select Sector SPDR Fund 5,808 210,133(g)
Industrial Select Sector SPDR Fund 22,579 881,484(d,g)
TOTAL EXCHANGE TRADED FUNDS
(COST $783,634) 1,091,617
TOTAL INVESTMENTS IN SECURITIES
(COST $32,512,694) 39,508,034
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 11.8%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.9%
GEI Short Term Investment Fund
5.55% 759,553 $ 759,553(b,f)
SHORT-TERM SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN -- 9.9%
State Street Navigator Securities
Lending Prime Portfolio
5.36% 3,959,866 3,959,866(b,c)
TOTAL SHORT-TERM INVESTMENTS
(COST $4,719,419) 4,719,419
TOTAL INVESTMENTS
(COST $37,232,113) 44,227,453
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (10.4)% (4,140,338)
------------
NET ASSETS -- 100.0% $ 40,087,115
============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Value Equity Fund had the following long futures contracts open at June
30, 2007 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE APPRECIATION
- --------------------------------------------------------------------------------
S&P 500 Index
Futures September 2007 1 $378,850 $805
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
Notes to Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(d) At June 30, 2007, 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) All or a portion of the security is out on loan.
(f) GEAM, the investment advisor of the fund, serves as investment advisor of
the GEI Short Term Investment Fund.
(g) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank
& Trust Co., the Fund's custodian and accounting agent.
+ Percentages are based on net assets as of June 30, 2007.
Abbreviations:
ADR American Depository Receipt
GDR Global Depository Receipt
SPDR Standard & Poors Depository Receipts
8
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
VALUE EQUITY FUND
6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
- -----------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 4/28/00
Net asset value, beginning of period .............. $10.70 $10.01 $9.77 $9.02 $7.36 $9.01
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.06 0.17 0.11 0.11 0.11 0.07
Net realized and unrealized
gains/(losses) on investments ............... 0.78 1.62 0.29 0.75 1.66 (1.65)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS .... 0.84 1.79 0.40 0.86 1.77 (1.58)
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .......................... -- 0.17 0.12 0.11 0.11 0.07
Net realized gains ............................. -- 0.93 0.04 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... -- 1.10 0.16 0.11 0.11 0.07
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD .................... $11.54 $10.70 $10.01 $9.77 $9.02 $7.36
===================================================================================================================================
TOTAL RETURN (A) .................................. 7.85% 17.85% 4.06% 9.57% 24.05% (17.57)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ....... $40,087 $39,683 $37,115 $37,128 $29,989 $24,623
Ratios to average net assets:
Net investment income* ...................... 0.99% 1.55% 1.13% 1.26% 1.16% 1.01%
Expenses* ................................... 0.81% 0.81% 0.80% 0.80% 0.73% 0.74%
Portfolio turnover rate ........................ 22% 42% 36% 53% 78% 76%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year. + Unaudited.
See Notes to Financial Statements.
9
VALUE
Statement of Assets EQUITY
and Liabilities JUNE 30, 2007 (UNAUDITED) FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $32,512,694) ................................................ $39,508,034
Short-term Investments (at amortized cost) .............................................................. 3,959,866
Short-term affiliated investments (at amortized cost) ................................................... 759,553
Receivable for investments sold ......................................................................... 311,006
Income receivables ...................................................................................... 40,869
Receivable for fund shares sold ......................................................................... 104
Variation margin receivable ............................................................................. 1,695
Other assets ............................................................................................ 943
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ........................................................................................ 44,582,070
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned ................................................................ 3,959,866
Payable for investments purchased ....................................................................... 222,815
Payable for fund shares redeemed ........................................................................ 261,065
Payable to GEAM ......................................................................................... 51,209
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ................................................................................... 4,494,955
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................................................. $40,087,115
===========================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ......................................................................................... 30,023,574
Undistributed (distribution in excess of) net investment income ......................................... 198,911
Accumulated net realized gain (loss) .................................................................... 2,868,485
Net unrealized appreciation/(depreciation) on:
Investments ......................................................................................... 6,995,340
Futures ............................................................................................. 805
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................................................. $40,087,115
===========================================================================================================================
NET ASSETS ................................................................................................. 40,087,115
Shares outstanding ($0.01 par value; unlimited shares authorized) .......................................... 3,473,063
Net asset value per share .................................................................................. $11.54
* Includes $3,886,671 of securities on loan
See Notes to Financial Statements.
10
VALUE
Statement of Operations EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) FUND
- --------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ................................................................................ $ 349,272
Interest* ............................................................................... 2,512
Interest from affliated investments ..................................................... 11,909
Less: Foreign taxes withheld ............................................................ (2,967)
- --------------------------------------------------------------------------------------------------------------
TOTAL INCOME .............................................................................. 360,726
- --------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ........................................................ 130,533
Transfer agent .......................................................................... 16
Trustee's fees .......................................................................... 534
Custody and accounting expenses ......................................................... 18,215
Professional fees ....................................................................... 8,867
Registration expenses ................................................................... 1,302
Other expenses .......................................................................... 2,348
- --------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ............................................................................ 161,815
- --------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) .............................................................. 198,911
==============================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments .......................................................................... 2,594,799
Futures .............................................................................. (15,265)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments .......................................................................... 292,395
Futures .............................................................................. 3,250
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .................................. 2,875,179
- --------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................... $3,074,090
==============================================================================================================
* Income attributable to security lending activity, net of rebate expenses,
was $2,512.
See Notes to Financial Statements.
11
VALUE
Statements of EQUITY
Changes in Net Assets FUND
- ------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007 DECEMBER 31,
(UNAUDITED) 2006
- ------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) ............................................................. $ 198,911 $ 582,026
Net realized gain (loss) on investments, futures, written options,
foreign currency transactions and swaps ................................................. 2,579,534 3,361,481
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation .................. 295,645 2,256,614
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ................................................... 3,074,090 6,200,121
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ..................................................................... -- (583,024)
Net realized gains ........................................................................ -- (3,132,510)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ......................................................................... -- (3,715,534)
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ......................... 3,074,090 2,484,587
- ------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares .............................................................. 1,029,517 1,598,076
Value of distributions reinvested ......................................................... -- 3,715,534
Cost of shares redeemed ................................................................... (3,699,192) (5,230,437)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ........................................... (2,669,675) 83,173
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ..................................................... 404,415 2,567,760
NET ASSETS
Beginning of period ......................................................................... 39,682,700 37,114,940
- ------------------------------------------------------------------------------------------------------------------------------
End of period ............................................................................... $40,087,115 $39,682,700
==============================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ................. $ 198,911 $ --
- ------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ............................................................................... 93,760 145,506
Issued for distributions reinvested ....................................................... -- 345,632
Shares redeemed ........................................................................... (329,970) (488,227)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ......................................................... (236,210) 2,911
==============================================================================================================================
See Notes to Financial Statements.
12
Notes to Financial Statements June 30, 2007 (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 thirteen 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, Value Equity Fund (the "Fund"), Mid-Cap Equity Fund, Small-Cap
Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions at the date of the financial statements. Actual
results may differ from those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sales occurred on
that day, at the last quoted bid price. Securities listed on the NASDAQ will be
valued at the NASDAQ's official close price. Certain fixed income securities are
valued by a dealer or by a pricing service based upon a matrix system, which
considers market transactions as well as dealer supplied valuations. Short-term
investments maturing within sixty days are valued at amortized cost. If
quotations are not readily available for a portfolio security, or if it is
believed that a quotation or other market 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 procedures require that the fair value of a security be
established by the valuation committee. The fair value committee follows
different protocols for different types of investments and 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. 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. GE Asset Management may also
separately monitor portfolio securities and, consistent with the Fund's fair
value procedures, apply a different value to a portfolio security than would be
applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which a Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
In September 2006, FASB issued Statement of Financial Accounting Standards No.
157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single
authoritative definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. FAS 157
applies to fair value measurements already required or permitted by existing
standards. The change to current generally accepted accounting principles from
the application of FAS 157 relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. Management of the Fund does not believe the adoption of FAS 157
will materially impact the financial statement amounts, however, additional
13
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period. FAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
REPURCHASE AGREEMENTS The Fund may engage into repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's 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 at
period end. Purchases and sales of securities, income receipts and expense
payments denominated in foreign currencies are translated into U.S. dollars at
the prevailing exchange rate on the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated
14
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
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.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2007, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- -------------------------------------------------------------------------
$37,470,965 $7,341,389 $(584,901) $6,756,488
As of December 31, 2006, the Fund has no capital loss carryovers. Capital loss
carryovers are available to offset future realized capital gains to the extent
provided in the Internal Revenue Code and regulations thereunder. To the extent
that these carryover losses are used to offset future capital gains, it is
probable that the gains so offset will not be distributed to shareholders
because they would be taxable as ordinary income.
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund incurred no such losses after October 31, 2006.
15
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The tax composition of distributions paid (other than return of capital
distributions for the year) during the year ended December 31, 2006 was as
follows:
Long-Term
Ordinary Capital
Income Gains Total
- --------------------------------------------------------------------------------
$671,827 $3,043,707 $3,715,534
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures and
losses deferred due to wash sale transactions. Reclassifications due to
permanent book/tax differences are made to the Fund's capital accounts to
reflect income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. These reclassifications have no impact
on net investment income, realized gains or losses, or the net asset value of
the Fund. The calculation of net investment income per share in the Financial
Highlights table excludes these adjustments.
The reclassifications for the year ended December 31, 2006 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated Paid in
Income Net Realized Gain Capital
- --------------------------------------------------------------------------------
$998 $(998) $ --
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax return to determine whether the tax positions
are "more likely than not" of being sustained by the applicable tax authority.
The adoption of FIN48 did not have an impact on the Fund's net assets and
financial statements.
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 Expenses of the Company which are directly identifiable to one of the
Funds are allocated to that portfolio. Expenses which are not directly
identifiable to one of the Funds are allocated in such a manner as deemed
equitable, taking into consideration the nature and type of expenses and
relative sizes of the Funds. All expenses of the Fund are paid by GEAM and
reimbursed by the Fund.
3. LINE OF CREDIT
The Fund shares a revolving credit facility of up to $25 million with a number
of its affiliates. The credit facility is with its custodian bank, State Street
Bank and Trust Company. The revolving credit facility requires the payment of a
commitment fee equal to 0.09% per annum on the daily unused portion of the
credit facility, payable quarterly. The portion borne by the Funds generally is
borne proportionally based upon net assets. Generally, borrowings under the
credit facility would accrue interest at the Federal Funds Rate plus 50 basis
points and is borne by each of the borrowing Funds. The maximum amount allowed
to be borrowed by any one of the Funds is the lesser of its prospectus
limitation, 20% of its net assets, or $25 million. The credit facility was not
utilized by the Fund during the period ended June 30, 2007.
4. AMOUNTS PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was
retained by the Company's Board of Directors effective May 1, 1997 to act as
investment adviser and administrator of the Fund. 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 .65%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2007, $312 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not
16
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
such officers or employees also serve in a similar capacity for other funds
advised by GEAM. Compensation paid to unaffiliated directors are reflected on
the Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$8,791,868 $11,287,834
SECURITY LENDING At June 30, 2007, the Fund participated in securities lending:
Loaned
securities at Cash
market value collateral*
- --------------------------------------------------------------------------------
$3,886,671 $3,959,866
* COLLATERAL OF $3,943,484 INCREASED BY $16,382 ON JULY 1, 2007 TO REFLECT THE
JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN.
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 58
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 - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM
since February 1997; President and Chief Executive Officer - Mutual Funds at
GEAM since 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,
since March 1993; Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their
inception; Trustee of Elfun Funds, GE Savings & Security Funds and General
Electric Pension Trust since 1988; Trustee of Fordham University since 2003;
Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset
Management (Ireland) since February 1999; Director, GE Asset Management Funds
Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 46
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
18
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager
since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds
and GE Investments Funds since November 2005 and Elfun Funds and GE Savings &
Security Funds since September 2005; from August 2004 to September 2005 Vice
President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds,
Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January
2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from
December 1996 to November 2003, Controller - Mutual Funds, American Skandia
Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and
American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years (Vice President); less than one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General
Counsel - Marketing and Client Services (formerly Asset Management Services) at
GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE
Institutional Funds and GE LifeStyle Funds since September 2003; Vice President
and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since
October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary
since July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
19
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds and GE LifeStyle Funds since their inception; Trustee of
Fordham University since 2002 and Marymount College from 2001 through 2002;
Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the
Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since
1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 71
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from
Salomon Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
20
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member NASD 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, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING
Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES
Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE
John J. Walker, EVP, CHIEF FINANCIAL OFFICER
21
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INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER NASD AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to
portfolio securities during the most recently disclosed 12-month period
ended June 30 is available without charge (i) through the Fund's website
at http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
- --------------------------------------------------------------------------------
[GE logo omitted]
GE Investments Funds, Inc.
Total Return Fund
Semi-Annual Report
JUNE 30, 2007
[GE LOGO OMITTED]
<page>
GE Investments Funds, Inc.
Total Return Fund Contents
- -------------------------------------------------------------------------------
NOTES TO PERFORMANCE ................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................. 2
NOTES TO SCHEDULE OF INVESTMENTS ....................................... 18
FINANCIAL STATEMENTS
Financial Highlights .............................................. 19
Statement of Assets and Liabilities ............................... 20
Statement of Operations ........................................... 21
Statements of Changes in Net Assets ............................... 22
Notes to Financial Statements ..................................... 24
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.
<Page>
Notes to Performance June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains distributions, if any. Investment returns and net
asset value on an investment will fluctuate and you may have a gain or loss when
you sell your shares. Periods less than one year are not annualized.
Current performance may be lower or higher than that shown. You may call
toll-free (800) 242-0134 for performance information as of the most recent month
end.
Total returns do not reflect expenses associated with the separate account such
as administrative fees, account charges and surrender charges, which, if
reflected, would reduce the total returns for all periods shown.
Shares of the Fund are neither insured nor guaranteed by the U.S. Government,
and their prices will fluctuate with market conditions.
The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500) and
Lehman Brothers Aggregate Bond Index (LB Aggregate) are unmanaged indices and do
not reflect the actual cost of investing in the instruments that comprise each
index.
The S&P 500 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 LB Aggregate Bond Index is a market value-weighted index
of investment-grade debt issues, including government, corporate, asset-backed
and mortgage-backed securities, with maturities of one year or more. The results
shown for the foregoing indices assume the reinvestment of net dividends or
interest.
The peer universe of the underlying annuity funds used in our peer ranking
calculation is based on the blend of Lipper peer categories, as shown. Lipper is
an independent mutual fund rating service. A Fund's performance may be compared
to or ranked within a universe of mutual funds with investment objectives and
policies similar but not necessarily identical to the Fund's. Such comparisons
or rankings are made on the basis of several factors, including the Fund's
objectives and policies, management style and strategy, and portfolio
composition, and may change over time if any of those factors change.
1
<Page>
Total Return Fund
- --------------------------------------------------------------------------------
THE TOTAL RETURN FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES
THOMAS R. LINCOLN, PAUL M. COLONNA, RALPH R. LAYMAN, JUDITH A. STUDER AND DIANE
M. WEHNER. THE TEAM IS LED BY MS. STUDER WHO, AS A LEAD MEMBER OF THE TACTICAL
ASSET ALLOCATION COMMITTEE, IS VESTED WITH OVERSIGHT AUTHORITY FOR DETERMINING
ASSET ALLOCATIONS FOR THE FUND. EACH OF THE FOREGOING PORTFOLIO MANAGERS IS
RESPONSIBLE FOR MANAGING ONE OF FOUR SUB-PORTFOLIOS: U.S. EQUITY, U.S. MID-CAP
EQUITY, INTERNATIONAL EQUITY AND FIXED INCOME. MR. LINCOLN MANAGES THE U.S.
EQUITY PORTION, MS. WEHNER MANAGES THE U.S. MID-CAP EQUITY PORTION, MR. LAYMAN
MANAGES THE INTERNATIONAL EQUITY PORTION AND MR. COLONNA MANAGES THE FIXED
INCOME PORTION, EACH WITH A TEAM OF PORTFOLIO MANAGERS AND ANALYSTS. THE
SUB-PORTFOLIOS UNDERLYING THIS FUND ARE MANAGED INDEPENDENTLY OF EACH OTHER AND
THE PORTFOLIO MANAGERS HAVE FULL DISCRETION OVER THEIR PARTICULAR SUB-PORTFOLIO;
HOWEVER, THE PORTFOLIO MANAGEMENT TEAM IS COLLABORATIVE TO ENSURE STRICT
ADHERENCE TO THIS FUND'S OBJECTIVES.
JUDITH A. STUDER IS A DIRECTOR AND EXECTIVE VICE PRESIDENT OF GE ASSET
MANAGEMENT AND PRESIDENT - U.S. EQUITIES 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. SHE BECAME SENIOR VICE PRESIDENT -
DOMESTIC EQUITIES IN 1991, SENIOR VICE PRESIDENT - INTERNATIONAL EQUITIES IN
1995 AND EXECUTIVE VICE PRESIDENT - INVESTMENT STRATEGIES IN JULY 2006.
PAUL M. COLONNA IS AN EXECUTIVE VICE PRESIDENT OF GE ASSET MANAGEMENT AND
PRESIDENT - FIXED INCOME AT GE ASSET MANAGEMENT. SINCE JANUARY 2005, HE HAS BEEN
RESPONSIBLE FOR THE FIXED INCOME PORTION OF THE TOTAL RETURN FUND. PRIOR TO
JOINING GE ASSET MANAGEMENT IN FEBRUARY 2000, MR. COLONNA WAS A SENIOR PORTFOLIO
MANAGER WITH THE FEDERAL HOME LOAN MORTGAGE CORPORATION, OVERSEEING THE MORTGAGE
INVESTMENT GROUP.
RALPH R. LAYMAN IS A DIRECTOR AND EXECUTIVE VICE PRESIDENT OF GE ASSET
MANAGEMENT AND PRESIDENT - INTERNATIONAL EQUITIES AT GE ASSET MANAGEMENT. HE
MANAGES THE OVERALL INTERNATIONAL EQUITY INVESTMENTS FOR GE ASSET MANAGEMENT.
MR. LAYMAN HAS BEEN RESPONSIBLE FOR THE INTERNATIONAL EQUITY PORTION OF THE
TOTAL RETURN FUND SINCE 1997. MR. LAYMAN JOINED GE ASSET MANAGEMENT IN 1991 AS
SENIOR VICE PRESIDENT FOR INTERNATIONAL INVESTMENTS AND BECAME AND EXECUTIVE
VICE PRESIDENT IN 1992.
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
DOMESTIC EQUITIES. MR. LINCOLN BECAME PART OF THE INVESTMENT MANAGEMENT TEAM FOR
DOMESTIC EQUITIES IN 1997 AND PORTFOLIO MANAGER FOR DOMESTIC EQUITIES IN 2003.
DIANE M. WEHNER IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. SHE HAS BEEN A
PORTFOLIO MANAGER OF THE TOTAL RETURN FUND SINCE JANUARY 2006. BEFORE JOINING GE
ASSET MANAGEMENT, MS. WEHNER WAS A VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER
FROM JANUARY 1997 TO JUNE 2001, AND ASSOCIATE PORTFOLIO MANAGER FROM MAY 1995 TO
JANUARY 1997, WITH BENEFIT CAPITAL MANAGEMENT CORPORATION. MS. WEHNER HAS SERVED
AS AN ANALYST/ PORTFOLIO MANAGER IN THE INVESTMENT MANAGEMENT INDUSTRY SINCE
1985.
[PHOTO OMITTED]
2
Q&A
Q. HOW DID THE TOTAL RETURN FUND PERFORM COMPARED TO ITS BENCHMARK AND
LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007?
A. For the six-month period ended June 30, 2007, the Total Return Fund returned
7.35%. The Fund's broad based benchmarks, the S&P 500 Index and the Lehman
Brothers Aggregate Bond Index, returned 6.96% and 0.98%, respectively. The
Fund's Lipper peer group of 173 mixed asset target allocation growth funds
returned an average of 6.29% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The period continued a rally that had propelled the U.S. equity markets
higher over the past year. While first-quarter `07 earnings growth moderated
into the single digit range for the first time in three years, corporate
profits did climb +9%, surprising market-watchers to the upside. Despite a
backdrop of slowing economic growth, a weakening dollar and rising oil
prices, stocks rallied amid the strong corporate earnings, record M&A
activity, cooling inflation worries and the absence of Fed tightening. By
early June, several key U.S. equity indices reached new highs. The second
quarter ended however with a whimper -- during the month of June each broad
measure of U.S. equity market performance retreated. The S&P 500's June
decline was just its second in 13 months, and its second down month in 2007.
The pullback was brought on by renewed inflation fears, housing/consumption
worries, and concern that the Fed might need to raise interest rates this
year to keep inflation in check. New liquidity and credit concerns also
spooked the markets, amid the near collapse of two large sub-prime hedge
funds.
Internationally, a similar pattern emerged with benchmarks hitting new highs
uplifted by strong earnings and M&A activity, and further supported by
attractive valuations and currency gains for U.S. investors. Sentiment
stayed positive on the back of strong first quarter results that showed
significant cash flow generation and more progress on efficiency. The
recovery of Continental Europe after years of sluggish performance has been
of increasing importance, with falling unemployment in the crucial markets
of Germany and France contributing to rising consumer sentiment. Japan
continued to disappoint although the background indications of improving
corporate performance and consumer trends are encouraging.
In the fixed income market, the Federal Reserve maintained the fed funds
target at 5.25% at each of its first four meetings this year. Worries over
the sub-prime loan market and a mid-February drop in the Chinese stock
market sent risk premiums higher. Investors quickly started building in
expectations for rate cuts from the Fed. As GDP growth came back in the
second quarter accompanied by the Fed's stated emphasis on inflation risk,
expectations for rate cuts disappeared. By June end, market pricing implied
no changes in fed funds through year-end.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund's performance was driven by the Fund's overweight position in
equities (particularly non-U.S.) and underweight in fixed income.
The U.S. Disciplined Growth Equity portion of the Fund moderately trailed
the S&P 500 Index, hurt by underweights in the strongly performing
telecommunications services, materials and energy sectors, the best
performing three groups in the index this year so far. Also weighing on
performance were our stock selections in the healthcare, information
technology and industrials groups. On the positive side, performance was
helped by our significant underweight in financials, especially commercial
bank stocks and REITs (both of which were hit as the sub-prime mortgage
market continued to deteriorate).
3
<Page>
Total Return Fund
- --------------------------------------------------------------------------------
Q&A
Positive stock selection within the consumer discretionary area,
particularly in media stocks, and the materials sector, also added value.
The Mid-Cap Equity allocation helped boost Fund performance in June with a
year-to-date return of over 11%, which outperformed its benchmark largely
due to solid stock selection within the information technology, healthcare,
energy, consumer staples and materials sectors.
The Fund's overweight position in International Equities contributed
strongly to returns, as the MSCI EAFE Index, a benchmark for non-U.S.
developed markets, returned nearly 11%; further, the Fund's investments in
this area handily exceeded the index. A significant positive contribution
came from holdings in the materials sector, from both metals and mining and
chemical stocks. In addition, industrial holdings in the conglomerate and
infrastructure equipment segments performed well as did holdings in telecom
services, especially wireless. Additionally, the Fund was overweight in
emerging markets, which had led market returns during the period with a
strong 17.6% showing.
In fixed income, the Fund benefited from being overweight in
shorter-duration securities but was hindered by being underweight in
high-yield, the period's best performing sector. Security selection
benefited the Fund's pre-fee return in the fixed income area.
4
<page>
Total Return Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service 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,
2007.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ---------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,073.49 2.67
Class 2 1,000.00 1,073.53 2.82
Class 3 1,000.00 1,072.92 3.18
Class 4 1,000.00 1,073.01 3.74
- ---------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ---------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,021.97 2.61
Class 2 1,000.00 1,021.82 2.76
Class 3 1,000.00 1,021.49 3.11
Class 4 1,000.00 1,020.95 3.66
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.52% FOR CLASS
1, 0.55% FOR CLASS 2, 0.62% FOR CLASS 3, AND 0.73% FOR CLASS 4, (FROM PERIOD
JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE
OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH PERIOD).
** ACTUAL FUND RETURNS FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WERE AS FOLLOWS:
7.35% FOR CLASS 1 SHARES, 7.35% FOR CLASS 2 SHARES, 7.29% FOR CLASS 3 SHARES,
AND 7.30% FOR CLASS 4 SHARES.
5
Total Return Fund (unaudited)
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek the highest total return, composed of
current income and capital appreciation, as is consistent with prudent
investment risk by investing primarily in a combination of equity securities
and investment grade debt securities.
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------
Federal National Mortgage
Assoc., 5.50%, TBA 2.11%
- --------------------------------------------
U.S. Treasury Notes, 4.63%,
11/15/09 - 02/15/17 2.09%
- --------------------------------------------
American International
Group, Inc. 1.21%
- --------------------------------------------
PepsiCo, Inc. 1.10%
- --------------------------------------------
Federal National Mortgage
Assoc., 5.00%, TBA 1.08%
- --------------------------------------------
Schlumberger Ltd. 1.04%
- --------------------------------------------
U.S. Treasury Notes,
4.88%, 05/31/09 1.00%
- --------------------------------------------
Cisco Systems, Inc. 0.99%
- --------------------------------------------
Exxon Mobil Corp. 0.93%
- --------------------------------------------
QUALCOMM, Inc. 0.92%
- --------------------------------------------
LIPPER PERFORMANCE COMPARISON
Mixed-Asset Target Allocation
Growth Funds
Based on average annual
total returns for the periods ended 6/30/07
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
- ----------------------------------------------------
Number of
Funds in
peer group: 173 165 76 45
- ----------------------------------------------------
Peer group
average
annual total
return: 6.29% 16.27% 9.39% 6.73%
- ----------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
[LINE CHART OMITTED -- PLOT POINTS ARE AS FOLLOWS:]
TOTAL S&P 500 LB AGGREGATE
RETURN INDEX BOND INDEX
06/97 $10000.00 $10000.00 $10000.00
12/97 10690.12 11057.91 10636.34
12/98 12518.19 14231.31 11560.26
12/99 14176.85 17229.53 11465.32
12/00 14877.72 15647.27 12798.28
12/01 14447.80 13783.37 13878.90
12/02 13102.41 10736.98 15302.19
12/03 15763.99 13821.52 15930.26
12/04 17054.79 15325.48 16621.44
12/05 17680.63 16079.27 17025.10
12/06 20111.23 18618.57 17762.93
6/07 21589.16 19914.71 17936.58
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007
ENDING
VALUE OF A
SIX ONE FIVE TEN $10,000
MONTHS YEAR YEAR YEAR INVESTMENT
- --------------------------------------------------------------------------------
Total Return Fund 7.35% 18.63% 9.46% 8.00% $21,589
S&P 500 Index 6.96% 20.59% 10.72% 7.13% $19,915
LB Aggregate
Bond Index 0.98% 6.12% 4.48% 6.02% $17,937
Inception date 7/1/85
CLASS 2 SHARES
[LINE CHART OMITTED -- PLOT POINTS ARE AS FOLLOWS:]
TOTAL S&P 500 LB AGGREGATE
RETURN INDEX BOND INDEX
05/06 $10000.00 $10000.00 $10000.00
06/06 9700.53 9725.39 10010.49
09/06 10099.82 10276.45 10391.65
12/06 10704.55 10964.86 10520.34
03/07 10874.08 11035.19 10678.50
06/07 11491.65 11728.19 10623.19
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007
ENDING
VALUE OF A
SIX ONE SINCE $10,000
MONTHS YEAR INCEPTION INVESTMENT
- --------------------------------------------------------------------------------
Total Return Fund 7.35% 18.46% 12.62% $11,492
S&P 500 Index 6.96% 20.59% 7.13% $11,728
LB Aggregate
Bond Index 0.98% 6.12% 6.02% $10,623
Inception date 5/1/06
CLASS 3 SHARES
[LINE CHART OMITTED -- PLOT POINTS ARE AS FOLLOWS:]
TOTAL S&P 500 LB AGGREGATE
RETURN INDEX BOND INDEX
05/06 $10000.00 $10000.00 $10000.00
06/06 9700.53 9725.39 10010.49
09/06 10105.70 10276.45 10391.65
12/06 10717.44 10964.86 10520.34
03/07 10874.96 11035.19 10678.50
06/07 11498.98 11728.19 10623.19
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007
ENDING
VALUE OF A
SIX ONE SINCE $10,000
MONTHS YEAR INCEPTION INVESTMENT
- --------------------------------------------------------------------------------
Total Return Fund 7.29% 18.54% 12.68% $11,499
S&P 500 Index 6.96% 20.59% 7.13% $11,728
LB Aggregate
Bond Index 0.98% 6.12% 6.02% $10,623
Inception date 5/1/06
CLASS 4 SHARES
[LINE CHART OMITTED -- PLOT POINTS ARE AS FOLLOWS:]
TOTAL S&P 500 LB AGGREGATE
RETURN INDEX BOND INDEX
05/06 $10000.00 $10000.00 $10000.00
06/06 9688.78 9725.39 10010.49
09/06 10088.08 10276.45 10391.65
12/06 10688.52 10964.86 10520.34
03/07 10845.80 11035.19 10678.50
06/07 11468.84 11728.19 10623.19
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007
ENDING
VALUE OF A
SIX ONE SINCE $10,000
MONTHS YEAR INCEPTION INVESTMENT
- --------------------------------------------------------------------------------
Total Return Fund 7.30% 18.37% 12.43% $11,469
S&P 500 Index 6.96% 20.59% 7.13% $11,728
LB Aggregate
Bond Index 0.98% 6.12% 6.02% $10,623
Inception date 5/1/06
Total Return Fund
S&P 500 Index
LB Aggregate Bond Index
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPHS AND TABLES
DO NOT REFLECT THE DEDUCTION OF TAXES.
6
TOTAL RETURN FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
TOTAL RETURN FUND
Portfolio Composition as a % of the Market Value of $2,647,083
(in thousands) as of June 30, 2007
[PIE CHART OMITTED -- PLOT POINTS ARE AS FOLLOWS:]
Domestic Equity 37.2%
Foreign Equity 26.4%
Bonds & Notes 22.2%
Short Term & Others 14.2%
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
DOMESTIC EQUITY -- 42.6%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 6.4%
Bed Bath & Beyond, Inc. 510,880 $ 18,386,571(a)
Carnival Corp. 288,376 14,064,098(h)
Coach, Inc. 16,026 759,472(a)
Comcast Corp. (Class A) 845,985 23,653,741(a)
Dick's Sporting Goods, Inc. 14,338 834,041(a,j)
Home Depot, Inc. 257,636 10,137,977(h)
Liberty Global, Inc. (Series C) 246,703 9,695,428(a)
Liberty Media Holding Corp -
Capital (Series A) 98,257 11,562,884(a)
Life Time Fitness, Inc. 54,831 2,918,654(a,j)
Lowe's Companies, Inc. 399,502 12,260,716
Omnicom Group, Inc. 161,022 8,521,284
O'Reilly Automotive, Inc. 79,245 2,896,405(a)
Pulte Homes, Inc. 33,342 748,528
Regal Entertainment
Group, (Class A) 80,025 1,754,948(j)
Staples, Inc. 284,445 6,749,880
Starwood Hotels & Resorts
Worldwide, Inc. 25,045 1,679,768
Target Corp. 174,196 11,078,866
The Cheesecake Factory 220,927 5,417,130(a,j)
Weight Watchers International
Inc. 33,888 1,722,866(j)
144,843,257
CONSUMER STAPLES -- 4.4%
Alberto-Culver Co. 123,417 2,927,452
Brown-Forman Corp. (Class B) 7,914 578,355
Clorox Co. 35,178 2,184,554
Colgate-Palmolive Co. 272,274 17,656,969(h)
Kimberly-Clark Corp. 33,668 2,252,053
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
McCormick & Company, Inc. 43,860 $ 1,674,575
PepsiCo, Inc. 447,935 29,048,585
Procter & Gamble Co. 320,581 19,616,351
The Coca-Cola Co. 380,598 19,909,081(h)
The Kroger Co. 23,992 674,895
Wal-Mart Stores, Inc. 49,771 2,394,483
98,917,353
ENERGY -- 3.4%
Dresser-Rand Group, Inc. 58,247 2,300,757(a)
EOG Resources, Inc. 111,798 8,167,962
Exxon Mobil Corp. 292,768 24,557,380(h)
GlobalSantaFe Corp. 32,060 2,316,335
Halliburton Co. 131,746 4,545,237
Hess Corp. 33,755 1,990,195
Peabody Energy Corp. 34,659 1,676,802
Schlumberger Ltd. 324,973 27,603,207
Weatherford International Ltd. 55,881 3,086,866(a)
76,244,741
FINANCIALS -- 5.6%
Affiliated Managers Group, Inc. 17,179 2,211,968(a,j)
American International Group, Inc. 456,7183 1,983,962(h)
CB Richard Ellis Group, Inc.
(Class A) 118,640 4,330,360(a)
Citigroup, Inc. 386,430 19,819,995
CVB Financial Corp. 178,985 1,990,313(j)
Douglas Emmett, Inc. (REIT) 52,700 1,303,798(j)
Federal National Mortgage Assoc. 235,678 15,396,844
Fortress Investment
Group LLC (Class A) 78,428 1,868,155(j)
Greenhill & Company, Inc. 33,116 2,275,400(j)
Hartford Financial Services
Group, Inc. 18,509 1,823,322
HCC Insurance Holdings, Inc. 195,213 6,522,066
Legg Mason, Inc. 27,522 2,707,614
Metlife, Inc. 70,264 4,530,623
SL Green Realty Corp. (REIT) 17,712 2,194,340
State Street Corp. 269,347 18,423,335(e)
SunTrust Banks, Inc. 84,903 7,279,583
Zions Bancorporation 22,098 1,699,557
126,361,235
HEALTHCARE -- 7.8%
Abbott Laboratories 275,202 14,737,067(h)
Aetna, Inc. 231,541 11,438,125
Alcon, Inc. 13,832 1,866,075
Amgen, Inc. 274,159 15,158,251(a,h)
Amylin Pharmaceuticals, Inc. 65,720 2,705,035(a,j)
Barr Pharmaceuticals, Inc. 55,191 2,772,244(a)
DENTSPLY International, Inc. 65,562 2,508,402
Gen-Probe Inc. 34,581 2,089,384(a)
Gilead Sciences, Inc. 252,590 9,792,914(a)
Henry Schein, Inc. 35,822 1,913,969(a)
Hologic, Inc. 54,825 3,032,371(a,j)
Lifecell Corp. 57,353 1,751,561(a,j)
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
7
<Page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Lincare Holdings Inc. 121,499 $ 4,841,735(a)
Manor Care, Inc. 42,720 2,789,189(j)
Medtronic Inc. 389,003 20,173,696
Pfizer Inc. 698,529 17,861,387
Psychiatric Solutions Inc. 101,574 3,683,073(a,j)
Resmed, Inc. 235,553 9,718,917(a,j)
Thermo Electron Corp. 77,583 4,012,593(a)
UnitedHealth Group, Inc. 418,799 21,417,381
Vertex Pharmaceuticals, Inc. 59,181 1,690,209(a)
Wyeth 348,393 19,976,855
175,930,433
INDUSTRIALS -- 3.3%
Corporate Executive Board Co. 39,148 2,541,097(j)
CoStar Group, Inc. 43,216 2,285,262(a,j)
Dover Corp. 289,850 14,825,828(h)
Harsco Corp. 70,057 3,642,964
Hexcel Corp. 179,168 3,775,070(a,j)
Joy Global, Inc. 28,478 1,661,122
SAIC, Inc. 98,850 1,786,220(a,j)
Southwest Airlines Co. 805,112 12,004,220(j)
Spirit Aerosystems
Holdings, Inc. (Class A) 33,455 1,206,053(a)
Stericycle, Inc. 12,400 551,304(a,j)
Textron Inc. 139,036 15,309,254
United Technologies Corp. 175,661 12,459,635
WESCO International, Inc. 30,364 1,835,504(a)
73,883,533
INFORMATION TECHNOLOGY -- 9.9%
Activision, Inc. 334,630 6,247,542(a)
Analog Devices, Inc. 141,992 5,344,579(h)
Automatic Data Processing, Inc. 211,509 10,251,841
Cisco Systems, Inc. 939,359 26,161,148(a,h)
Citrix Systems, Inc. 54,823 1,845,890(a)
Cogent, Inc. 117,081 1,719,920(a,j)
Comverse Technology, Inc. 82,832 1,727,047(a)
DST Systems, Inc. 28,713 2,274,357(a)
eBay, Inc. 48,307 1,554,519(a)
Electronic Arts, Inc. 8,435 399,144(a)
EMC Corp. 183,126 3,314,581(a)
Global Cash Access Holdings, Inc. 152,508 2,443,178(a,j)
Harris Corp. 43,529 2,374,507
Hittite Microwave Corp. 38,799 1,657,881(a,j)
Intel Corp. 652,872 15,512,239
Intuit Inc. 517,658 15,571,152(a)
Juniper Networks, Inc. 113,836 2,865,252(a)
Limelight Networks, Inc. 53,364 1,055,540(a,j)
Linear Technology Corp. 26,705 966,187(j)
Macrovision Corp. 123,033 3,698,372(a,j)
Microchip Technology Inc. 57,698 2,137,134
Microsoft Corp. 526,982 15,530,160
Molex, Inc. (Class A) 462,349 12,275,366(j)
NAVTEQ Corp. 14,638 619,773(a,j)
Network Appliance, Inc. 31,922 932,122(a)
Nvidia Corp. 42,172 1,742,125(a)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Oracle Corp. 819,750 $ 16,157,273(a,h)
Paychex, Inc. 473,527 18,524,376
QUALCOMM, Inc. 562,994 24,428,310
Salesforce.com, Inc. 27,833 1,192,922(a,j)
Western Union Co. 712,890 14,849,499
Yahoo! Inc. 345,466 9,372,493(a)
224,746,429
MATERIALS -- 0.8%
Cabot Corp. 40,534 1,932,661
Martin Marietta Materials, Inc. 17,543 2,842,317
Monsanto Co. 152,406 10,293,501
Praxair, Inc. 33,620 2,420,304
17,488,783
TELECOMMUNICATION SERVICES -- 0.7%
American Tower Corp. (Class A) 48,258 2,026,836(a)
BigBand Networks, Inc. 100,255 1,314,343(a,j)
Neustar, Inc. (Class A) 124,587 3,609,285(a,j)
NII Holdings Inc. (Class B) 117,732 9,505,682(a)
16,456,146
UTILITIES -- 0.3%
DTE Energy Co. 33,342 1,607,751
ITC Holdings Corp. 76,758 3,118,678(j)
PPL Corp. 35,078 1,641,300
SCANA Corp. 40,675 1,557,446
7,925,175
TOTAL DOMESTIC EQUITY
(COST $874,139,743) 962,797,085
- --------------------------------------------------------------------------------
FOREIGN EQUITY -- 31.0%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 2.3%
Accor S.A. 22,619 1,995,246(j)
China Travel International Inv 1,523,319 798,954
DaimlerChrysler AG (Regd.) 38,378 3,542,805
Esprit Holdings Ltd. 100,000 1,270,757
Gafisa S.A. 37,950 595,062
Hyundai Motor Co. 37,400 2,950,930
Indian Hotels Company Ltd. 107,352 397,216
Koninklijke Philips
Electronics N.V. 304,090 12,858,750
LVMH Moet Hennessy
Louis Vuitton S.A. 43,916 5,042,337(j)
Megainfo Holdings Ltd. 1,808,000 408,275(a)
Naspers Ltd. 13,572 349,463
Natura Cosmeticos S.A. 30,000 436,137
ON*Media Corp. 78,340 724,887(a)
Prajay Engineers Syndicate Ltd. 75,862 468,065
Reed Elsevier PLC 268,350 3,465,087
Renault S.A. 14,689 2,350,899
Sekisui Chemical Company Ltd. 90,989 701,107
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
8
TOTAL RETURN FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Swatch Group AG 7,988 $ 2,261,553
Toyota Motor Corp. 172,988 10,877,041
Truworths International Ltd. 63,887 329,388
Urbi Desarrollos Urbanos S.A.
de C.V. 187,037 862,225(a)
52,686,184
CONSUMER STAPLES -- 1.9%
Cosan S.A. Industria e Comercio 25,800 422,231(a)
Diageo PLC 304,699 6,327,562
Groupe Danone 24,051 1,938,337
IOI Corp. 535,000 807,421
ITC Ltd. 97,097 369,139
Massmart Holdings Ltd. 25,468 310,940
Metro AG 54,146 4,486,072(j)
Nestle S.A. (Regd.) 29,514 11,177,016
Seven & I Holdings Company Ltd. 155,300 4,426,008(j)
Shinsegae Company Ltd. 630 409,982
Shiseido Company Ltd. 294,000 6,257,043
Tesco PLC 722,696 6,041,265
Tiger Brands Ltd. 25,902 664,250
43,637,266
ENERGY -- 2.8%
Acergy S.A. 280,556 6,306,018(j)
BG Group, PLC 247,524 4,053,984
CAT Oil AG 27,566 746,903(a)
China Oilfield Services Ltd.
(Series H) 206,000 208,242
China Petroleum & Chemical Corp. 4,248,000 4,745,605
China Shenhua Energy
Company Ltd. 174,000 601,689
ENI S.p.A. 49,858 1,803,841(j)
LUKOIL ADR 13,085 997,077
Nexen, Inc. 55,222 1,709,121
OAO Gazprom ADR 83,407 3,494,753(j)
Paladin Resources Ltd. 527,140 3,665,473(a,j)
PetroChina Company Ltd. 260,000 384,912
Petroleo Brasileiro S.A. ADR 92,333 9,850,085
Reliance Industries Ltd. 13,602 569,206
Saipem S.p.A. 419,036 14,266,999(j)
Thai Oil PCL 290,300 592,792
Total S.A. 117,299 9,489,985(j)
63,486,685
FINANCIALS -- 7.6%
Allianz AG (Regd.) 25,915 6,064,926(j)
AXA S.A. 132,706 5,692,210(j)
Banca Intesa S.p.A. 927,046 6,896,978(j)
Banco do Brasil S.A. 46,192 668,897
Banco Santander Central
Hispano S.A. (Regd.) 476,283 8,736,232(j)
Bank of Yokohama Ltd. 541,012 3,777,772
BNP Paribas 94,619 11,215,060(j)
CapitaLand Ltd. 935,000 4,957,906(j)
China Merchants Bank
Company Ltd. 54,000 164,819
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
China Vanke Company Ltd. 367,850 $ 761,534
Credit Agricole S.A. 151,519 6,135,143(j)
Credit Suisse Group, (Regd.) 131,354 9,293,765
Dubai Islamic Bank 182,573 491,123
Egyptian Financial Group-
Hermes Holding 48,149 385,202
Emaar Properties 171,269 552,578
Hongkong Land Holdings Ltd. 727,999 3,280,510(j)
Hung Poo Real Estate
Development Corp. 686,000 818,305
ICICI Bank Ltd. 17,570 411,651
ICICI Bank Ltd. ADR 45,238 2,223,448(j)
ING Groep N.V. 144,115 6,329,434
Jardine Matheson Holdings Ltd. 106,306 2,532,041(j)
Kookmin Bank 58,191 5,103,576
Lloyds TSB Group, PLC 343,846 3,818,953
Mitsubishi Estate Company Ltd. 401,982 10,873,351
Mitsubishi UFJ Financial
Group, Inc. 1,024 11,251,363
Nomura Holdings, Inc. 723,798 14,016,457(j)
Ping An Insurance Group 68,500 485,304
Plaza Centers N.V. 104,902 419,503(a)
Prudential PLC 484,597 6,891,833
PT Bank Niaga 7,931,553 719,092
Royal Bank of Scotland
Group, PLC 826,765 10,452,261
Samsung Fire & Marine
Insurance Company Ltd. 4,990 960,560
Siam Commercial Bank PCL 383,400 810,665
Standard Bank Group, Ltd. 46,348 643,153
State Bank of India Ltd. 3,520 132,246
State Bank of India Ltd. GDR 5,284 466,049(j)
Sumitomo Realty & Development
Company Ltd. 104,000 3,376,761
Sun Hung Kai Properties Ltd. 328,476 3,957,295
Swiss Reinsurance 28,905 2,627,320
Tisco Bank PCL 436,686 347,598
UniCredito Italiano S.p.A. 1,229,333 10,956,345
Woori Investment &
Securities Co Ltd 32,350 987,990
170,687,209
HEALTHCARE -- 1.2%
GlaxoSmithKline PLC 139,192 3,622,765
Novartis AG (Regd.) 75,215 4,208,488
Roche Holding AG 80,614 14,235,923
Smith & Nephew PLC ADR 31,729 1,968,150(j)
Teva Pharmaceutical
Industries Ltd. ADR 19,895 820,669(j)
Yuhan Corp. 3,291 615,753
Zentiva N.V. 6,692 452,500(a)
25,924,248
INDUSTRIALS -- 4.5%
ABB Ltd. (Regd.) 375,335 8,434,655
Adecco S.A. (Regd.) 41,921 3,232,246(j)
Alstom 30,741 5,115,139(a,j)
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
9
TOTAL RETURN FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Asahi Glass Company Ltd. 346,005 $ 4,651,353(j)
Barloworld Ltd. 14,715 409,774
Brambles Ltd. 144,921 1,495,101(a)
Canadian National Railway Co. 143,997 7,336,909
China Communications
Construction Company Ltd. 408,080 731,399
Chiyoda Corp. 224,676 4,268,339(j)
Daewoo Shipbuilding & Marine
Engineering Company Ltd. 8,340 471,498
Doosan Heavy Industries and
Construction Company Ltd. 18,570 1,776,014
East Japan Railway Co. 895 6,875,496
Empresas ICA Sociedad
Controladora S.A. de C.V. 150,029 761,826(a)
Enka Insaat ve Sanayi AS 79,044 905,057
Fraser and Neave Ltd. 100,000 356,767
Genting Bhd 227,000 543,207
Group 4 Securicor PLC 1,288,341 5,419,531
Grupo Aeroportuario del Sureste
S.A. de C.V. ADR (Series B) 7,286 383,899
Hyunjin Materials Company Ltd. 16,695 741,833
Jaguar Mining Inc. 53,686 371,954(a)
Jaiprakash Associates Ltd. 40,469 738,743
Komatsu Ltd. 196,075 5,665,829
Larsen & Toubro Ltd. 37,787 2,033,158
Mitsubishi Heavy Industries Ltd. 578,000 3,690,726
Orascom Construction Industries 80,112 5,244,127
Orascom Construction
Industries GDR 100 13,212
Orkla ASA 167,776 3,158,363
Sandvik AB 315,070 6,333,145(j)
Schneider Electric S.A. 23,911 3,342,938
Siemens AG (Regd.) 74,765 10,735,875(j)
Smiths Group PLC 94,003 2,227,388
United Tractors Tbk PT 946,000 864,627
Vinci S.A. 31,951 2,379,610
100,709,738
INFORMATION TECHNOLOGY -- 2.3%
Delta Electronics Inc. 272,579 1,073,126(a)
Gemtek Technology Corp. 328,000 842,597
HON HAI Precision Industry
Company Ltd. 200,200 1,729,233
Hoya Corp. 114,200 3,777,017
Ibiden Company Ltd. 96,361 6,198,919
MediaTek Inc. 118,900 1,849,908
Mettler Toledo International Inc. 19,831 1,894,059(a)
Nidec Corp. 107,613 6,294,627(j)
Nokia OYJ 484,915 13,589,738(j)
Samsung Electronics
Company Ltd. 12,790 7,818,773
Sohu.com Inc. 10,188 325,914(a,j)
Taiwan Semiconductor
Manufacturing Company Ltd. 2,861,914 6,129,193
51,523,104
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
MATERIALS -- 3.5%
Bayer AG 109,493 $ 8,272,761(j)
BHP Billiton PLC 577,410 16,025,686
Good Fellow Group Ltd. 6,636,000 1,275,898(a)
Harmony Gold Mining
Company Ltd. ADR 42,256 602,993(a,j)
Holcim Ltd. (Regd.) 24,528 2,640,102(j)
Israel Chemicals Ltd. 135,211 1,075,770
Linde AG 64,179 7,729,312(j)
Makhteshim-Agan Industries Ltd. 107,775 780,013
MMC Norilsk Nickel ADR 5,141 1,141,302
Novozymes (Series B) 19,598 2,266,581
POSCO 2,170 1,041,725
Potash Corp of Saskatchewan 141,332 11,064,767
Rio Tinto PLC (Regd.) 93,062 7,113,340
Samling Global Ltd. 1,692,000 653,608(a)
Steppe Cement Ltd. 5,687 36,848(a)
Syngenta AG (Regd) 31,105 6,043,654
Toray Industries Inc. 1,427,998 10,520,449(j)
Vedanta Resources PLC 32,143 1,035,180
79,319,989
TELECOMMUNICATION SERVICES -- 2.7%
America Movil S.A. de C.V.
ADR (Series L) 147,947 9,162,357
Bharti Airtel Ltd. 49,773 1,021,939(a)
China Mobile Ltd. 104,500 1,126,513
Hellenic Telecommunications
Organization S.A. 168,232 5,203,012
Hutchison Telecommunications
International Ltd. 317,000 408,361
Mobile Telesystems OJSC ADR 65,469 3,965,457(a)
MTN Group, Ltd. 457,080 6,226,692
Orascom Telecom Holding SAE 53,873 692,585
Philippine Long Distance
Telephone Co. 8,920 509,885
Singapore Telecommunications Ltd. 2,359,003 5,250,931
Telekom Malaysia Bhd 254,000 758,880
Telekomunikasi Indonesia
Tbk PT (Series B) 684,500 742,538
Telenor ASA 669,184 13,059,642
Vodafone Group, PLC 4,133,247 13,837,560
61,966,352
UTILITIES -- 1.4%
CEZ 16,084 827,418
E.ON AG 58,404 9,785,463
First Philippine Holdings Corp. 307,500 598,794
National Grid PLC 274,712 4,049,896
Perusahaan Gas Negara 465,500 487,436
RWE AG 33,790 3,598,624(j)
Suez S.A. 60,988 3,479,105
Veolia Environnement 110,103 8,629,039(j)
31,455,775
TOTAL COMMON STOCK
(COST $554,602,148) 681,396,550
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
10
<Page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.8%
- --------------------------------------------------------------------------------
All America Latina Logistica S.A. 229,100 $ 3,140,312
Cia Vale do Rio Doce 52,761 1,985,797
Cia Vale do Rio Doce ADR 312,667 11,787,546
Petroleo Brasileiro S.A. 14,400 386,093
TOTAL PREFERRED STOCK
(COST $11,118,801) 17,299,748
- --------------------------------------------------------------------------------
RIGHTS -- 0.0%*
- --------------------------------------------------------------------------------
Veolia Environnement
(COST $7,751) 110,103 156,135(a,j)
TOTAL FOREIGN EQUITY
(COST $565,728,700) 698,852,433
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BONDS AND NOTES -- 23.7%
- --------------------------------------------------------------------------------
U.S. TREASURIES -- 5.5%
U.S. Treasury Bonds
4.50% 02/15/36 $ 265,000 240,175(j)
4.75% 02/15/37 16,210,000 15,293,163(j)
U.S. Treasury Notes
4.50% 04/30/12 18,020,000 17,688,251(j)
4.63% 11/15/09 - 02/15/17 56,636,000 55,289,502(j)
4.75% 05/31/12 10,316,000 10,235,948(j)
4.88% 05/31/09 26,364,000 26,360,573(j)
125,107,612
FEDERAL AGENCIES -- 0.5%
Federal Home Loan Mortgage Corp.
4.75% 03/05/12 7,890,000 7,711,396
4.88% 02/09/10 610,000 605,442(j)
5.00% 02/16/17 3,480,000 3,361,033(j)
11,677,871
AGENCY MORTGAGE BACKED -- 7.0%
Federal Home Loan Mortgage Corp.
4.50% 06/01/33 - 02/01/35 282,089 256,767(h)
5.00% 07/01/35 - 10/01/35 8,678,905 8,157,184(h)
5.50% 05/01/20 98,652 97,241(h)
6.00% 04/01/17 - 11/01/36 788,768 787,759(h)
6.50% 01/01/27 - 08/01/36 1,066,222 1,079,777(h)
7.00% 10/01/25 - 08/01/36 305,335 313,492(h)
7.50% 11/01/09 - 09/01/33 48,572 50,536(h)
8.00% 01/01/30 - 11/01/30 17,018 17,882(h)
9.00% 10/01/25 767 829(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Federal National Mortgage Assoc.
4.00% 05/01/19 - 06/01/19 $ 259,004 $ 240,025(h)
4.50% 05/01/18 - 02/01/35 2,545,758 2,391,934 (h)
5.00% 06/01/20 - 08/01/35 5,067,611 4,773,280 (h)
5.01% 07/01/35 1,177,628 1,175,526(h,i)
5.10% 08/01/35 767,462 763,448(h,i)
5.26% 04/01/37 598,775 591,509 (i)
5.44% 04/01/37 53,309 52,980 (i)
5.50% 04/01/14 - 08/01/35 1,932,640 1,889,186 (h)
5.53% 04/01/37 752,385 749,153 (i)
5.56% 03/01/37 51,013 50,833 (i)
5.62% 04/01/37 1,340,508 1,337,310 (i)
5.64% 06/01/37 1,003,998 1,002,451 (i)
5.67% 05/01/37 388,988 388,395 (i)
5.69% 04/01/37 482,141 481,937 (i)
5.71% 04/01/37 1,901,800 1,901,636 (i)
5.85% 06/01/37 1,209,961 1,213,670 (i)
6.00% 09/01/19 - 08/01/35 4,804,636 4,765,750 (h)
6.50% 09/01/17 - 08/01/36 2,497,943 2,531,552 (h)
7.00% 04/01/17 - 06/01/36 419,019 431,707 (h)
7.50% 12/01/09 - 03/01/34 108,772 112,988 (h)
8.00% 12/01/11 - 11/01/33 39,600 41,325 (h)
8.50% 06/01/30 225 242 (h)
9.00% 06/01/09 - 12/01/22 20,128 21,095 (h)
5.00% TBA 30,180,000 28,505,334 (c)
5.50% TBA 57,664,000 55,808,236 (c)
6.00% TBA 23,488,000 23,245,743 (c)
6.50% TBA 5,845,000 5,899,797 (c)
Government National Mortgage Assoc.
4.50% 08/15/33 - 09/15/34 464,833 428,613 (h)
6.00% 04/15/27 - 09/15/36 668,028 665,676 (h)
6.50% 04/15/24 - 09/15/36 642,127 652,522 (h)
7.00% 03/15/12 - 10/15/36 679,059 700,405 (h)
8.00% 03/15/30 3,376 3,625 (h)
9.00% 11/15/16 - 12/15/21 20,650 22,189 (h)
5.50% TBA 4,535,000 4,400,365 (c)
158,001,904
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.8%
Federal Home Loan Mortgage Corp.
1.13% 04/15/37 1,980,951 93,341(g,i)
1.33% 10/15/18 - 04/25/37 1,943,821 95,976(g,h,i)
1.43% 05/15/37 2,806,630 130,903(g,i)
1.83% 12/15/30 421,277 17,575(g,h,i)
1.88% 09/15/36 1,862,160 126,860(g,i)
2.46% 09/15/36 1,588,639 141,488(g,h,i)
3.98% 12/15/33 45,000 33,773(h,i)
4.50% 04/15/13 - 03/15/19 479,372 35,287(g,h)
5.00% 12/15/13 - 12/01/34 4,868,945 1,110,855(g,h)
5.50% 04/15/17 - 06/15/33 216,765 33,768(g,h)
5.50% 04/15/26 - 12/15/36 6,326,919 6,233,722
6.00% 03/15/28 1,872,117 1,885,074
7.50% 01/15/16 9,293 9,550 (h)
7.50% 07/15/27 6,339 1,326(g,h)
8.00% 02/01/23 - 07/01/24 4,494 1,143(g,h)
24.46% 09/25/43 425,216 4,703(d,g,h,i)
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
11
<Page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp. REMICS
6.00% 01/15/30 $ 2,085,000 $ 2,103,325
Federal Home Loan
Mortgage STRIPS
7.24% 08/01/27 1,017 793(d,f,h)
Federal National Mortgage
Assoc STRIPS (Class 2)
7.50% 11/01/23 20,186 5,529(g,h)
8.00% 08/01/23 - 07/01/24 9,494 2,404(g,h)
Federal National Mortgage Assoc.
1.13% 05/25/37 - 06/25/37 23,908,770 1,186,002(g,i)
1.19% 12/25/42 235,681 7,807(g,h,i)
1.45% 03/25/37 1,555,516 96,909(g,i)
1.88% 06/25/36 - 07/25/37 21,836,984 1,461,042(g,h,i)
2.28% 09/25/42 233,164 12,387(g,h,i)
2.33% 04/25/17 - 10/25/17 187,070 10,718(g,h,i)
2.38% 08/25/16 71,427 2,836(g,h,i)
4.50% 05/25/18 124,247 11,415(g,h)
4.75% 11/25/14 23,998 1,297(g,h)
5.00% 02/25/32 34,077 2,660(g,h)
5.50% 03/25/29 - 03/25/33 2,210,000 2,193,779
8.00% 07/25/14 25,885 26,164(h)
Federal National Mortgage
Assoc. (Class 2)
5.50% 12/01/33 - 05/25/37 409,365 106,589(g)
Federal National Mortgage
Assoc. (Class S)
1.78% 02/25/31 75,971 3,542(g,h,i)
Federal National Mortgage
Assoc. REMIC
1.88% 01/25/37 4,411,412 279,860(g,h,i)
4.50% 11/25/13 71,754 2,661(g,h)
4.91% 03/25/31 80,170 75,562(h,i)
5.00% 10/25/22 109,898 17,705(g,h)
Federal National Mortgage Assoc.
REMIC (Class J)
1080.91% 03/25/22 7 52(g,h)
Federal National Mortgage
Assoc. REMIC (Class K)
1008.00% 05/25/22 5 144(g,h)
Federal National Mortgage
Assoc. STRIPS (Class 2)
5.00% 08/01/34 4,987,341 1,298,267(g)
18,864,793
ASSET BACKED -- 2.7%
American Express Credit Account
Master Trust (Class A)
5.31% 12/17/12 5,000,000 4,999,957(h,i)
BA Credit Card Trust
5.32% 08/15/12 9,500,000 9,500,000(h,i)
Bank One Issuance Trust
3.59% 05/17/10 20,000 19,929(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Bear Stearns Asset Backed
Securities Inc. (Class A)
5.69% 01/25/34 $ 14,031 $ 14,078(h,i)
Capital Auto Receivables
Asset Trust
5.38% 05/15/11 8,000,000 8,001,248(h,i)
Capital One Auto Finance Trust
5.32% 04/15/12 3,000,000 2,999,985(h,i)
Carmax Auto Owner Trust
4.35% 03/15/10 154,000 152,446(h)
Citibank Credit Card Issuance Trust
4.45% 04/07/10 35,000 34,701(h)
Ford Credit Auto Owner
Trust (Class A)
5.36% 02/15/12 7,125,000 7,121,254(h,i)
Ford Credit Floorplan Master
Owner Trust (Class A)
5.36% 07/15/09 2,000,000 1,999,947(h,i)
Honda Auto Receivables
Owner Trust (Class A)
4.15% 10/15/10 138,000 136,347(h)
Indymac Residential Asset
Backed Trust
5.49% 10/25/35 4,500,000 4,500,809(h,i)
7.32% 04/25/37 189,000 181,568(i)
JP Morgan Mortgage
Acquisition Corp.
5.47% 03/01/37 1,500,000 1,499,160(i)
Long Beach Mortgage Loan Trust
5.60% 09/25/35 1,184,086 1,185,390(h,i)
Mid-State Trust
7.54% 07/01/35 5,267 5,557(h)
Option One Mortgage Loan Trust
5.45% 06/25/37 4,000,000 4,002,218(i)
Peco Energy Transition Trust
6.52% 12/31/10 50,000 51,465(h)
Residential Asset Mortgage
Products, Inc.
5.56% 03/25/34 10,283 10,289(h,i)
Residential Asset Securities Corp.
5.57% 01/25/36 3,000,000 3,005,156(h,i)
5.82% 07/25/32 10,070 10,073(h,i)
Residential Asset Securities
Corp. (Class A)
4.16% 07/25/30 138,384 136,915(h,i)
SLM Student Loan Trust (Class A)
5.41% 06/15/18 289,483 289,696(h,i)
Superior Wholesale Inventory
Financing Trust (Class A)
5.50% 06/15/10 4,000,000 4,009,930(h,i)
Swift Master Auto Receivables
Trust (Class A)
5.42% 06/15/12 4,250,000 4,250,000(i)
Triad Auto Receivables Owner
Trust (Class A)
5.38% 02/12/14 2,000,000 1,998,911(i)
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
12
<Page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
Volkswagen Auto Lease
Trust (Class A)
3.94% 10/20/10 $ 103,000 102,681(h)
Wells Fargo Home Equity Trust
3.97% 05/25/34 44,160 42,885(h,i)
60,262,595
CORPORATE NOTES -- 3.6%
Abbey National PLC
7.95% 10/26/29 340,000 407,746(h)
Allied World Assurance
Holdings Ltd.
7.50% 08/01/16 325,000 341,762(h)
American Electric Power
Company, Inc. (Series C)
5.38% 03/15/10 2,125,000 2,114,366(h)
American Electric Power
Company, Inc. (Series D)
5.25% 06/01/15 1,040,000 998,909(h)
American International Group, Inc.
6.25% 05/01/36 490,000 498,706(h)
Appalachian Power Co. (Series G)
3.60% 05/15/08 20,000 19,682(h)
Arizona Public Service Co.
6.25% 08/01/16 370,000 371,741(h)
AT&T, Inc.
4.13% 09/15/09 1,800,000 1,749,008(h)
BAC CAP TRUST V
5.63% 03/08/35 925,000 825,109(h)
BellSouth Corp.
4.20% 09/15/09 735,000 715,308(h)
6.55% 06/15/34 510,000 508,229(h)
BJ Services Co.
5.75% 06/01/11 430,000 428,805(h)
Bristol-Myers Squibb Co.
5.88% 11/15/36 420,000 395,288(h)
British Telecommunications PLC
8.63% 12/15/10 170,000 185,818(h)
Burlington Northern Santa Fe Corp.
6.75% 07/15/11 1,000,000 1,036,328(h)
Capital One Bank
6.50% 06/13/13 25,000 25,641(h)
Carolina Power & Light Co.
5.15% 04/01/15 810,000 776,738(h)
5.70% 04/01/35 155,000 144,336(h)
6.13% 09/15/33 190,000 188,072(h)
Chubb Corp.
6.00% 05/11/37 400,000 382,490(h)
CIT Group, Inc.
5.13% 09/30/14 485,000 454,599(h)
Citigroup, Inc.
5.13% 02/14/11 - 05/05/14 3,805,000 3,695,071(h)
Clear Channel Communications, Inc.
4.25% 05/15/09 355,000 343,104(h)
Consumers Energy Co.
5.15% 02/15/17 555,000 521,603(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Corrections Corp of America
7.50% 05/01/11 $ 645,000 $ 653,869(h)
COX Communications, Inc.
7.13% 10/01/12 505,000 533,013(h)
7.75% 11/01/10 375,000 398,659(h)
CRH America, Inc.
6.00% 09/30/16 290,000 286,736(h)
CSX Corp.
6.15% 05/01/37 485,000 464,703(h)
CSX Transportation, Inc.
9.75% 06/15/20 1,021,000 1,304,715(h)
DaimlerChrysler NA Holding Corp.
4.05% 06/04/08 280,000 276,352(h)
Dex Media West LLC
8.50% 08/15/10 270,000 279,788
Dominion Resources, Inc.
5.69% 05/15/08 370,000 370,445(h,k)
Dominion Resources, Inc. (Series B)
6.30% 09/30/66 1,505,000 1,507,101(h,i)
Dover Corp.
6.50% 02/15/11 375,000 385,788(h)
6.65% 06/01/28 195,000 206,845(h)
Duke Energy Corp.
5.38% 01/01/09 160,000 159,626(h)
EI Du Pont de Nemours & Co.
4.88% 04/30/14 325,000 308,383(h)
El Paso Electric Co.
6.00% 05/15/35 270,000 251,803
Embarq Corp.
7.08% 06/01/16 490,000 492,251(h)
Federated Retail Holdings Inc.
5.35% 03/15/12 1,790,000 1,757,154
FirstEnergy Corp. (Series B)
6.45% 11/15/11 2,040,000 2,091,843(h)
GMAC LLC
5.85% 01/14/09 600,000 591,322
Goldman Sachs Group, Inc.
6.60% 01/15/12 5,135,000 5,323,863(h)
6.88% 01/15/11 900,000 936,678
GTE Corp.
6.94% 04/15/28 850,000 869,962(h)
7.51% 04/01/09 165,000 170,080(h)
Harrah's Operating Company, Inc.
5.38% 12/15/13 640,000 542,400
Hospira, Inc.
5.55% 03/30/12 590,000 583,197
HSBC Bank USA NA
3.88% 09/15/09 1,175,000 1,137,112(h)
4.63% 04/01/14 1,085,000 1,013,924
HSBC Finance Corp.
6.75% 05/15/11 405,000 419,856
HSBC Holdings PLC
6.50% 05/02/36 100,000 102,669(h)
Hydro Quebec
8.05% 07/07/24 820,000 1,029,456(h)
8.50% 12/01/29 1,585,000 2,128,386(h)
ING Capital Funding TR III
8.44% 12/29/49 960,000 1,042,353(h,i)
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
13
<Page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ING Groep N.V.
5.78% 12/29/49 $1,265,000 $ 1,219,543(h,i)
International Business
Machines Corp.
4.75% 11/29/12 1,300,000 1,253,733(h)
International Steel Group Inc.
6.50% 04/15/14 415,000 421,751
IPSCO, Inc.
8.75% 06/01/13 350,000 370,782
iStar Financial, Inc. (REIT)
7.00% 03/15/08 400,000 403,240(h)
JP Morgan Chase & Co.
7.00% 11/15/09 1,130,000 1,167,627(h)
JP Morgan Chase Bank
5.88% 06/13/16 825,000 823,518
Kansas Gas & Electric
5.65% 03/29/21 425,000 407,735(h)
Lehman Brothers Holdings, Inc.
5.00% 01/14/11 1,150,000 1,128,879(h)
Markel Corp.
7.35% 08/15/34 340,000 351,255(h)
Marsh & McLennan Companies, Inc.
5.50% 07/13/07 1,500,000 1,500,009(h,i)
Martin Marietta Materials, Inc.
6.25% 05/01/37 105,000 101,853
MBIA, Inc.
5.70% 12/01/34 285,000 261,847
Merck & Company, Inc.
5.75% 11/15/36 445,000 415,435(h)
Mizuho Financial Group Cayman Ltd.
8.38% 12/29/49 595,000 621,287
Mohegan Tribal Gaming Authority
6.38% 07/15/09 80,000 79,200
MUFG Capital Finance 1 Ltd.
6.35% 07/29/49 240,000 235,547(h,i)
Munich Re America Corp. (Series B)
7.45% 12/15/26 315,000 350,467(h)
Nevada Power Co. (Series A)
8.25% 06/01/11 250,000 270,514(h)
Nevada Power Company (Series I)
6.50% 04/15/12 515,000 524,431(h)
Nexen Inc.
6.40% 05/15/37 930,000 892,033
Nisource Finance Corp.
5.45% 09/15/20 370,000 336,467(h)
7.88% 11/15/10 160,000 170,912(h)
Norfolk Southern Corp.
6.00% 04/30/08 20,000 20,063(h)
8.63% 05/15/10 485,000 523,467(h)
Norfolk Southern Railway Co.
9.75% 06/15/20 64,000 82,112(h)
Northeast Utilities (Series B)
3.30% 06/01/08 30,000 29,341(h)
NorthWestern Corp.
5.88% 11/01/14 200,000 194,086(h)
ONEOK Partners LP
5.90% 04/01/12 780,000 784,440(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Pacific Bell
7.13% 03/15/26 $ 55,000 $ 58,024(h)
Pacific Gas & Electric Co.
5.80% 03/01/37 500,000 466,748
Pemex Finance Ltd.
9.03% 02/15/11 198,750 210,371(h)
Pemex Project Funding Master Trust
7.38% 12/15/14 2,055,000 2,228,976(h)
7.88% 02/01/09 195,000 201,612
8.63% 02/01/22 60,000 73,495(h)
Petrobras International Finance Co.
6.13% 10/06/16 740,000 725,200(h)
Prudential Financial, Inc.
5.70% 12/14/36 485,000 447,600(h)
6.10% 06/15/17 415,000 419,680
Public Service Company of Colorado
7.88% 10/01/12 520,000 572,637(h)
Puget Sound Energy, Inc.
3.36% 06/01/08 30,000 29,423(h)
5.48% 06/01/35 130,000 114,158(h)
Puget Sound Energy, Inc. (Series A)
6.97% 06/01/67 830,000 830,000(i)
Pulte Homes, Inc.
4.88% 07/15/09 385,000 373,269(h)
Reliant Energy, Inc.
7.88% 06/15/17 420,000 408,450
Residential Capital LLC
6.38% 06/30/10 660,000 650,877
6.46% 04/17/09 650,000 648,921(i)
Royal Bank of Scotland Group PLC
5.00% 10/01/14 375,000 358,899(h)
SLM Corp.
5.66% 01/27/14 1,251,000 1,085,019(i)
Sovereign Capital Trust VI
7.91% 06/13/36 945,000 1,009,809(h)
Sprint Capital Corp.
7.63% 01/30/11 2,200,000 2,316,478
Standard Chartered Bank
Hong Kong Ltd.
4.38% 12/03/14 380,000 369,360(i)
Station Casinos Inc.
7.75% 08/15/16 50,000 49,500(h)
Telecom Italia Capital S.A.
6.20% 07/18/11 1,175,000 1,190,482
Telefonica Emisiones SAU
5.86% 02/04/13 600,000 598,697
Tennessee Gas Pipeline Co.
7.63% 04/01/37 275,000 300,853
8.38% 06/15/32 325,000 381,094
Time Warner, Inc.
6.88% 05/01/12 25,000 26,085(h)
TXU Electric Delivery Co.
6.38% 05/01/12 580,000 591,899(h)
UBS Preferred Funding Trust I
8.62% 10/29/49 495,000 537,613(i)
Valspar Corp.
5.63% 05/01/12 320,000 315,915
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
14
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Verizon Global Funding Corp.
7.25% 12/01/10 $ 900,000 $ 948,589
Verizon Pennsylvania Inc.
8.75% 08/15/31 165,000 199,861(h)
8.35% 12/15/30 210,000 241,532(h)
Wal-Mart Stores, Inc.
6.88% 08/10/09 1,000,000 1,028,882(h)
Wells Fargo & Co.
5.25% 12/01/07 90,000 89,911(h)
Wells Fargo Bank NA
5.95% 08/26/36 1,450,000 1,420,908(h)
Westar Energy, Inc.
7.13% 08/01/09 190,000 194,325(h)
Wisconsin Electric Power
5.70% 12/01/36 115,000 108,247(h)
81,513,764
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.5%
Banc of America Commercial
Mortgage Inc.
4.13% 07/10/42 1,800,000 1,752,128(h)
5.32% 10/10/11 1,300,000 1,282,062(h)
5.69% 03/10/17 2,600,000 2,572,472(h)
Banc of America Commercial
Mortgage Inc. (Class A)
5.79% 05/11/35 1,927,791 1,942,389(h)
Banc of America Commercial
Mortgage Inc. (Class C)
5.70% 04/10/17 400,000 388,737(h)
Banc of America Funding Corp.
5.74% 03/20/36 194,164 192,417(h,i)
5.84% 02/20/36 345,942 344,571(h,i)
Banc of America Mortgage
Securities (Class B)
5.33% 10/25/35 199,929 188,343(h,i)
5.38% 01/25/36 198,971 193,692(h,i)
5.56% 02/25/36 159,086 156,137(h,i)
Bank of America Alternative
Loan Trust
6.50% 07/25/35 224,198 225,281(h)
Bear Stearns Asset Backed
Securities Trust (Class A)
5.57% 07/25/36 7,859,322 7,847,821(h,i)
Bear Stearns Commercial
Mortgage Securities
5.48% 10/12/41 1,500,000 1,487,788(h,i)
5.53% 10/12/41 1,500,000 1,478,072(h,i)
5.58% 03/11/39 1,000,000 997,193(h,i)
6.02% 02/14/31 75,000 75,399(h)
Bear Stearns Commercial
Mortgage Securities (Class A)
5.63% 04/12/38 700,000 699,722(h,i)
5.66% 06/11/40 2,100,000 2,101,880(i)
Citigroup Mortgage Loan Trust, Inc.
6.07% 08/25/36 549,026 544,911(h,i)
Countrywide Alternative Loan Trust
5.98% 05/25/36 74,067 64,139(h,i)
6.00% 03/25/36 - 08/25/36 424,473 300,493(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Countrywide Alternative Loan
Trust (Class B)
6.00% 05/25/36 - 08/25/36 $ 227,917 $ 173,115(h)
Countrywide Home Loan Mortgage
Pass Through Trust
5.47% 02/25/47 809,682 801,548(h,i)
Countrywide Home Loan Mortgage
Pass Through Trust (Class M)
5.50% 12/25/35 166,727 156,093(h)
Credit Suisse Mortgage
Capital Certificates
5.47% 09/15/39 682,000 661,718(h)
Credit Suisse Mortgage Capital
Certificates (Class C)
5.65% 02/25/36 113,263 107,859(h,i)
Crusade Global Trust (Class A)
5.56% 01/17/34 2,566,733 2,572,380(h,i)
CS First Boston Mortgage
Securities Corp.
5.25% 08/25/34 249,005 245,641(h)
5.33% 10/25/35 167,840 155,137(h,i)
6.13% 04/15/37 50,000 50,865(h)
CS First Boston Mortgage
Securities Corp. (Class A)
5.44% 09/15/34 600,000 595,721(h)
6.53% 06/15/34 600,000 616,980(h)
DLJ Commercial Mortgage Corp.
6.24% 11/12/31 220,651 222,045(h)
DLJ Commercial Mortgage
Corp. (Class A)
7.18% 11/10/33 1,662,600 1,729,546
7.62% 06/10/33 2,973,106 3,113,109(h)
GMAC Commercial Mortgage
Securities, Inc.
6.42% 05/15/35 434,874 437,506(h)
6.47% 04/15/34 400,000 409,378(h)
GMAC Commercial Mortgage
Securities, Inc. (Class X)
5.71% 12/10/41 3,436,128 70,135(d,h,i)
Greenwich Capital Commercial
Funding Corp.
5.12% 04/10/37 500,000 494,448(h)
Impac CMB Trust
5.58% 04/25/35 376,587 376,688(h,i)
Indymac INDA Mortgage Loan Trust
5.15% 01/25/36 99,828 95,975(h,i)
Indymac INDA Mortgage Loan
Trust (Class B)
5.15% 01/25/36 107,814 105,974(h,i)
Indymac Index Mortgage Loan Trust
5.36% 06/25/35 317,190 311,550(h,i)
JP Morgan Chase Commercial
Mortgage Securities Corp.
5.75% 02/12/49 3,700,000 3,665,886(i)
6.47% 11/15/35 40,000 41,157(h)
JP Morgan Mortgage Trust
5.87% 04/25/37 635,000 634,251(i)
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
15
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust
4.06% 09/15/27 $ 108,000 $ 105,260(h,i)
5.26% 09/15/39 1,000,000 987,415(h)
5.42% 02/15/40 359,000 347,048
5.53% 03/15/39 1,000,000 999,203(h)
5.64% 01/18/12 4,585,120 113,336(d,h,i)
5.66% 03/15/39 1,000,000 987,908(h,i)
6.23% 03/15/26 53,000 53,513(h)
LB-UBS Commercial Mortgage
Trust (Class A)
6.65% 11/15/27 704,000 726,366(h)
LB-UBS Commercial Mortgage
Trust (Class X)
5.76% 09/15/39 21,464,000 666,313(d,h,i)
Master Alternative Loans Trust
5.00% 08/25/18 53,309 8,579(g,h)
6.50% 08/25/34 - 05/25/35 472,934 476,018(h)
Master Alternative Loans
Trust (Class 3)
6.50% 01/25/35 113,206 113,736(h)
Medallion Trust (Class A)
5.40% 08/22/36 1,577,032 1,581,137(h,i)
Merrill Lynch Mortgage Trust (Class A)
5.80% 05/12/39 1,000,000 1,002,733(h,i)
Merrill Lynch/Countrywide
Commercial Mortgage
Trust (Class A)
5.49% 03/12/51 2,700,000 2,615,796(i)
5.75% 06/12/50 1,900,000 1,880,167(i)
MLCC Mortgage Investors, Inc.
5.38% 02/25/36 164,986 161,640(h,i)
Morgan Stanley Capital I
5.28% 12/15/43 1,500,000 1,477,777(h,i)
5.33% 12/15/43 1,500,000 1,441,073(h,i)
5.39% 11/12/41 2,000,000 1,920,152(h,i)
5.44% 02/20/44 1,000,000 978,421(b,i)
5.45% 02/12/44 1,000,000 966,857(i)
5.69% 04/15/49 2,500,000 2,462,144(i)
5.71% 07/20/44 300,000 299,536(h)
6.53% 03/15/31 272,379 274,987(h)
7.11% 04/15/33 71,006 72,811(h)
Morgan Stanley Capital I (Class A)
5.36% 02/12/44 1,000,000 987,170(i)
Morgan Stanley Dean
Witter Capital I
7.20% 10/15/33 46,471 48,148(h)
MortgageIT Trust (Class A)
5.62% 08/25/35 2,529,452 2,532,968(h,i)
Nomura Asset Securities
Corp. (Class A)
6.59% 03/15/30 472,878 475,672(h)
Opteum Mortgage Acceptance Corp.
5.62% 02/25/35 271,317 271,275(h,i)
PNC Mortgage Acceptance
Corp. (Class A)
6.36% 03/12/34 2,000,000 2,044,626
Residential Accredit Loans, Inc.
6.00% 01/25/36 244,617 233,467(h)
6.04% 01/25/36 108,709 108,750(h,i)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Residential Asset Securitization
Trust (Class A)
5.50% 05/25/35 $ 985,656 $ 984,171(h,i)
Residential Funding
Mortgage Security I
5.75% 01/25/36 229,409 218,055(h)
Wachovia Bank Commercial
Mortgage Trust
5.34% 12/15/43 2,600,000 2,490,633
5.42% 04/15/47 2,000,000 1,969,360
Washington Mutual Inc.
5.66% 01/25/45 154,791 155,168(h,i)
Wells Fargo Mortgage Backed
Securities Trust
5.39% 08/25/35 472,913 456,019(h,i)
5.50% 01/25/36 - 03/25/36 686,279 641,298(h)
Wells Fargo Mortgage Backed
Securities Trust (Class B)
5.50% 03/25/36 983,512 929,054(h)
79,946,112
SOVEREIGN BONDS -- 0.1%
Government of Canada
7.50% 09/15/29 495,000 604,421
Government of Manitoba Canada
4.90% 12/06/16 330,000 316,728(h)
921,149
TOTAL BONDS AND NOTES
(COST $541,663,666) 536,295,800
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 1.0%
- --------------------------------------------------------------------------------
Financial Select Sector SPDR Fund 24,551 4,506,255(j,m)
Industrial Select Sector SPDR Fund 472,996 18,465,764(j,m)
TOTAL EXCHANGE TRADED FUNDS
(COST $18,393,174) 22,972,019
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SECURITIES PURCHASED WITH COLLATERAL
FROM SECURITIES ON LOAN -- 2.2%
- --------------------------------------------------------------------------------
ASSET BACKED -- 1.6%
Bear Stearns Asset Backed
Securities Inc.
5.54% 11/25/35 $5,000,000 5,004,972(h,i)
Countrywide Asset-Backed
Certificates
5.43% 06/25/35 2,072,528 2,072,642(h,i)
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
16
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2007 (unaudited)
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Countrywide Asset-Backed
Certificates (Class M)
6.02% 06/26/33 $ 740,121 $ 741,208(h,i)
Discover Card Master Trust I
5.33% 04/15/10 3,000,000 2,999,188(i)
Discover Card Master
Trust I (Class A)
5.35% 04/16/10 3,200,000 3,202,653(h,i)
GSAA Trust
5.38% 10/25/36 7,301,067 7,301,044(h,i)
GSAMP Trust
5.43% 05/25/36 1,951,922 1,944,602(b,h,i)
GSR Mortgage Loan Trust
5.52% 11/25/30 2,217,870 2,218,373(h,i)
Indymac Residential Asset
Backed Trust
5.44% 06/25/36 7,000,000 7,002,370(h,i)
Waverly Community School (Class A)
5.48% 02/25/37 4,592,723 4,596,310(h,i)
37,083,362
CORPORATE NOTES -- 0.4%
Countrywide Financial Corp.
5.51% 09/02/08 4,000,000 4,001,388(h,i)
Morgan Stanley
5.41% 05/07/09 4,000,000 4,000,204(i)
8,001,592
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.2%
JP Morgan Alternative Loan Trust
5.38% 08/25/36 1,704,698 1,704,758(h,i)
Residential Accredit Loans, Inc.
5.50% 07/25/36 3,668,794 3,667,605(h,i)
5,372,363
TOTAL SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN
(COST $50,454,421) 50,457,317
TOTAL INVESTMENTS IN SECURITIES
(COST $2,050,379,704) 2,271,374,654
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 16.6%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 6.1%
GEI Short Term Investment Fund
5.55% 138,244,865 138,244,865(d,l)
SHORT-TERM SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN -- 10.5%
GEI Short Term Investment Fund
5.55% 51,560,010 51,560,010(d,l)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
State Street Navigator Securities
Lending Prime Portfolio
5.36% 185,903,699$ 185,903,699(d,e)
TOTAL SHORT-TERM SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN
(COST $237,463,709) 237,463,709
TOTAL SHORT-TERM INVESTMENTS
(COST $375,708,574) 375,708,574
TOTAL INVESTMENTS
(COST $2,426,088,278) 2,647,083,228
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (17.1)% (387,839,104)
--------------
NET ASSETS-- 100.0% $2,259,244,124
==============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Total Return Fund had the following long futures contracts open at June
30, 2007 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
Euro Dollar
Futures September 2007 309 $73,132,575 $ 6,757
90 Day Sterling
Future December 2007 85 19,982,976 (64,413)
S&P 500 Index
Futures September 2007 64 24,246,400 (183,350)
U.S. Treasury
Notes 10 Yr.
Futures September 2007 354 37,418,906 210,550
---------
$(30,456)
=========
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
17
<page>
Notes to Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may be
resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30,2007, these securities amounted to
$2,923,023 or 0.13% of net assets for the GE Investments Total Return Fund.
These securities have been determined to be liquid using procedures
established by the Board of Trustees.
(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, 2007, 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, 2007.
(j) All or a portion of the security is out on loan.
(k) Step coupon bond. Security becomes interest bearing at a future date.
(l) GEAM, the investment advisor of the fund, serves as investment advisor of
the GEI Short Term Investment Fund.
(m) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank
& Trust Co., the Fund's custodian and accounting agent.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2007.
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
18
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN FUND
-------------------------------------------------------------------------
CLASS 1
-------------------------------------------------------------------------
6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
-------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 7/1/85
Net asset value, beginning of period ..................... $17.69 $16.04 $15.97 $15.09 $12.68 $14.49
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.24 0.36 0.23 0.20 0.16 0.31
Net realized and unrealized gains/(losses)
on investments ...................................... 1.06 1.84 0.36 1.04 2.41 (1.67)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ........... 1.30 2.20 0.59 1.24 2.57 (1.36)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .................................. -- 0.31 0.23 0.20 0.16 0.32
Net realized gains ..................................... -- 0.24 0.29 0.16 -- 0.13
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ...................................... -- 0.55 0.52 0.36 0.16 0.45
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ........................... $18.99 $17.69 $16.04 $15.97 $15.09 $12.68
====================================================================================================================================
TOTAL RETURN (A) ......................................... 7.35% 13.75% 3.67% 8.19% 20.31% (9.31)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............... $1,485,208 $1,390,230 $959,531 $515,506 $225,867 $112,747
Ratios to average net assets:
Net investment income* ............................... 2.65% 2.33% 1.89% 1.81% 1.58% 2.22%
Net Expenses* ........................................ 0.52% 0.48% 0.45% 0.49% 0.53% 0.54%
Gross Expenses* ...................................... 0.57% 0.53% 0.45% 0.49% 0.53% 0.54%
Portfolio turnover rate ................................ 89% 138% 146% 141% 115% 126%
-------------------- ----------------- -----------------
CLASS 2 CLASS 3 CLASS 4
-------------------- ----------------- -----------------
6/30/07+ 12/31/06 6/30/07+ 12/31/06 6/30/07+ 12/31/06
-------- -------- -------- -------- -------- --------
INCEPTION DATE -- 5/1/06 -- 5/1/06 -- 5/1/06
Net asset value, beginning of period ..................... $17.68 $17.03 $17.69 $17.03 $17.68 $17.03
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.02 0.26 0.18 0.12 0.22 0.26
Net realized and unrealized gains/(losses)
on investments ..................................... 1.28 0.94 1.11 1.10 1.06 0.92
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ........... 1.30 1.20 1.29 1.22 1.28 1.18
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .................................. -- 0.31 -- 0.32 -- 0.29
Net realized gains ..................................... -- 0.24 -- 0.24 -- 0.24
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ...................................... -- 0.55 -- 0.56 -- 0.53
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ........................... $18.98 $17.68 $18.98 $17.69 $18.96 $17.68
====================================================================================================================================
TOTAL RETURN (A) ......................................... 7.35% 7.05% 7.29% 7.17% 7.30% 6.89%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............... $1,368 $1 $772,665 $396,349 $1 $1
Ratios to average net assets:
Net investment income* ............................... 2.60% 2.33% 2.64% 2.09% 2.45% 2.17%
Net Expenses* ........................................ 0.55% 0.57% 0.62% 0.62% 0.73% 0.77%
Gross Expenses* ...................................... 0.59% 0.64% 0.66% 0.69% 0.81% 0.84%
Portfolio turnover rate ................................ 89% 138% 89% 138% 89% 138%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited
See Notes to Financial Statements.
19
<page>
Statement of Assets
and Liabilities JUNE 30, 2007 (UNAUDITED)
TOTAL
RETURN
FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $2,050,379,704) ..................................... $ 2,271,374,654
Short-term Investments (at amortized cost) ...................................................... 185,903,699
Short-term affiliated investments (at amortized cost) ........................................... 189,804,875
Foreign cash (cost $2,734,365) .................................................................. 2,674,184
Receivable for investments sold ................................................................. 92,944,008
Income receivables .............................................................................. 8,313,653
Receivable for fund shares sold ................................................................. 3,542,407
Variation margin receivable ..................................................................... 184,725
Other assets .................................................................................... 3,037
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ................................................................................ 2,754,745,242
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned ........................................................ 287,921,026
Payable for investments purchased ............................................................... 206,070,012
Payable for fund shares redeemed ................................................................ 51,636
Payable to GEAM ................................................................................. 1,427,230
Variation margin payable ........................................................................ 31,214
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................................................... 495,501,118
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ......................................................................................... $2,259,244,124
===========================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ................................................................................. 1,944,596,567
Undistributed (distribution in excess of) net investment income ................................. 26,321,275
Accumulated net realized gain (loss) ............................................................ 67,402,077
Net unrealized appreciation/(depreciation) on:
Investments ................................................................................. 220,994,950
Futures ..................................................................................... (30,456)
Foreign currency related transactions ....................................................... (40,289)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ......................................................................................... $2,259,244,124
===========================================================================================================================
CLASS 1:
NET ASSETS ......................................................................................... 1,485,208,967
Shares outstanding ($0.01 par value; unlimited shares authorized) .................................. 78,205,031
Net asset value per share .......................................................................... 18.99
CLASS 2:
NET ASSETS ......................................................................................... 1,368,194
Shares outstanding ($0.01 par value; unlimited shares authorized) .................................. 72,095
Net asset value per share .......................................................................... 18.98
CLASS 3:
NET ASSETS ......................................................................................... 772,665,815
Shares outstanding ($0.01 par value; unlimited shares authorized) .................................. 40,716,664
Net asset value per share .......................................................................... 18.98
CLASS 4:
NET ASSETS ......................................................................................... 1,148
Shares outstanding ($0.01 par value; unlimited shares authorized) .................................. 61
Net asset value per share .......................................................................... 18.96
* Includes $280,572,128 of securities on loan.
See Notes to Financial Statements.
20
<Page>
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)
TOTAL
RETURN
FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ....................................................................... $17,010,031
Interest ....................................................................... 9,286,543
Interest from affliated investments* ........................................... 6,334,784
Less: Foreign taxes withheld ................................................... (1,140,931)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ..................................................................... 31,490,427
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ............................................... 3,239,893
Investor Service Fees - Class 1 (Notes 4) ...................................... 1,427,758
Distributors Fees (Notes 4)
Class 2 ..................................................................... 149
Class 3 ..................................................................... 838,994
Class 4 ..................................................................... 2
Transfer agent ................................................................. 17,930
Trustee's fees ................................................................. 26,021
Custody and accounting expenses ................................................ 197,081
Professional fees .............................................................. 107,314
Registration expenses .......................................................... 10,987
Other expenses ................................................................. 52,710
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ................................... 5,918,839
- ---------------------------------------------------------------------------------------------------------------------------
Less: Expenses Waived or borne by the adviser .................................. (472,375)
Net expenses ................................................................... 5,446,464
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ..................................................... 26,043,963
===========================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ................................................................. 48,328,628
Futures ..................................................................... 4,674,439
Written options ............................................................. (10,988)
Foreign currency transactions ............................................... (166,321)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ................................................................. 63,394,717
Futures ..................................................................... 78,065
Foreign currency transactions ............................................... (39,561)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ......................... 116,258,979
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................. $142,302,942
===========================================================================================================================
* Income attributable to security lending, net of rebate expenses, was $618,187.
See Notes to Financial Statements.
21
<page>
Statements of
Changes in Net Assets
TOTAL
RETURN
FUND
- -----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007 DECEMBER 31,
(UNAUDITED) 2006
- ----------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) .................................................. $ 26,043,963 $ 30,879,471
Net realized gain (loss) on investments, futures, written options,
foreign currency transactions and swaps ...................................... 52,825,758 34,835,590
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation ....... 63,433,221 115,639,111
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ........................................ 142,302,942 181,354,172
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 ...................................................................... -- (23,735,343)
Class 2 ...................................................................... -- (18)
Class 3 ...................................................................... -- (6,765,709)
Class 4 ...................................................................... -- (17)
Net realized gains
Class 1 ...................................................................... -- (18,619,381)
Class 2 ...................................................................... -- (15)
Class 3 ...................................................................... -- (5,194,867)
Class 4 ...................................................................... -- (15)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............................................................. -- (54,315,365)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions .............. 142,302,942 127,038,807
- -----------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 ...................................................................... 23,929,622 289,978,256
Class 2 ...................................................................... 1,365,237 1,000
Class 3 ...................................................................... 336,279,316 372,387,466
Class 4 ...................................................................... -- 1,000
Value of distributions reinvested
Class 1 ...................................................................... -- 42,354,257
Class 2 ...................................................................... -- 32
Class 3 ...................................................................... -- 11,960,436
Class 4 ...................................................................... -- 31
Cost of shares redeemed
Class 1 ...................................................................... (31,119,289) (16,516,114)
Class 2 ...................................................................... (1) --
Class 3 ...................................................................... (94,601) (155,188)
Class 4 ...................................................................... -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ................................ 330,360,284 700,011,176
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .......................................... 472,663,226 827,049,983
NET ASSETS
Beginning of period .............................................................. 1,786,580,898 959,530,915
- -----------------------------------------------------------------------------------------------------------------------------
End of period .................................................................... $2,259,244,124 $1,786,580,898
=============================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ...... $ 26,321,275 $ 277,312
- -----------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
22
<Page>
Statements of Changes in Net Assets (continued)
Changes in Fund Shares
TOTAL
RETURN
FUND
- ------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007 DECEMBER 31,
(UNAUDITED) 2006
- ------------------------------------------------------------------------------------------------------------------------------
CLASS 1:
Shares sold ............................................................................. 1,308,369 17,330,893
Issued for distributions reinvested ..................................................... -- 2,390,195
Shares redeemed ......................................................................... (1,682,586) (952,918)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .................................................. (374,217) 18,768,170
==============================================================================================================================
CLASS 2:
Shares sold ............................................................................. 72,034 59
Issued for distributions reinvested ..................................................... -- 2
Shares redeemed ......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .................................................. 72,034 61
==============================================================================================================================
CLASS 3:
Shares sold ............................................................................. 18,312,517 21,743,379
Issued for distributions reinvested ..................................................... -- 674,968
Shares redeemed ......................................................................... (5,078) (9,122)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .................................................. 18,307,439 22,409,225
==============================================================================================================================
CLASS 4:
Shares sold ............................................................................. -- 59
Issued for distributions reinvested ..................................................... -- 2
Shares redeemed ......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .................................................. -- 61
==============================================================================================================================
See Notes to Financial Statements.
23
<Page>
Notes to Financial Statements June 30, 2007 (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 thirteen 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, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund, Total Return Fund (the "Fund"), Income Fund, Money
Market Fund and Real Estate Securities Fund. The Fund presently offers four
classes of shares.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions at the date of the financial statements. Actual
results may differ from those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS for which exchange quotations are readily
available are valued at the last sale price, or if no sales occurred on that
day, at the last quoted bid price. Securities listed on the NASDAQ will be
valued at the NASDAQ's official close price. Certain fixed income securities are
valued by a dealer or by a pricing service based upon a matrix system, which
considers market transactions as well as dealer supplied valuations. Short-term
investments maturing within sixty days are valued at amortized cost. If
quotations are not readily available for a portfolio security, or if it is
believed that a quotation or other market 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 procedures require that the fair value of a security be
established by the valuation committee. The fair value committee follows
different protocols for different types of investments and 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. 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. GE Asset Management may also
separately monitor portfolio securities and, consistent with the Fund's fair
value procedures, apply a different value to a portfolio security than would be
applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which a Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
In September 2006, FASB issued Statement of Financial Accounting Standards No.
157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single
authoritative definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. FAS 157
applies to fair value measurements already required or permitted by existing
standards. The change to current generally accepted accounting principles from
the application of FAS 157 relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. Management of the Fund does not believe the adoption of FAS 157
will materially impact the financial statement amounts, however, additional
disclosures may be required about the inputs used to
24
<Page>
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
develop the measurements and the effect of certain of the measurements on
changes in net assets for the period. FAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years.
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 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 at
period end. Purchases and sales of securities, income receipts and expense
payments denominated in foreign currencies are translated into U.S. dollars at
the prevailing exchange rate on the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
25
<Page>
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. The Fund will not enter
into a transaction involving options for speculative purposes. The Fund's risks
in using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Options
are valued at the last sale price, or if no sales occurred on that day, at the
last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
SWAP CONTRACTS As part of the investment strategy, the Fund may invest in swap
agreements, which are agreements to exchange the return generated by one
instrument for the return generated by another instrument. Total return swap
agreements involve commitments to pay interest in exchange for a market linked
return based upon a notional principal amount. To the extent the total return of
the security or index underlying the agreement exceeds or falls short of the
offsetting interest rate obligation, the Fund will receive a payment from or
make a payment to the counterparty. Swaps are marked to market daily based upon
the underlying security or index. Payments received or made are recorded as
realized gain or loss in the Statement of Operations. Entering into swap
agreements involves, to varying degrees, elements of credit and market risk in
excess of the amounts recognized on the Statement of Assets and Liabilities.
Such risks involve the possibility that there will be no liquid market for these
agreements, that the counterparty to the agreements may default on its
obligation to perform and that there may be unfavorable changes in the value of
the index or securities underlying the agreement. Notional principal amounts are
used to express the extent of involvement in these transactions, but the amounts
potentially subject to credit risk are much smaller.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The Fund may purchase or sell
securities on a when-issued or forward commitment basis. These transactions are
arrangements in which the Fund purchases and sells securities with payment and
delivery scheduled a month or more after entering into the transactions. The
price of the underlying securities and the date when these securities will be
delivered and paid for are fixed at the time the transaction is negotiated.
Losses may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contracts. In connection with
such purchases, the Fund maintains cash or liquid assets in an amount equal to
purchase commitments for such underlying securities until settlement date and
for sales commitments, the Fund maintains equivalent deliverable securities as
"cover" for the transaction. Unsettled commitments are valued at the current
market value of the underlying security. Daily fluctuations in the value of such
contracts are recorded as unrealized gains or losses. The Fund will not enter
into such commitments for the purpose of investment leverage.
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
26
<Page>
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
segregate cash or liquid securities with its custodian in an amount equal to the
value of the Fund's total assets committed to the consummation of the forward
contract. If the value of the segregated securities declines, additional cash or
securities is segregated so that the value of the account will equal the amount
of the Fund's commitment with respect to the contract.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2007, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- ---------------------------------------------------------------------------------------------------------------------------
$2,427,637,644 $246,904,469 $(27,458,906) $219,445,564
As of December 31, 2006, the Fund has no capital loss carryovers.
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, 2006 as follows:
Capital Currency
- --------------------------------------------------------------------------------
$-- $42,064
The tax composition of distributions paid (other than return of capital
distributions for the year) during the year ended December 31, 2006 was as
follows:
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
$31,461,661 $22,853,704 $54,315,365
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures,
treatment of realized gains and losses on foreign currency transactions, and
losses deferred due to wash sale transactions. Reclassifications due to
permanent book/tax differences are made to the Fund's capital accounts to
reflect income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. These reclassifications have no impact
on net investment income, realized gains or losses, or the net asset value of
the Fund. The calculation of net investment income per share in the Financial
Highlights table excludes these adjustments.
27
<Page>
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The reclassifications for the year ended December 31, 2006 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated Paid in
Income Net Realized Gain Capital
- --------------------------------------------------------------------------------
$(80,440) $80,440 $--
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax return to determine whether the tax positions
are "more likely than not" of being sustained by the applicable tax authority.
The adoption of FIN48 did not have an impact on the Fund's net assets and
financial statements.
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 Expenses of the Company which are directly identifiable to one of the
Funds are allocated to that portfolio and pro rata across share classes .
Expenses which are not directly identifiable to one of the Funds are allocated
in such a manner as deemed equitable, taking into consideration the nature and
type of expenses and relative sizes of the Funds based on net assets. All
expenses of the Fund are paid by GEAM and reimbursed by the Fund.
3. LINE OF CREDIT
The Fund shares a revolving credit facility of up to $25 million with a number
of its affiliates. The credit facility is with its custodian bank, State Street
Bank and Trust Company. The revolving credit facility requires the payment of a
commitment fee equal to 0.09% per annum on the daily unused portion of the
credit facility, payable quarterly. The portion borne by the Funds generally is
borne proportionally based upon net assets. Generally. borrowings under the
credit facility would accrue interest at the Federal Funds Rate plus 50 basis
points and is borne by each of the borrowing Funds. The maximum amount allowed
to be borrowed by any one of the Funds is the lesser of its prospectus
limitation, 20% of its net assets, or $25 million. The credit facility was not
utilized by the Fund during the period ended June 30, 2007.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund. The
advisory and administrative fee is stated in the following schedule:
Annualized based on
average daily net assets
- --------------------------------------------------------------------------------
Average Daily Advisory and
Net Assets Administration
of Fund Fees
- --------------------------------------------------------------------------------
First $100 million .50%
Next $100 million .45%
Next $100 million .40%
Next $100 million .35%
Over $400 million .30%
Pursuant to an expense limitation agreement with the Fund, GEAM has agreed to
limit total operating expenses charged to Fund assets attributable to each class
of shares (excluding class specific expenses such as Investor Service Plan Fees
(for Class 1 shares), Distribution and Service (12b-1) Fees, and excluding
interest, taxes, brokerage commissions, other expenditures that are capitalized
in accordance with generally accepted accounting principles, and other
extraordinary expenses not incurred in the ordinary course of the Fund's
business) to 0.32% of the average daily net assets of the Fund attributable to
such shares, in each case on an annual basis. Under the agreement, this expense
limitation will continue until April 30, 2009, unless extended. The expense
limitation agreement will terminate upon termination of the management
agreement, or by the Fund without payment of penalty upon sixty (60) days
written notice to GEAM. The agreement can only be changed with the approval of
both the Fund and GEAM.
28
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2007, $15,485 was charged to
the Fund.
INVESTOR SERVICE PLAN -- CLASS 1 SHARES The Company adopted an Investor Service
Plan (the "Services Plan") on December 9, 2005 with respect to Class 1 shares of
the Total Return Fund. The Services Plan was not adopted pursuant to Rule 12b-1
under the 1940 Act. The Services Plan provides that during any fiscal year, the
amount of compensation paid under the Services Plan by the Total Return Fund
Class 1 shares may not exceed the annual rate of 20% of the average daily net
assets of the Total Return Fund attributable to such class shares.
DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Fund has adopted a Shareholder
Servicing and Distribution Plan ("the Plan") pursuant to Rule 12b-1 under the
1940 Act with respect to Class 2, 3 and 4 shares of the Fund. The Fund pays GE
Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and
the Fund's principal underwriter, a monthly fee for distribution and/or
shareholder services provided, at an annual rate of the average daily net assets
attributable to each applicable class of shares. The annual rates applicable are
0.25% for Class 2 shares, 0.30% for Class 3 shares and 0.45% for Class 4 shares.
Currently, Class 1 shares are not subject to a 12b-1 fee.
DIRECTORS' COMPENSATION The Fund pays no compensation to its Directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual Fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2007, were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$2,142,799,957 $1,752,073,326
SECURITY LENDING At June 30, 2007, the Fund participated in securities lending:
Loaned
securities at Cash
market value collateral*
- --------------------------------------------------------------------------------
$280,572,128 $287,921,026
* COLLATERAL OF $289,237,063 DECREASED BY $1,316,037 ON JULY 1, 2007 TO REFLECT
THE JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN.
29
<page>
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 58
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 - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM
since February 1997; President and Chief Executive Officer - Mutual Funds at
GEAM since 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,
since March 1993; Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their
inception; Trustee of Elfun Funds, GE Savings & Security Funds and General
Electric Pension Trust since 1988; Trustee of Fordham University since 2003;
Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset
Management (Ireland) since February 1999; Director, GE Asset Management Funds
Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 46
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
30
<Page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years (Vice President); less than one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General
Counsel - Marketing and Client Services (formerly Asset Management Services) at
GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE
Institutional Funds and GE LifeStyle Funds since September 2003; Vice President
and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since
October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary
since July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
31
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
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 - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds and GE LifeStyle Funds since their inception; Trustee of
Fordham University since 2002 and Marymount College from 2001 through 2002;
Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the
Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since
1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 71
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
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
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member NASD 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, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING
Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES
Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS
AND REAL ESTATE
John J. Walker, EVP, CHIEF FINANCIAL OFFICER
33
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<Page>
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER NASD AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to
portfolio securities during the most recently disclosed 12-month
period ended June 30 is available without charge (i) through the Fund's
website at http://www.gefunds.com; and (ii) on the Commission's website
at http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
S&P 500 Index Fund
Semi-Annual Report
JUNE 30, 2007
[GE logo omitted]
<page>
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 ........................................ 11
FINANCIAL STATEMENTS
Financial Highlights ............................................... 12
Statement of Assets and Liabilities ................................ 13
Statement of Operations ............................................ 14
Statements of Changes in Net Assets ................................ 15
Notes to Financial Statements ...................................... 16
ADDITIONAL INFORMATION .................................................. 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.
<page>
Notes to Performance June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains distributions, if any. Investment returns and net
asset value on an investment will fluctuate and you may have a gain or loss when
you sell your shares. Periods less than one year are not annualized.
Current performance may be lower or higher than that shown. You may call
toll-free (800) 242-0134 for performance information as of the most recent month
end.
Total returns do not reflect expenses associated with the separate account such
as administrative fees, account charges and surrender charges, which, if
reflected, would reduce the total returns for all periods shown.
Shares of the Fund are neither insured nor guaranteed by the U.S. Government,
and their prices will fluctuate with market conditions.
The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500) is
an unmanaged index and do not reflect the actual cost of investing in the
instruments that comprise the index.
The S&P 500 is a market capitalization-weighted index of stocks of 500 large
U.S. companies, which is widely used as a measure of large-cap stock market
performance. The results shown for the foregoing index assume the reinvestment
of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer ranking
calculation is based on the blend of Lipper peer categories, as shown. Lipper is
an independent mutual fund rating service. A Fund's performance may be compared
to or ranked within a universe of mutual funds with investment objectives and
policies similar but not necessarily identical to the Fund's. Such comparisons
or rankings are made on the basis of several factors, including the Fund's
objectives and policies, management style and strategy, and portfolio
composition, and may change over time if any of those factors change.
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.
1
S&P 500 Index Fund Q&A
- --------------------------------------------------------------------------------
SSGA FUNDS MANAGEMENT, INC. ("SSGA FM") IS THE SUB- ADVISER FOR THE S&P 500
INDEX FUND. SSGA FM IS REGISTERED WITH THE SEC AS AN INVESTMENT ADVISER UNDER
THE INVESTMENT ACT OF 1940 AND IS A WHOLLY OWNED SUBSIDIARY OF STATE STREET
CORPORATION. THE FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS COMPOSED OF THE
FOLLOWING MEMBERS: KARL SCHNEIDER AND JOHN TUCKER.
KARL SCHNEIDER, LEAD PORTFOLIO MANAGER FOR THE FUND, IS A VICE PRESIDENT OF
STATE STREET GLOBAL ADVISORS AND A PRINCIPAL OF SSGA FM. KARL JOINED THE FIRM IN
1996 AND IS A MEMBER OF THE FIRM'S GLOBAL STRUCTURED PRODUCTS TEAM. KARL MANAGES
A VARIETY OF THE FIRM'S DOMESTIC AND INTERNATIONAL PASSIVE FUNDS. KARL HOLDS A
BACHELORS OF SCIENCE DEGREE IN FINANCE AND INVESTMENTS FROM BABSON COLLEGE AND
ALSO A MASTER OF SCIENCE DEGREE IN FINANCE FROM THE CARROLL SCHOOL OF MANAGEMENT
AT BOSTON COLLEGE. ADDITIONALLY, HE HOLDS A SERIES 3 LICENSE FROM THE NATIONAL
FUTURES ASSOCIATION.
JOHN TUCKER, CFA, IS A VICE PRESIDENT OF SSGA AND A PRINCIPAL OF SSGA FM. JOHN
JOINED THE FIRM IN 1988 AND IS 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 LIPPER
PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007?
A. For the six-month period ended June 30, 2007, the S&P 500 Index Fund
returned 6.75%. The S&P 500 Index, the Fund's benchmark, returned 6.96% and
the Fund's Lipper peer group of 56 S&P 500 Index Objective funds returned an
average of 6.75% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. Signs of stress in the fixed income markets brought a cautious end to the
first half of 2007, with US stocks and bonds both slipping in June. Risk
aversion tended to increase in choppy fashion throughout the second quarter,
especially after hopes for an official rate cut eroded through May. The
second quarter did bring record highs for both the Dow Jones Industrial
Average and the S&P 500, but the underpinnings of the global liquidity that
has been buoying the capital markets clearly began to creak.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. By utilizing a passive, full replication investment style, the Fund owns the
same stocks and sectors in approximately the same weights as the S&P 500
Index. As of June 30, 2007, the four largest sectors in the S&P 500 Index
were Financials (20.9%), Information Technology (15.5%), Healthcare (11.8%)
and Industrials (11.1%). The highest returning sector for the last six
months was Energy (+16%) followed by Materials (+15%). The lowest returning
sectors were Financials (-2%) and Consumer Discretionary (+2%).
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. Over the last six months, there were 21 index addition/deletion changes
announced by Standard & Poors that impacted the Fund. Not all the additions
and deletions were bought and sold in the Fund, however, as many changes
were as a result of a merger or acquisition, or a spin-off involving another
S&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 transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service 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,
2007.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,067.54 2.01
- ------------------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,022.58 1.97
- ------------------------------------------------------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.39% (FROM
PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH
PERIOD).
**ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 6.75%.
3
S&P 500 Index Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
S&P 500 Index Fund S&P 500 Index
06/97 $10,000.00 $10,000.00
12/97 11,035.49 11,057.91
12/98 14,152.08 14,231.31
12/99 17,069.00 17,229.53
12/00 15,460.09 15,647.27
12/01 13,563.75 13,783.37
12/02 10,529.98 10,736.98
12/03 13,507.16 13,821.52
12/04 14,920.19 15,325.48
12/05 15,592.61 16,079.27
12/06 17,998.42 18,618.57
06/07 19,213.97 19,914.71
S&P 500 Index Fund (ending value $19,214)
S&P 500 Index (ending value $19,915)
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2007
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
- --------------------------------------------------------------------------------
S&P 500 Index Fund 6.75% 20.19% 10.33% 6.75%
- --------------------------------------------------------------------------------
S&P 500 Index 6.96% 20.59% 10.72% 7.13%
- --------------------------------------------------------------------------------
Lipper peer group average* 6.75% 20.11% 10.28% 6.81%
- --------------------------------------------------------------------------------
Inception date 4/15/85
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek growth of capital and accumulation of
income that corresponds to the investment return of the Standard & Poor's 500
Composite Stock Index by investing at least 80% of its net assets in equity
securities of companies contained in that Index.
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 3.47%
- --------------------------------------------------------------------------------
General Electric Co. 2.89%
- --------------------------------------------------------------------------------
AT&T, Inc. 1.88%
- --------------------------------------------------------------------------------
Citigroup, Inc. 1.86%
- --------------------------------------------------------------------------------
Microsoft Corp. 1.82%
- --------------------------------------------------------------------------------
Bank of America Corp. 1.59%
- --------------------------------------------------------------------------------
Procter & Gamble Co. 1.42%
- --------------------------------------------------------------------------------
American International Group, Inc. 1.33%
- --------------------------------------------------------------------------------
Chevron Corp. 1.33%
- --------------------------------------------------------------------------------
Pfizer Inc. 1.32%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $481,721 (in thousands)
Financials 20.5%
Information Technology 15.1%
Healthcare 11.5%
Industrials 11.2%
Energy 10.6%
Consumer Discretionary 10.0%
Consumer Staples 9.1%
Telecommunication Services 3.7%
Utilities 3.5%
Materials 3.1%
Short-Term 1.7%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE S&P
500 INDEX OBJECTIVE FUNDS PEER GROUP CONSISTING OF 56, 56, 49 AND 22
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE
DO NOT REFLECT THE DEDUCTION OF TAXES.
4
S&P 500 INDEX FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
S&P 500 INDEX FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.0%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 10.0%
Abercrombie & Fitch Co. (Class A) 3,200 $ 233,536
Amazon.Com, Inc. 11,000 752,510(a)
Apollo Group, Inc. (Class A) 5,000 292,150(a)
Autonation, Inc. 5,772 129,524(a)
Autozone, Inc. 1,744 238,265(a)
Bed Bath & Beyond, Inc. 10,000 359,900(a)
Best Buy Company, Inc. 14,600 681,382
Big Lots, Inc. 3,600 105,912(a)
Black & Decker Corp. 2,207 194,900
Brunswick Corp. 3,368 109,898
Carnival Corp. 15,400 751,058
CBS Corp. 25,613 853,425
Centex Corp. 4,120 165,212
Circuit City Stores, Inc. 5,226 78,808
Citadel Broadcasting Corp. 601 3,877
Clear Channel Communications, Inc. 17,700 669,414
Coach, Inc. 13,400 635,026(a)
Comcast Corp. (Class A) 110,658 3,111,703(a)
D.R. Horton, Inc. 10,200 203,286
Darden Restaurants, Inc. 5,329 234,423
Dillard's, Inc. (Class A) 2,295 82,459
DIRECTV Group, Inc. 27,600 637,836(a)
Dollar General Corp. 11,591 254,075
Dow Jones & Company, Inc. 2,442 140,293
Eastman Kodak Co. 9,775 272,038
Family Dollar Stores, Inc. 5,400 185,328
Ford Motor Co. 66,999 631,131
Fortune Brands, Inc. 5,441 448,175
Gannett Company, Inc. 8,108 445,535
General Motors Corp. 20,247 765,337
Genuine Parts Co. 5,896 292,442
Goodyear Tire & Rubber Co. 6,419 223,124(a)
H&R Block, Inc. 11,008 257,257
Harley-Davidson, Inc. 9,200 548,412
Harman International
Industries Inc. 2,300 268,640
Harrah's Entertainment, Inc. 6,735 574,226
Hasbro, Inc. 5,496 172,629
Hilton Hotels Corp. 13,988 468,178
Home Depot, Inc. 69,718 2,743,403
IAC/InterActiveCorp. 8,000 276,880(a)
International Game Technology 12,000 476,400
Interpublic Group of
Companies, Inc. 16,830 191,862(a)
J.C. Penney Company, Inc. 7,987 578,099
Johnson Controls, Inc. 6,982 808,306
Jones Apparel Group, Inc. 4,200 118,650
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
KB Home 2,860 $ 112,598
Kohl's Corp. 11,500 816,845(a)
Leggett & Platt, Incorporated 6,800 149,940
Lennar Corp. (Class A) 4,800 175,488
Limited Brands, Inc. 11,988 329,071
Liz Claiborne Inc. 3,830 142,859
Lowe's Companies, Inc. 53,156 1,631,358
Macy's, Inc. 16,630 661,541
Marriott International Inc.
(Class A) 11,944 516,458
Mattel, Inc. 14,151 357,879
McDonald's Corp. 42,090 2,136,488
McGraw-Hill Companies Inc. 12,040 819,683
Meredith Corp. 1,498 92,277
New York Times Co. (Class A) 5,188 131,775
Newell Rubbermaid Inc. 9,656 284,176
News Corp. (Class A) 82,000 1,739,220
Nike Inc. (Class B) 13,608 793,210
Nordstrom, Inc. 7,984 408,142
Office Depot, Inc. 9,500 287,850(a)
OfficeMax, Inc. 2,523 99,154
Omnicom Group, Inc. 11,500 608,580
Polo Ralph Lauren Corp.
(Class A) 2,300 225,653
Pulte Homes, Inc. 7,388 165,861
RadioShack Corp. 4,656 154,300
Sears Holdings Corp. 2,819 477,820(a)
Snap-On Incorporated 2,009 101,475
Staples, Inc. 25,250 599,182
Starbucks Corp. 26,800 703,232(a)
Starwood Hotels & Resorts
Worldwide, Inc. 7,500 503,025
Target Corp. 30,352 1,930,387
The E.W. Scripps Co. (Class A) 2,700 123,363
The Gap, Inc. 18,118 346,054
The Sherwin-Williams Co. 3,863 256,774
The Stanley Works 3,026 183,678
The Walt Disney Co. 69,837 2,384,235
Tiffany & Co. 4,900 259,994
Time Warner, Inc. 134,214 2,823,862(d)
TJX Companies, Inc. 16,380 450,450
Tribune Co. 1,830 53,802
VF Corp. 3,102 284,081
Viacom Inc. (Class B) 24,513 1,020,476(a)
Wendy's International, Inc. 3,331 122,414
Whirlpool Corp. 2,743 305,022
Wyndham Worldwide Corp. 6,549 237,467(a)
Yum! Brands, Inc. 18,844 616,576
48,288,699
CONSUMER STAPLES -- 9.1%
Altria Group, Inc. 74,679 5,237,985
Anheuser-Busch Companies, Inc. 26,708 1,393,089(d)
Archer-Daniels-Midland Co. 22,886 757,298
Avon Products, Inc. 15,828 581,679
Brown-Forman Corp. (Class B) 2,958 216,171
Campbell Soup Co. 7,976 309,549
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
5
S&P 500 INDEX FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Clorox Co. 5,584 $ 346,766
Coca-Cola Enterprises, Inc. 9,400 225,600
Colgate-Palmolive Co. 18,272 1,184,939
ConAgra Foods, Inc. 17,568 471,877
Constellation Brands, Inc.
(Class A) 6,400 155,392(a)
Costco Wholesale Corp. 15,666 916,774
CVS Corp. 54,480 1,985,796
Dean Foods Co. 4,700 149,789
General Mills, Inc. 12,022 702,325
HJ Heinz Co. 11,697 555,257
Kellogg Co. 8,890 460,413
Kimberly-Clark Corp. 16,036 1,072,648
Kraft Foods, Inc. (Class A) 56,540 1,993,035
McCormick & Company, Inc. 4,800 183,264
Molson Coors Brewing Co.
(Class B) 1,665 153,946
Pepsi Bottling Group, Inc. 4,500 151,560
PepsiCo, Inc. 57,574 3,733,674
Procter & Gamble Co. 111,445 6,819,319
Reynolds American Inc. 6,200 404,240
Safeway Inc. 15,800 537,674
Sara Lee Corp. 26,157 455,132
Supervalu Inc. 7,513 348,002
Sysco Corp. 21,544 710,736
The Coca-Cola Co. 70,951 3,711,447(d)
The Estee Lauder Companies Inc.
(Class A) 4,100 186,591
The Hershey Co. 6,284 318,096
The Kroger Co. 24,630 692,842
Tyson Foods, Inc. (Class A) 8,900 205,056
UST Inc. 5,779 310,390
Walgreen Co. 35,400 1,541,316
Wal-Mart Stores, Inc. 85,624 4,119,371
Whole Foods Market, Inc. 4,900 187,670
WM Wrigley Jr. Co. 7,385 408,464
43,895,172
ENERGY -- 10.5%
Anadarko Petroleum Corp. 16,656 865,945
Apache Corp. 11,848 966,678
Baker Hughes Incorporated 11,450 963,288
BJ Services Co. 10,800 307,152
Chesapeake Energy Corp. 14,300 494,780
Chevron Corp. 76,069 6,408,052
ConocoPhillips 57,788 4,536,358
Consol Energy, Inc. 6,400 295,104
Devon Energy Corp. 15,792 1,236,356
El Paso Corp. 25,482 439,055
ENSCO International Inc. 5,300 323,353
EOG Resources, Inc. 8,600 628,316
Exxon Mobil Corp. 199,524 16,736,073(d)
Halliburton Co. 32,391 1,117,489
Hess Corp. 9,470 558,351(d)
Marathon Oil Corp. 24,442 1,465,542
Murphy Oil Corp. 6,800 404,192
Nabors Industries Ltd. 10,000 333,800(a)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
National Oilwell Varco, Inc. 6,300 $ 656,712(a)
Noble Corp. 4,700 458,344
Occidental Petroleum Corp. 29,620 1,714,406
Peabody Energy Corp. 9,200 445,096
Rowan Companies, Inc. 3,677 150,684
Schlumberger Ltd. 41,708 3,542,677
Smith International, Inc. 7,300 428,072
Spectra Energy Corp. 22,277 578,311
Sunoco, Inc. 4,276 340,712
The Williams Companies, Inc. 20,986 663,577
Transocean Inc. 10,066 1,066,795(a)
Valero Energy Corp. 19,600 1,447,656
Weatherford International Ltd. 12,100 668,404(a)
XTO Energy, Inc. 13,233 795,303
51,036,633
FINANCIALS -- 20.5%
ACE Ltd. 11,500 718,980
AFLAC Incorporated 17,400 894,360
Allstate Corp. 21,376 1,314,838(d)
AMBAC Financial Group, Inc. 3,600 313,884
American Express Co. 41,922 2,564,788(d)
American International Group, Inc. 91,809 6,429,384(d)
Ameriprise Financial, Inc. 8,504 540,599
AON Corp. 10,536 448,939
Apartment Investment &
Management Co. (Class A) (REIT) 3,700 186,554
Archstone-Smith Trust (REIT) 7,900 466,969
Assurant, Inc. 3,000 176,760
AvalonBay Communities, Inc. (REIT) 2,800 332,864
Bank of America Corp. 157,021 7,676,757
BB&T Corp. 19,500 793,260
Boston Properties, Inc. (REIT) 4,200 428,946
Capital One Financial Corp. 14,425 1,131,497
CB Richard Ellis Group, Inc.
(Class A) 6,500 237,250(a)
Charles Schwab Corp. 36,511 749,206
Chicago Mercantile Exchange
Holdings Inc. 1,227 655,660
Chubb Corp. 14,494 784,705
Cincinnati Financial Corp. 5,892 255,713
CIT Group, Inc. 6,900 378,327
Citigroup, Inc. 175,076 8,979,648(d)
Comerica Incorporated 5,556 330,415
Commerce Bancorp Inc. 6,300 233,037
Compass Bancshares, Inc. 4,700 324,206
Countrywide Financial Corp. 20,798 756,007
Developers Diversified Realty
Corp. (REIT) 4,600 242,466
E*Trade Financial Corp. 15,100 333,559(a)
Equity Residential (REIT) 10,000 456,300
Federal Home Loan
Mortgage Corp. 23,665 1,436,465
Federal National Mortgage Assoc. 34,476 2,252,317
Federated Investors Inc. (Class B) 3,000 114,990
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
6
S&P 500 INDEX FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Fifth Third Bancorp 19,816 $ 788,082
First Horizon National Corp. 4,400 171,600
Franklin Resources, Inc. 5,800 768,326
General Growth Properties,
Inc. (REIT) 8,700 460,665
Genworth Financial, Inc. (Class A) 14,500 498,800
Goldman Sachs Group, Inc. 14,400 3,121,200
Hartford Financial Services
Group, Inc. 11,304 1,113,557
Host Hotels & Resorts Inc. (REIT) 19,1004 41,592
Hudson City Bancorp, Inc. 16,800 205,296
Huntington Bancshares
Incorporated 12,934 294,119
Janus Capital Group, Inc. 6,400 178,176
JP Morgan Chase & Co. 121,276 5,875,822(d)
Keycorp 14,228 488,447
Kimco Realty Corp. (REIT) 8,200 312,174
Legg Mason, Inc. 4,700 462,386
Lehman Brothers Holdings, Inc. 18,700 1,393,524
Lincoln National Corp. 9,642 684,100
Loews Corp. 15,596 795,084
M&T Bank Corp. 2,800 299,320
Marsh & McLennan
Companies, Inc. 19,708 608,583
Marshall & Ilsley Corp. 9,300 442,959
MBIA Inc. 4,735 294,612
Mellon Financial Corp. 15,028 661,232
Merrill Lynch & Company, Inc. 30,734 2,568,748
Metlife, Inc. 26,100 1,682,928
MGIC Investment Corp. 3,159 179,621
Moody's Corp. 8,284 515,265
Morgan Stanley 37,396 3,136,777
National City Corp. 20,600 686,392
Northern Trust Corp. 6,900 443,256
Plum Creek Timber
Company, Inc. (REIT) 6,200 258,292
PNC Financial Services Group, Inc. 12,108 866,691
Principal Financial Group, Inc. 9,400 547,926
Prologis (REIT) 9,200 523,480
Prudential Financial, Inc. 16,600 1,614,018
Public Storage, Inc. (REIT) 4,300 330,326
Regions Financial Corp. 24,668 816,511
Safeco Corp. 3,981 247,857
Simon Property Group, Inc. (REIT) 7,900 735,016
SLM Corp. 14,700 846,426
Sovereign Bancorp, Inc. 12,850 271,649
State Street Corp. 14,100 964,440(c)
SunTrust Banks, Inc. 12,529 1,074,237
Synovus Financial Corp. 11,750 360,725
T Rowe Price Group, Inc. 9,600 498,144
The Bank of New York
Company, Inc. 27,110 1,123,438(d)
The Bear Stearns Companies Inc. 4,269 597,660
The Progressive Corp. 26,200 626,966
Torchmark Corp. 3,400 227,800
Travelers Companies, Inc. 23,399 1,251,846
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
UnumProvident Corp. 11,789 $ 307,811
US Bancorp 61,499 2,026,392
Vornado Realty Trust (REIT) 4,700 516,248
Wachovia Corp. 67,688 3,469,010
Washington Mutual Inc. 31,581 1,346,614
Wells Fargo & Co. 118,536 4,168,911
XL Capital Ltd. 6,500 547,885
Zions Bancorporation 3,800 292,258
98,970,870
HEALTHCARE -- 11.4%
Abbott Laboratories 54,596 2,923,616(d)
Aetna, Inc. 18,208 899,475
Allergan, Inc. 10,904 628,506
AmerisourceBergen Corp. 6,542 323,633
Amgen, Inc. 41,248 2,280,602(a,d)
Applera Corp - Applied
Biosystems Group 6,800 207,672
Barr Pharmaceuticals, Inc. 3,900 195,897(a)
Bausch & Lomb Inc. 1,828 126,936
Baxter International, Inc. 23,248 1,309,792
Becton Dickinson & Co. 8,670 645,915
Biogen Idec, Inc. 12,200 652,700(a)
Biomet, Inc. 8,915 407,594
Boston Scientific Corp. 42,178 647,010(a)
Bristol-Myers Squibb Co. 69,408 2,190,517(d)
C.R. Bard, Inc. 3,702 305,896
Cardinal Health, Inc. 13,501 953,711
Celgene Corp. 13,500 773,955(a)
Cigna Corp. 10,189 532,070
Coventry Healthcare, Inc. 5,300 305,545(a)
Eli Lilly & Co. 34,916 1,951,106
Express Scripts, Inc. 9,800 490,098(a)
Forest Laboratories, Inc. 11,000 502,150(a)
Genzyme Corp. 9,500 611,800(a)
Gilead Sciences, Inc. 33,000 1,279,410(a)
Hospira, Inc. 5,539 216,243(a)
Humana Inc. 5,827 354,923(a)
IMS Health Inc. 6,757 217,102
Johnson & Johnson 102,893 6,340,267
King Pharmaceuticals, Inc. 8,833 180,723(a)
Laboratory Corp of
America Holdings 4,300 336,518(a)
Manor Care, Inc. 2,537 165,641
McKesson Corp. 10,461 623,894
Medco Health Solutions, Inc. 9,783 762,976(a)
Medtronic Inc. 40,832 2,117,547
Merck & Company, Inc. 76,950 3,832,110
Millipore Corp. 1,945 146,050(a)
Mylan Laboratories Inc. 7,500 136,425
Patterson Companies, Inc. 4,800 178,896(a)
PerkinElmer, Inc. 4,410 114,925
Pfizer Inc. 249,277 6,374,013
Quest Diagnostics Inc. 5,400 278,910
Schering-Plough Corp. 52,958 1,612,041(d)
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
7
S&P 500 INDEX FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
St. Jude Medical, Inc. 12,292 $ 509,995(a)
Stryker Corp. 10,500 662,445
Tenet Healthcare Corp. 15,395 100,222(a)
Thermo Electron Corp. 14,928 772,076(a)
UnitedHealth Group, Inc. 47,476 2,427,923
Varian Medical Systems, Inc. 4,800 204,048(a)
Waters Corp. 3,600 213,696(a)
Watson Pharmaceuticals, Inc. 3,600 117,108(a)
WellPoint, Inc. 21,800 1,740,294(a)
Wyeth 47,854 2,743,948(d)
Zimmer Holdings, Inc. 8,300 704,587(a)
55,331,152
INDUSTRIALS -- 11.2%
Allied Waste Industries, Inc. 9,000 121,140(a)
American Standard
Companies, Inc. 6,100 359,778
Avery Dennison Corp. 3,155 209,744
Boeing Co. 27,916 2,684,402(d)
Burlington Northern
Santa Fe Corp. 12,449 1,059,908
Caterpillar, Inc. 22,832 1,787,746
CH Robinson Worldwide, Inc. 6,100 320,372
Cintas Corp. 5,000 197,150
Cooper Industries Ltd. 6,442 367,774
CSX Corp. 15,576 702,166
Cummins, Inc. 3,678 372,250
Danaher Corp. 8,600 649,300
Deere & Co. 7,920 956,261
Dover Corp. 7,358 376,362
Eaton Corp. 5,100 474,300
Emerson Electric Co. 27,948 1,307,966
Equifax, Inc. 4,400 195,448
FedEx Corp. 10,760 1,194,037
Fluor Corp. 3,052 339,901
General Dynamics Corp. 14,364 1,123,552
General Electric Co. 364,295 13,945,213(f)
Goodrich Corp. 4,601 274,036
Honeywell International Inc. 27,516 1,548,601
Illinois Tool Works Inc. 14,494 785,430
Ingersoll-Rand Company Ltd.
(Class A) 10,898 597,428
ITT Corp. 6,526 445,595
L-3 Communications
Holdings, Inc. 4,400 428,516
Lockheed Martin Corp. 12,552 1,181,520
Masco Corp. 13,590 386,907
Monster Worldwide, Inc. 4,800 197,280(a)
Norfolk Southern Corp. 13,901 730,776
Northrop Grumman Corp. 12,122 943,940
Paccar Inc. 8,715 758,554
Pall Corp. 4,278 196,745
Parker Hannifin Corp. 4,115 402,900
Pitney Bowes Inc. 8,032 376,058
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Precision Castparts Corp. 4,900 $ 594,664
Raytheon Co. 15,624 841,977
Robert Half International Inc. 5,800 211,700
Rockwell Automation, Inc. 5,468 379,698
Rockwell Collins, Inc. 5,868 414,515
RR Donnelley & Sons Co. 7,952 345,991
Ryder System, Inc. 1,931 103,888
Southwest Airlines Co. 28,349 422,684
Terex Corp. 3,600 292,680(a)
Textron Inc. 4,568 502,983
3M Co. 25,480 2,211,409
Tyco International Ltd. 70,239 2,373,376
Union Pacific Corp. 9,554 1,100,143
United Parcel Service Inc.
(Class B) 37,500 2,737,500
United Technologies Corp. 35,072 2,487,657
W.W. Grainger, Inc. 2,482 230,950
Waste Management, Inc. 18,112 707,274
53,958,145
INFORMATION TECHNOLOGY -- 15.1%
Adobe Systems Incorporated 21,084 846,523(a,d)
Advanced Micro Devices, Inc. 19,574 279,908(a,d)
Affiliated Computer Services,
Inc. (Class A) 3,500 198,520(a)
Agilent Technologies, Inc. 13,685 526,051(a)
Altera Corp. 12,400 274,412
Analog Devices, Inc. 11,900 447,916
Apple Computer, Inc. 30,740 3,751,510(a)
Applied Materials, Inc. 48,400 961,708(d)
Autodesk, Inc. 7,948 374,192(a)
Automatic Data Processing, Inc. 19,418 941,191
Avaya, Inc. 16,801 282,929(a)
BMC Software, Inc. 7,600 230,280(a)
Broadcom Corp. (Class A) 16,050 469,462(a)
CA, Inc. 14,900 384,867
Ciena Corp. 3,242 117,134(a)
Cisco Systems, Inc. 215,604 6,004,571(a,d)
Citrix Systems, Inc. 6,800 228,956(a)
Cognizant Technology Solutions
Corp. (Class A) 5,100 382,959(a)
Computer Sciences Corp. 6,182 365,665(a)
Compuware Corp. 11,000 130,460(a)
Convergys Corp. 5,000 121,200(a)
Corning Incorporated 55,239 1,411,357(a)
Dell, Inc. 80,048 2,285,370(a,d)
eBay, Inc. 39,700 1,277,546(a)
Electronic Arts, Inc. 10,900 515,788(a)
Electronic Data Systems Corp. 18,300 507,459
EMC Corp. 74,614 1,350,513(a)
Fidelity National Information
Services, Inc. 5,800 314,824
First Data Corp. 27,160 887,317
Fiserv, Inc. 5,750 326,600(a)
Google, Inc. (Class A) 7,658 4,008,044(a)
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
8
S&P 500 INDEX FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Hewlett-Packard Co. 92,565 $ 4,130,250
Intel Corp. 205,408 4,880,494
International Business
Machines Corp. 48,430 5,097,257
Intuit Inc. 12,100 363,968(a)
Jabil Circuit, Inc. 5,800 128,006
JDS Uniphase Corp. 7,250 97,367(a)
Juniper Networks, Inc. 19,600 493,332(a)
Kla-Tencor Corp. 6,600 362,670
Lexmark International Inc.
(Class A) 3,600 177,516(a)
Linear Technology Corp. 8,700 314,766
LSI Logic Corp. 28,192 211,722(a)
Maxim Integrated Products, Inc. 11,000 367,510
MEMC Electronic Materials, Inc. 8,000 488,960(a)
Micron Technology, Inc. 26,654 333,975(a)
Microsoft Corp. 298,000 8,782,060(d)
Molex, Inc. 5,150 154,551
Motorola, Inc. 81,750 1,446,975
National Semiconductor Corp. 10,366 293,047
NCR Corp. 6,600 346,764(a)
Network Appliance, Inc. 13,600 397,120(a)
Novell, Inc. 12,866 100,226(a)
Novellus Systems, Inc. 4,300 121,991(a)
Nvidia Corp. 12,900 532,899(a)
Oracle Corp. 140,252 2,764,367(a)
Paychex, Inc. 11,825 462,594
QLogic Corp. 5,700 94,905(a)
QUALCOMM, Inc. 59,000 2,560,010
SanDisk Corp. 8,000 391,520(a)
Solectron Corp. 30,900 113,712(a)
Sun Microsystems, Inc. 125,860 662,024(a)
Symantec Corp. 32,545 657,409(a)
Tektronix, Inc. 2,576 86,914
Tellabs, Inc. 14,552 156,579(a)
Teradyne, Inc. 6,400 112,512(a)
Texas Instruments Incorporated 50,536 1,901,670
Unisys Corp. 13,509 123,472(a)
VeriSign Inc. 8,400 266,532(a)
Western Union Co. 27,460 571,992
Xerox Corp. 33,990 628,135(a)
Xilinx, Inc. 10,200 273,054
Yahoo! Inc. 43,200 1,172,016(a)
72,828,075
MATERIALS -- 3.1%
Air Products & Chemicals, Inc. 7,732 621,421(d)
Alcoa, Inc. 30,640 1,241,839(d)
Allegheny Technologies
Incorporated 3,751 393,405
Ashland, Inc. 2,007 128,348
Ball Corp. 3,816 202,897
Bemis Co. 3,362 111,551
Domtar Corp. 11 123(a)
Dow Chemical Co. 33,894 1,498,793
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
E.I. du Pont de Nemours and Co. 32,813 $ 1,668,213
Eastman Chemical Co. 3,059 196,786
Ecolab Inc. 6,252 266,960
Freeport-McMoRan Copper &
Gold Inc. (Class B) 13,455 1,114,343
Hercules Incorporated 4,228 83,080(a)
International Flavors &
Fragrances Inc. 2,647 138,015
International Paper Co. 15,175 592,584
MeadWestvaco Corp. 6,800 240,176
Monsanto Co. 19,216 1,297,849
Newmont Mining Corp. 16,228 633,866
Nucor Corp. 10,836 635,531
Pactiv Corp. 4,848 154,603(a)
PPG Industries, Inc. 5,937 451,865
Praxair, Inc. 11,170 804,128
Rohm & Haas Co. 4,914 268,697
Sealed Air Corp. 6,114 189,656
Sigma-Aldrich Corp. 4,682 199,781
Temple-Inland Inc. 3,952 243,167
United States Steel Corp. 4,265 463,819
Vulcan Materials Co. 3,500 400,890
Weyerhaeuser Co. 7,494 591,501
14,833,887
TELECOMMUNICATION SERVICES -- 3.7%
Alltel Corp. 12,294 830,460
AT&T, Inc. 218,181 9,054,511
CenturyTel, Inc. 4,150 203,557
Citizens Communications Co. 12,200 186,294
Embarq Corp. 5,370 340,297
Qwest Communications
International Inc. 53,848 522,326(a)
Sprint Nextel Corp. (Series 1) 102,800 2,128,988
Verizon Communications Inc. 102,586 4,223,466
Windstream Corp. 16,743 247,127
17,737,026
UTILITIES -- 3.4%
Allegheny Energy, Inc. 6,000 310,440(a)
Ameren Corp. 7,542 369,633
American Electric Power
Company, Inc. 14,225 640,694(d)
Centerpoint Energy, Inc. 11,818 205,633
CMS Energy Corp. 8,600 147,920
Consolidated Edison, Inc. 9,107 410,908
Constellation Energy Group, Inc. 6,303 549,432
Dominion Resources, Inc. 12,418 1,071,798
DTE Energy Co. 6,166 297,324
Duke Energy Corp. 44,154 808,018
Dynegy, Inc. (Class A) 12,900 121,776(a)
Edison International 11,342 636,513
Entergy Corp. 7,047 756,496
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
9
S&P 500 INDEX FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Exelon Corp. 23,826 $ 1,729,768
FirstEnergy Corp. 10,620 687,433
FPL Group, Inc. 14,262 809,226
Integrys Energy Group, Inc. 2,531 128,398
KeySpan Corp. 6,500 272,870
Nicor Inc. 1,543 66,226
NiSource Inc. 9,515 197,056
PG&E Corp. 12,454 564,166
Pinnacle West Capital Corp. 3,500 139,475
PPL Corp. 13,844 647,761
Progress Energy, Inc. 9,256 421,981
Public Service Enterprise
Group, Inc. 8,959 786,421
Questar Corp. 6,000 317,100
Sempra Energy 9,275 549,358
TECO Energy, Inc. 7,100 121,978
The AES Corp. 24,100 527,308(a)
The Southern Co. 26,758 917,532
TXU Corp. 16,472 1,108,566
Xcel Energy Inc. 14,680 300,500
16,619,708
TOTAL INVESTMENTS IN SECURITIES
(COST $384,118,458) 473,499,367
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.7%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.4%
GEI Short Term Investment Fund
5.55% 6,734,056 6,734,056(b,e)
Money Market Obligation trust
5.22% 448 448(g)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT -- 0.3%
U.S. Treasury Bill
4.67% 09/06/07 $1,500,000 $ 1,486,977
TOTAL SHORT-TERM INVESTMENTS
(COST $8,221,481) 8,221,481
TOTAL INVESTMENTS
(COST $392,339,939) 481,720,848
OTHER ASSETS AND LIABLITES,
NET-- 0.3% 1,611,836
------------
NET ASSETS-- 100.0% $483,332,684
============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI S&P 500 Index had the following long futures contracts open at June 30,
2007 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
S&P Mini
500 Index
Futures September 2007 133 $10,077,410 $(64,904)
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
10
Notes to Schedule of Investments June 30, 2007 (unaudited)
- -------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(d) At June 30, 2007, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(e) GEAM, the investment advisor of the fund, serves as investment advisor of
the GEI Short Term Investment Fund.
(f) General Electric Co. is the parent company of GE Asset Management
Incorporated, the Fund's investment Advisor.
(g) Managed by SSgA Funds Management, Inc., the Fund's sub-adviser.
+ Percentages are based on net assets as of June 30, 2007.
Abbreviations:
REGD. Registered
REIT Real Estate Investment Trust
11
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX FUND
6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 4/15/85
Net asset value, beginning of period ............. $26.06 $22.94 $22.30 $20.51 $16.18 $21.19
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.21 0.42 0.36 0.36 0.24 0.24
Net realized and unrealized
gains/(losses) on investments .............. 1.55 3.12 0.65 1.79 4.33 (4.98)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ... 1.76 3.54 1.01 2.15 4.57 (4.74)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ......................... -- 0.42 0.37 0.36 0.24 0.24
Net realized gains ............................ -- -- -- -- -- 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............................. -- 0.42 0.37 0.36 0.24 0.27
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ................... $27.82 $26.06 $22.94 $22.30 $20.51 $16.18
====================================================================================================================================
TOTAL RETURN (A) ................................. 6.75% 15.43% 4.51% 10.46% 28.27% (22.37)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ...... $483,333 $497,105 $531,015 $601,008 $597,185 $449,173
Ratios to average net assets:
Net investment income* ..................... 1.53% 1.58% 1.47% 1.62% 1.41% 1.20%
Expenses* .................................. 0.39% 0.40% 0.40% 0.40% 0.37% 0.40%
Portfolio turnover rate ....................... 1% 4% 4% 5% 5% 11%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited.
See Notes to Financial Statements.
12
Statement of Assets
and Liabilities JUNE 30, 2007 (UNAUDITED)
S&P 500
INDEX FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $369,399,865) ........................................... $459,554,155
Investments in affiliated securities, at market (cost $14,718,593) .................................. 13,945,212
Short-term Investments (at amortized cost) .......................................................... 1,487,425
Short-term affiliated investments (at amortized cost) ............................................... 6,734,056
Receivable for investments sold ..................................................................... 2,341,031
Income receivables .................................................................................. 546,852
Receivable for fund shares sold ..................................................................... 2,316
Other assets ........................................................................................ 2,021
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS .................................................................................... 484,613,068
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ................................................................... 717,194
Payable for fund shares redeemed .................................................................... 330,347
Payable to GEAM ..................................................................................... 220,873
Variation margin payable ............................................................................ 11,970
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ............................................................................... 1,280,384
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ............................................................................................. $483,332,684
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ..................................................................................... 396,600,022
Undistributed (distribution in excess of) net investment income ..................................... 3,720,754
Accumulated net realized gain (loss) ................................................................ (6,304,097)
Net unrealized appreciation/ (depreciation) on:
Investments ..................................................................................... 89,380,909
Futures ......................................................................................... (64,904)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ............................................................................................. $483,332,684
====================================================================================================================================
NET ASSETS ............................................................................................. 483,332,684
Shares outstanding ($0.01 par value; unlimited shares authorized) ...................................... 17,374,996
Net asset value per share .............................................................................. $27.82
See Notes to Financial Statements.
13
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)
S&P 500
INDEX FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend .............................................................................. $ 4,244,722
Dividend from affliated investments ................................................... 211,369
Interest .............................................................................. 41,357
Interest from affliated investments ................................................... 172,285
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ............................................................................ 4,669,733
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ...................................................... 853,869
Transfer agent ........................................................................ 16
Trustee's fees ........................................................................ 6,437
Custody and accounting expenses ....................................................... 23,678
Professional fees ..................................................................... 21,344
Registration expenses ................................................................. 30,679
Other expenses ........................................................................ 21,569
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .......................................................................... 957,592
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ............................................................ 3,712,141
===========================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ........................................................................ 2,429,713
Futures ............................................................................ 458,584
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON:
Investments ........................................................................ 25,154,037
Futures ............................................................................ (61,845)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ................................ 27,980,489
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......................... $31,692,630
===========================================================================================================================
See Notes to Financial Statements.
14
Statements of
Changes in Net Assets
S&P 500
INDEX FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007 DECEMBER 31,
(UNAUDITED) 2006
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) .......................................................... $ 3,712,141 $ 7,945,552
Net realized gain (loss) on investments, futures, written options,
foreign currency transactions and swaps .............................................. 2,888,297 710,908
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation ............... 25,092,192 63,299,875
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ................................................ 31,692,630 71,956,335
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................................................................. -- (7,912,831)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ...................................................................... -- (7,912,831)
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ...................... 31,692,630 64,043,504
- --------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ........................................................... 3,121,024 5,786,380
Value of distributions reinvested ...................................................... -- 7,912,831
Cost of shares redeemed ................................................................ (48,585,947) (111,652,724)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ........................................ (45,464,923) (97,953,513)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................................................. (13,772,293) (33,910,009)
NET ASSETS
Beginning of period ...................................................................... 497,104,977 531,014,986
- --------------------------------------------------------------------------------------------------------------------------------
End of period ............................................................................ $ 483,332,684 $ 497,104,977
================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD .............. $ 3,720,754 $ 8,613
- --------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ............................................................................ 114,780 241,604
Issued for distributions reinvested .................................................... -- 302,363
Shares redeemed ........................................................................ (1,817,021) (4,614,589)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ...................................................... (1,702,241) (4,070,622)
================================================================================================================================
See Notes to Financial Statements.
15
<page>
Notes to Financial Statements June 30, 2007 (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 thirteen 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, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap
Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions at the date of the financial statements. Actual
results may differ from those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sales occurred on
that day, at the last quoted bid price. Securities listed on the NASDAQ will be
valued at the NASDAQ's official close price. Certain fixed income securities are
valued by a dealer or by a pricing service based upon a matrix system, which
considers market transactions as well as dealer supplied valuations. Short-term
investments maturing within sixty days are valued at amortized cost. If
quotations are not readily available for a portfolio security, or if it is
believed that a quotation or other market 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 procedures require that the fair value of a security be
established by the valuation committee. The fair value committee follows
different protocols for different types of investments and 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. 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. GE Asset Management may also
separately monitor portfolio securities and, consistent with the Fund's fair
value procedures, apply a different value to a portfolio security than would be
applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which a Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
In September 2006, FASB issued Statement of Financial Accounting Standards No.
157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single
authoritative definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. FAS 157
applies to fair value measurements already required or permitted by existing
standards. The change to current generally accepted accounting principles from
the application of FAS 157 relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. Management of the Fund does not believe the adoption of FAS 157
will materially impact the financial statement amounts, however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the
16
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
measurements on changes in net assets for the period. FAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007
and interim periods within those fiscal years.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's or a third party custodian takes possession
of the collateral pledged for investments in repurchase agreements on behalf of
the Fund. The Fund values the underlying collateral daily on a mark-to-market
basis to determine that the value, including accrued interest, is at least equal
to 102% of the repurchase price. In the event the seller defaults and the value
of the security declines, or if the seller enters an insolvency proceeding,
realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange at
period end. Purchases and sales of securities, income receipts and expense
payments denominated in foreign currencies are translated into U.S. dollars at
the prevailing exchange rate on the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
17
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
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.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2007, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- ------------------------------------------------------------------------------------------------------------------------------------
$383,430,057 $133,365,932 $(49,793,734) $83,572,198
As of December 31, 2006, 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
- --------------------------------------------------------------------------------
$2,515,583 12/31/2010
857,803 12/31/2011
During the year ended December 31, 2006, the Fund utilized approximately
$122,615 of capital loss carryovers. 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.
18
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The Fund elected to defer losses incurred after October 31, 2006 as follows:
Capital Currency
- --------------------------------------------------------------------------------
$(13,356) $--
The tax composition of distributions paid (other than return of capital
distributions for the year) during the year ended December 31, 2006 was as
follows:
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
$7,912,831 $-- $7,912,831
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures,
distributions from Real Estate Investment Trusts (REITS), and losses deferred
due to wash sale transactions. Reclassifications due to permanent book/tax
differences are made to the Fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryovers) under income
tax regulations. These reclassifications have no impact on net investment
income, realized gains or losses, or the net asset value of the Fund. The
calculation of net investment income per share in the Financial Highlights table
excludes these adjustments.
The reclassifications for the year ended December 31, 2006 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated Paid in
Income Net Realized Gain Capital
- --------------------------------------------------------------------------------
$(24,108) $54,148 $(30,040)
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax return to determine whether the tax positions
are "more likely than not" of being sustained by the applicable tax authority.
The adoption of FIN48 did not have an impact on the Fund's net assets and
financial statements.
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 Expenses of the Company which are directly identifiable to one of the
Funds are allocated to that portfolio. Expenses which are not directly
identifiable to one of the Funds are allocated in such a manner as deemed
equitable, taking into consideration the nature and type of expenses and
relative sizes of the Funds. All expenses of the Fund are paid by GEAM and
reimbursed by the Fund.
3. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund at an
annualized rate of .35%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2007, $3,784 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
19
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
4. SUB-ADVISORY FEES
Pursuant to an investment sub-advisory agreement with GEAM, SSgA Funds
Management, Inc. ("SSgA") is the Sub-Adviser to the S&P 500 Index Fund. SSgA is
responsible for the day-to-day portfolio management of the assets of the Fund,
including the responsibility for making decisions to buy, sell or hold a
particular security, under the general supervision of GEAM and the Board.
For its services, GEAM pays SSgA monthly sub-advisory fees which are calculated
as a percentage of the average daily net assets of the Fund.
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$6,460,061 $49,263,933
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 58
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 - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM
since February 1997; President and Chief Executive Officer - Mutual Funds at
GEAM since 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,
since March 1993; Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their
inception; Trustee of Elfun Funds, GE Savings & Security Funds and General
Electric Pension Trust since 1988; Trustee of Fordham University since 2003;
Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset
Management (Ireland) since February 1999; Director, GE Asset Management Funds
Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 46
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
21
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years (Vice President); less than one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General
Counsel - Marketing and Client Services (formerly Asset Management Services) at
GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE
Institutional Funds and GE LifeStyle Funds since September 2003; Vice President
and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since
October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary
since July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
22
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds and GE LifeStyle Funds since their inception; Trustee of
Fordham University since 2002 and Marymount College from 2001 through 2002;
Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the
Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since
1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 71
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
23
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member NASD 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, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING
Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES
Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS
AND REAL ESTATE
John J. Walker, EVP, CHIEF FINANCIAL OFFICER
24
[This page intentionally left blank.]
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER NASD AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to
portfolio securities during the most recently disclosed 12-month period
ended June 30 is available without charge (i) through the Fund's website
at http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
Small-Cap Equity Fund
Semi-Annual Report
JUNE 30, 2007
[GE logo omitted]
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 ...................................... 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 ................................................ 17
INVESTMENT TEAM ....................................................... 20
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, 2007 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains distributions, if any. Investment returns and net
asset value on an investment will fluctuate and you may have a gain or loss when
you sell your shares. Periods less than one year are not annualized.
Current performance may be lower or higher than that shown. You may call
toll-free (800) 242-0134 for performance information as of the most recent month
end.
Total returns do not reflect expenses associated with the separate account such
as administrative fees, account charges and surrender charges, which, if
reflected, would reduce the total returns for all periods shown.
Shares of the Fund are neither insured nor guaranteed by the U.S. Government,
and their prices will fluctuate with market conditions.
The Russell 2000 Index (Russell 2000) is an unmanaged index and do 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
approximately 2,000 of the smallest U.S.-domiciled publicly traded common stocks
that are included in the Russell 3000(R) Index. The Russell 3000 Index is
comprised of the 3,000 largest U.S. domiciled companies. The results shown for
the foregoing index assume the reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer ranking
calculation is based on the blend of Lipper peer categories, as shown. Lipper is
an independent mutual fund rating service. A Fund's performance may be compared
to or ranked within a universe of mutual funds with investment objectives and
policies similar but not necessarily identical to the Fund's. Such comparisons
or rankings are made on the basis of several factors, including the Fund's
objectives and policies, management style and strategy, and portfolio
composition, and may change over time if any of those factors change.
1
Small-Cap Equity Fund
- --------------------------------------------------------------------------------
PALISADE CAPITAL MANAGEMENT, L.L.C. ("PALISADE") HAS A HISTORY OF MANAGING
SMALL-CAP EQUITY PORTFOLIOS AND FOR SEVERAL YEARS HAS PROVIDED PENSION FUND
SERVICES TO GE. PALISADE TRANSLATES ITS EXPERIENCE FROM VARIOUS INSTITUTIONAL
AND PRIVATE ACCOUNTS TO MUTUAL FUND PORTFOLIOS IT SUB-ADVISES FOR GE ASSET
MANAGEMENT. PALISADE HAS MANAGED THE SMALL-CAP EQUITY FUND SINCE ITS INCEPTION.
SMALL-CAP EQUITY FUND IS MANAGED BY JACK FEILER, JEFFREY SCHWARTZ AND DENNISON
T. ("DAN") VERU, MEMBERS OF PALISADE'S INVESTMENT POLICY COMMITTEE. MR. FEILER,
MR. SCHWARTZ AND MR. VERU ARE JOINTLY AND PRIMARILY RESPONSIBLE FOR THE STRATEGY
OF THE FUND AND THE DAY-TO-DAY MANAGEMENT OF THE FUND IS EXECUTED BY MR.
SCHWARTZ.
JACK FEILER, PRESIDENT AND CHIEF INVESTMENT OFFICER, HAS DAY-TO-DAY
RESPONSIBILITY FOR MANAGING THE SMALL-CAP EQUITY FUND. MR. FEILER HAS MORE THAN
33 YEARS OF INVESTMENT EXPERIENCE AND HAS SERVED AS THE PRINCIPAL SMALL-CAP
PORTFOLIO MANAGER AT PALISADE SINCE THE COMMENCEMENT OF PALISADE'S OPERATIONS IN
APRIL 1995. HE HAS SERVED AS A PORTFOLIO MANAGER OF THE SMALL-CAP EQUITY FUND
SINCE ITS INCEPTION. PRIOR TO JOINING PALISADE, MR. FEILER WAS A SENIOR VICE
PRESIDENT-INVESTMENTS AT SMITH BARNEY FROM 1990 TO 1995.
JEFFREY SCHWARTZ, SENIOR PORTFOLIO MANAGER, JOINED PALISADE IN OCTOBER 2004.
PRIOR TO JOINING PALISADE, MR. SCHWARTZ WAS VICE PRESIDENT AND SENIOR PORTFOLIO
MANAGER OF SAFECO ASSET MANAGEMENT FROM SEPTEMBER 2003 TO SEPTEMBER 2004. FROM
JUNE 2001 TO AUGUST 2003, MR. SCHWARTZ FOUNDED NANTUCKET INVESTMENT RESEARCH IN
FARMINGTON HILLS, MI, CONDUCTED INDEPENDENT INVESTMENT RESEARCH AND WAS A
PRIVATE INVESTOR. FROM JUNE 1992 UNTIL MAY 2001, MR. SCHWARTZ WAS AT MUNDER
CAPITAL MANAGEMENT, MOST RECENTLY AS A SENIOR PORTFOLIO MANAGER AND PRINCIPAL.
DENNISON T. ("DAN") VERU IS AN EXECUTIVE VICE-PRESIDENT AND CO-INVESTMENT
OFFICER OF PALISADE. SINCE JOINING PALISADE IN MARCH 2000, MR. VERU HAS BEEN A
MEMBER OF THE INVESTMENT POLICY COMMITTEE. MR. VERU BECAME A PRINCIPAL OF
PALISADE IN JULY 2004. PRIOR TO JOINING PALISADE, HE WAS PRESIDENT AND DIRECTOR
OF RESEARCH OF AWAD ASSET MANAGEMENT, A DIVISION OF RAYMOND JAMES & ASSOCIATES.
MR. VERU HAS BEEN A FREQUENT GUEST ON CNBC, CNN AND BLOOMBERG TELEVISION. PRIOR
TO AWAD, MR. VERU WORKED WITH THE PALISADE TEAM FROM 1984 THROUGH 1992.
Q. HOW DID THE SMALL-CAP EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE
SIX-MONTH PERIOD ENDED JUNE 30, 2007?
A. For the six-month period ended June 30, 2007, the Small-Cap Equity Fund
returned 9.03%. The Russell 2000 Index, the Fund's benchmark, returned 6.42%
and the Fund's Lipper peer group of 124 Small-Cap Core Funds returned an
average of 8.25% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The Fund added value relative to the benchmark during the first and second
quarters of 2007. This occurred despite continued investor unease about high
oil prices and concerns about the subprime mortgage market. The adjustments
made during the second half of 2006 served the Fund well during the first
half of this year. The portfolio remains positioned for slow, steady
domestic economic growth but should continue to participate in global
economic growth. We remain invested in companies with consistent earnings
growth, increasing ROIC, and improving free cash flow generation.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The primary contributors during the six-month period came from the Fund's
selection of stocks in the Energy, Industrials, and Financials sectors.
Despite the Energy sector's small relative allocation in the Fund, the
Fund's Energy names significantly outpaced those of the benchmark's sector
which delivered a robust amount of added value. The Fund received
disappointing results from the Healthcare and Utilities sectors. Much of the
underperformance in Healthcare came from Medical Action Industries which
declined (-16%) on valuation concerns and integration risk of
2
- --------------------------------------------------------------------------------
Q&A
announced acquisitions. The Fund held only one position in Utilities and
that position created drag relative to the benchmark.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. The most significant changes in sector allocation include reductions in the
Industrials and Information Technology sectors and increases in the Consumer
Discretionary and Healthcare sectors. Accordingly, we are now overweight in
the Consumer Discretionary sector and remain underweight in Healthcare,
although by a smaller margin than in the previous six-month period. While
our overall allocation to the Financials sector has changed only nominally,
we have reduced our exposure to community banks due to net interest margin
pressures while increasing our exposure to insurance brokers and financial
services providers.
3
Small-Cap Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service 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,
2007.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007
- ------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,090.34 4.48
- ------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,020.32 4.31
- ------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.86% (FROM
PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 9.03%.
4
Small-Cap Equity Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
Small-Cap Equity Fund Russell 2000 Index
04/28/00 $10,000.00 $10,000.00
12/00 11,325.90 9,650.02
12/01 12,455.23 9,896.45
12/02 10,729.52 7,876.43
12/03 13,316.94 11,601.44
12/04 15,334.17 13,727.92
12/05 16,795.59 14,348.21
12/06 19,023.85 16,983.05
06/07 20,742.48 18,074.18
- --------------------------------------------
Small-Cap Equity Fund (ending value $20,742)
Russell 2000 Index (ending value $18,074)
- --------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2007
- --------------------------------------------------------------------------------
SIX ONE FIVE SINCE
MONTHS YEAR YEAR INCEPTION
- --------------------------------------------------------------------------------
Small-Cap Equity Fund 9.03% 17.40% 10.72% 10.70%
- --------------------------------------------------------------------------------
Russell 2000 Index 6.42% 16.42% 13.89% 8.61%
- --------------------------------------------------------------------------------
Lipper peer group average* 8.25% 16.82% 13.09% N/A
- --------------------------------------------------------------------------------
Inception date 4/28/00
================================================================================
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital by investing
at least 80% of its net assets in equity securities of small-cap companies under
normal circumstances. The Fund invests primarily in small-cap companies that the
portfolio managers believe are undervalued by the market but have solid growth
prospects.
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Oil States International, Inc. 2.63%
- --------------------------------------------------------------------------------
DRS Technologies, Inc. 2.59%
- --------------------------------------------------------------------------------
Harsco Corp. 2.25%
- --------------------------------------------------------------------------------
Oshkosh Truck Corp. 2.23%
- --------------------------------------------------------------------------------
Woodward Governor Co. 2.04%
- --------------------------------------------------------------------------------
Varian, Inc. 1.99%
- --------------------------------------------------------------------------------
HCC Insurance Holdings, Inc. 1.93%
- --------------------------------------------------------------------------------
Arbitron, Inc. 1.84%
- --------------------------------------------------------------------------------
Micros Systems, Inc. 1.82%
- --------------------------------------------------------------------------------
Jarden Corp. 1.80%
================================================================================
PORTFOLIO COMPOSITION
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $152,653 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Industrials 20.9%
Short-Term 16.0%
Financials 15.9%
Consumer Discretionary 15.1%
Information Technology 11.4%
Healthcare 9.4%
Energy 4.0%
Materials 3.2%
Consumer Staples 3.0%
Utilities 1.1%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR, AND FIVE-YEAR PERIODS INDICATED IN THE SMALL-CAP
CORE FUNDS PEER GROUP CONSISTING OF 124, 120 AND 83 UNDERLYING ANNUITY
FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
5
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
SMALL-CAP EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 99.4%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 17.8%
Aaron Rents, Inc. 75,400 $ 2,201,680(d)
Aeropostale, Inc. 62,300 2,596,664(a)
American Eagle Outfitters 21,900 561,954
Arbitron, Inc. 54,600 2,813,538
Bright Horizons Family
Solutions, Inc. 46,200 1,797,642(a,d)
CBRL Group, Inc. 23,600 1,002,528(d)
Finish Line (Class A) 34,000 309,740(d)
Interactive Data Corp. 91,500 2,450,370(d)
Jarden Corp. 63,900 2,748,339(a,d)
LKQ Corp. 49,700 1,225,602(a,d)
Pool Corp. 46,900 1,830,507(d)
RARE Hospitality
International, Inc. 15,000 401,550(a)
The Talbots, Inc. 32,800 820,984(d)
Timberland Co. (Class A) 27,600 695,244(a)
Triarc Companies, Inc. (Class B) 97,600 1,532,320(d)
22,988,662
CONSUMER STAPLES -- 3.5%
Central European
Distribution Corp. 69,800 2,416,476(a,d)
Smithfield Foods, Inc. 70,200 2,161,458(a,d)
4,577,934
ENERGY -- 4.8%
Dril-Quip Inc. 38,700 1,739,565(a)
Oil States International, Inc. 97,200 4,018,248(a,d)
St. Mary Land & Exploration Co. 10,200 373,524
6,131,337
FINANCIALS -- 18.9%
BioMed Realty Trust, Inc. (REIT) 103,400 2,597,408
Cullen/Frost Bankers, Inc. 18,600 994,542
DCT Industrial Trust, Inc. (REIT) 91,300 982,388(d)
Federal Realty Investment
Trust (REIT) 13,700 1,058,462
GFI Group, Inc. 22,500 1,630,800(a,d)
Global Cash Access Holdings, Inc. 117,600 1,883,952(a,d)
HCC Insurance Holdings, Inc. 88,400 2,953,444
Hilb Rogal & Hobbs Co. 60,800 2,605,888(d)
Jones Lang LaSalle Inc. 10,200 1,157,700
Omega Healthcare
Investors, Inc. (REIT) 150,800 2,387,164
Raymond James Financial, Inc. 78,275 2,418,698(d)
Sandy Spring Bancorp, Inc. 24,600 773,424(d)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Sterling Bancorp 33,562 $ 537,998(d)
Webster Financial Corp. 23,900 1,019,813(d)
Westamerica Bancorporation 29,900 1,322,776(d)
24,324,457
HEALTHCARE -- 11.1%
AMN Healthcare Services, Inc. 53,400 1,174,800(a,d)
Computer Programs and
Systems, Inc. 53,300 1,651,234(d)
Cubist Pharmaceuticals, Inc. 27,100 534,141(a,d)
HMS Holdings Corp. 20,300 388,542(a,d)
Immunicon Corp. 79,700 163,385(a,d)
KV Pharmaceutical Co. (Class A) 97,900 2,666,796(a,d)
Medical Action Industries Inc. 76,000 1,372,560(a,d)
Molina Healthcare, Inc. 37,400 1,141,448(a,d)
Salix Pharmaceuticals Ltd. 69,500 854,850(a,d)
Thoratec Corp. 71,900 1,322,241(a,d)
Varian, Inc. 55,400 3,037,582(a)
14,307,579
INDUSTRIALS -- 24.8%
Applied Industrial
Technologies, Inc. 24,200 713,900(d)
Baldor Electric Co. 35,800 1,764,224(d)
Comfort Systems USA, Inc. 81,100 1,149,998(d)
DRS Technologies, Inc. 69,100 3,957,357(d)
Genesee & Wyoming
Inc. (Class A) 88,700 2,646,808(a,d)
Harsco Corp. 66,000 3,432,000
Herman Miller Inc. 79,300 2,505,880
Mueller Industries, Inc. 59,200 2,038,848
NCI Building Systems, Inc. 33,100 1,632,823(a,d)
Old Dominion Freight Line 41,800 1,260,270(a)
Oshkosh Truck Corp. 54,200 3,410,264(d)
Quanta Services, Inc. 61,200 1,877,004(a,d)
Teledyne Technologies Inc. 53,900 2,476,705(a)
Woodward Governor Co. 57,900 3,107,493(d)
31,973,574
INFORMATION TECHNOLOGY -- 13.4%
Blackbaud, Inc. 67,700 1,494,816(d)
CommScope, Inc. 43,700 2,549,895(a,d)
Micros Systems, Inc. 51,100 2,779,840(a)
Mobility Electronics, Inc. 87,600 330,252(a,d)
MoneyGram International, Inc. 70,800 1,978,860(d)
Parametric Technology Corp. 121,100 2,616,971(a,d)
Photon Dynamics, Inc. 51,800 564,620(a,d)
Rudolph Technologies, Inc. 96,600 1,604,526(a,d)
Semtech Corp. 71,500 1,239,095(a,d)
SRA International,
Inc. (Class A) 13,900 351,114(a)
Transaction Systems
Architects Inc. (Class A) 27,400 922,284(a,d)
Zebra Technologies
Corp. (Class A) 23,200 898,768(a,d)
17,331,041
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
MATERIALS -- 3.8%
Commercial Metals Co. 76,700 $ 2,590,159(d)
Packaging Corporation
of America 69,500 1,759,045
Pioneer Drilling Co. 38,200 569,562(a,d)
4,918,766
UTILITIES -- 1.3%
IDACORP, Inc. 53,100 1,701,324(d)
TOTAL INVESTMENTS IN SECURITIES
(COST $109,544,424) 128,254,674
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 18.9%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.0%
GEI Short Term Investment Fund
5.55% 1,267,836 1,267,836(b,e)
SHORT-TERM SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN -- 17.9%
State Street Navigator Securities
Lending Prime Portfolio
5.36% 23,130,091 23,130,091(b,c)
TOTAL SHORT-TERM INVESTMENTS
(COST $24,397,927) 24,397,927
TOTAL INVESTMENTS
(COST $133,942,351) 152,652,601
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (18.3)% (23,633,230)
------------
NET ASSETS -- 100.0% $129,019,371
============
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
Notes to Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(d) All or a portion of the security is out on loan.
(e) GEAM, the investment advisor of the fund, serves as investment advisor of
the GEI Short Term Investment Fund.
+ Percentages are based on net assets as of June 30, 2007.
Abbreviations:
ADR American Depository Receipt
REIT Real Estate Investment Trust
8
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
SMALL-CAP EQUITY FUND
6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
- --------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 4/28/00
Net asset value, beginning of period ............... $14.39 $14.44 $13.62 $12.74 $10.27 $12.01
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.02 0.05 0.02 0.08 0.02 0.03
Net realized and unrealized
gains/(losses) on investments ................ 1.28 1.87 1.28 1.85 2.46 (1.69)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ..... 1.30 1.92 1.30 1.93 2.48 (1.66)
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................... -- 0.04 0.03 0.07 0.01 0.02
Net realized gains .............................. -- 1.93 0.45 0.98 -- 0.05
Return of capital ............................... -- -- -- -- -- 0.01
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................ -- 1.97 0.48 1.05 0.01 0.08
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ..................... $15.69 $14.39 $14.44 $13.62 $12.74 $10.27
================================================================================================================================
TOTAL RETURN (A) ................................... 9.03% 13.27% 9.53% 15.15% 24.11% (13.86)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ........ $129,019 $127,381 $128,142 $117,158 $86,330 $52,359
Ratios to average net assets:
Net investment income* ....................... 0.27% 0.31% 0.11% 0.67% 0.17% 0.34%
Expenses* .................................... 0.86% 0.86% 0.86% 0.88% 0.86% 0.84%
Portfolio turnover rate ......................... 17% 52% 33% 101% 119% 108%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited.
See Notes to Financial Statements.
9
SMALL-CAP
Statement of Assets EQUITY
and Liabilities JUNE 30, 2007 (UNAUDITED) FUND
- -------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $109,544,424) ........................................... $128,254,674
Short-term Investments (at amortized cost) .......................................................... 23,130,091
Short-term affiliated investments (at amortized cost) ............................................... 1,267,836
Receivable for investments sold ..................................................................... 765,820
Income receivables .................................................................................. 113,396
Receivable for fund shares sold ..................................................................... 2,497
Other assets ........................................................................................ 1,414
- -------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS .................................................................................... 153,535,728
- -------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned ............................................................ 23,130,091
Payable for investments purchased ................................................................... 1,192,871
Payable for fund shares redeemed .................................................................... 72,072
Payable to GEAM ..................................................................................... 121,323
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ............................................................................... 24,516,357
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS ............................................................................................. $129,019,371
=========================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ..................................................................................... 93,479,305
Undistributed (distribution in excess of) net investment income ..................................... 206,557
Accumulated net realized gain (loss) ................................................................ 16,623,259
Net unrealized appreciation/(depreciation) on:
Investments ...................................................................................... 18,710,250
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS ............................................................................................. $129,019,371
=========================================================================================================================
NET ASSETS ............................................................................................. 129,019,371
Shares outstanding ($0.01 par value; unlimited shares authorized) ...................................... 8,223,270
Net asset value per share .............................................................................. $15.69
* Includes $22,415,620 of securities on loan.
See Notes to Financial Statements.
10
SMALL-CAP
Statement of Operations EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) FUND
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ................................................................................ $ 630,495
Interest* ............................................................................... 24,605
Interest from affliated investments ..................................................... 66,808
- ---------------------------------------------------------------------------------------------------------------
TOTAL INCOME .............................................................................. 721,908
- ---------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ........................................................ 511,661
Transfer agent .......................................................................... 16
Trustee's fees .......................................................................... 1,691
Custody and accounting expenses ......................................................... 17,575
Professional fees ....................................................................... 11,826
Registration expenses ................................................................... 2,076
Other expenses .......................................................................... 6,663
- ---------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ............................................................................ 551,508
- ---------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) .............................................................. 170,400
===============================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments .......................................................................... 9,007,542
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON:
Investments .......................................................................... 1,893,827
- ---------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .................................. 10,901,369
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................... $11,071,769
===============================================================================================================
* Income attributable to security lending activity, net of rebate expenses,
was $24,605.
See Notes to Financial Statements.
11
SMALL-CAP
Statements of EQUITY
Changes in Net Assets FUND
- ----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007 DECEMBER 31,
(UNAUDITED) 2006
- ----------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) ..................................................... $ 170,400 $ 342,034
Net realized gain (loss) on investments, futures, written options,
foreign currency transactions and swaps ......................................... 9,007,542 22,145,575
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation .......... 1,893,827 (6,549,704)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ........................................... 11,071,769 15,937,905
- ----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................................. -- (348,798)
Net realized gains ................................................................ -- (15,076,626)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................. -- (15,425,424)
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ................. 11,071,769 512,481
- ----------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ...................................................... 1,933,497 10,121,601
Value of distributions reinvested ................................................. -- 15,425,391
Cost of shares redeemed ........................................................... (11,366,621) (26,821,168)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions .................................. (9,433,124) (1,274,176)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................. 1,638,645 (761,695)
NET ASSETS
Beginning of period ................................................................. 127,380,726 128,142,421
- ----------------------------------------------------------------------------------------------------------------------------
End of period ...................................................................... $129,019,371 $127,380,726
============================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ........ $ 206,557 $ 36,157
- ----------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ....................................................................... 126,773 657,522
Issued for distributions reinvested ............................................... -- 1,064,554
Shares redeemed ................................................................... (755,876) (1,744,050)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ................................................. (629,103) (21,974)
============================================================================================================================
See Notes to Financial Statements.
12
Notes to Financial Statements June 30, 2007 (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 thirteen 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, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund (the
"Fund"), International Equity Fund, Total Return Fund, Income Fund, Money Market
Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions at the date of the financial statements. Actual
results may differ from those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS for which exchange quotations are readily
available are valued at the last sale price, or if no sales occurred on that
day, at the last quoted bid price. Securities listed on the NASDAQ will be
valued at the NASDAQ's official close price. Certain fixed income securities are
valued by a dealer or by a pricing service based upon a matrix system, which
considers market transactions as well as dealer supplied valuations. Short-term
investments maturing within sixty days are valued at amortized cost. If
quotations are not readily available for a portfolio security, or if it is
believed that a quotation or other market 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 procedures require that the fair value of a security be
established by the valuation committee. The fair value committee follows
different protocols for different types of investments and 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. 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. GE Asset Management may also
separately monitor portfolio securities and, consistent with the Fund's fair
value procedures, apply a different value to a portfolio security than would be
applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which a Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
In September 2006, FASB issued Statement of Financial Accounting Standards No.
157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single
authoritative definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. FAS 157
applies to fair value measurements already required or permitted by existing
standards. The change to current generally accepted accounting principles from
the application of FAS 157 relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. Management of the Fund does not believe the adoption of FAS 157
will materially impact the financial statement amounts, however, additional
13
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period. FAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Funds's investment
objectives or policies. The Fund's 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 at
period end. Purchases and sales of securities, income receipts and expense
payments denominated in foreign currencies are translated into U.S. dollars at
the prevailing exchange rate on the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
14
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
At June 30, 2007, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- --------------------------------------------------------------------------------
$133,999,605 $23,005,084 $(4,352,088) $18,652,996
As of December 31, 2006, the Fund has no capital loss carryovers. Capital loss
carryovers are available to offset future realized capital gain to the extent
provided in the Internal Revenue Code and regulations thereunder. To the extent
that these carryover losses are used to offset future capital gains, it is
probable that gains so offset will not be distributed to shareholders because
they would be taxable as ordinary income.
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund incurred no such losses after October 31, 2006.
The tax composition of distributions paid (other than return of capital
distributions for the year) during the year ended December 31, 2006 was as
follows:
Long-Term
Ordinary Capital
Income Gains Total
- --------------------------------------------------------------------------------
$966,332 $14,459,092 $15,425,424
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) distributions
from Real Estate Investment Trusts (REITS) and losses deferred due to wash sale
transactions. Reclassifications due to permanent book/tax differences are made
to the Fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryovers) under income tax
regulations. These reclassifications have no impact on net investment income,
realized gains or losses, or the net asset value of the Fund. The calculation of
net investment income per share in the Financial Highlights table excludes these
adjustments.
The reclassifications for the year ended December 31, 2006 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated Paid in
Income Net Realized Gain Capital
- --------------------------------------------------------------------------------
$26,690 $(26,690) $ --
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax return to determine whether the tax positions
are "more likely than not" of being sustained by the applicable tax authority.
The adoption of FIN48 did not have an impact on the Fund's net assets and
financial statements.
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 Expenses of the Company which are directly identifiable to one of the
Funds are allocated to that portfolio. Expenses which are not directly
identifiable to one of the Funds are allocated in such a manner as deemed
equitable, taking into consideration the nature and type of expenses and
relative sizes of the Funds. All expenses of the Fund are paid by GEAM and
reimbursed by the Fund.
15
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
3. LINE OF CREDIT
The Fund shares a revolving credit facility of up to $25 million with a number
of its affiliates. The credit facility is with its custodian bank, State Street
Bank and Trust Company. The revolving credit facility requires the payment of a
commitment fee equal to 0.09% per annum on the daily unused portion of the
credit facility, payable quarterly. The portion borne by the Funds generally is
borne proportionally based upon net assets. Generally, borrowings under the
credit facility would accrue interest at the Federal Funds Rate plus 50 basis
points and is borne by each of the borrowing Funds. The maximum amount allowed
to be borrowed by any one of the Funds is the lesser of its prospectus
limitation, 20% of its net assets, or $25 million. The credit facility was not
utilized by the Fund during the period ended June 30, 2007.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund at an
annualized rate of .80%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2007, $995 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. SUB-ADVISORY FEES
Pursuant to an investment sub-advisory agreement with GEAM, Palisade Capital
Management, LLC ("Palisade") is the Sub-Adviser to the Small-Cap Equity Fund.
Palisade 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 Palisade monthly sub-advisory fees which are
calculated as a percentage of the average daily net assets of the Fund.
6. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$21,423,799 $26,100,628
SECURITY LENDING At June 30, 2007, the Fund participated in securities lending:
Loaned
securities at Cash
market value collateral*
- --------------------------------------------------------------------------------
$22,415,620 $23,130,091
* COLLATERAL OF $23,252,454 DECREASED BY $122,363 ON JULY 1, 2007 TO REFLECT
THE JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN.
16
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 58
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 - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM
since February 1997; President and Chief Executive Officer - Mutual Funds at
GEAM since 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,
since March 1993; Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their
inception; Trustee of Elfun Funds, GE Savings & Security Funds and General
Electric Pension Trust since 1988; Trustee of Fordham University since 2003;
Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset
Management (Ireland) since February 1999; Director, GE Asset Management Funds
Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 46
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
17
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years (Vice President); less than one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General
Counsel - Marketing and Client Services (formerly Asset Management Services) at
GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE
Institutional Funds and GE LifeStyle Funds since September 2003; Vice President
and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since
October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary
since July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
18
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
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 - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds and GE LifeStyle Funds since their inception; Trustee of
Fordham University since 2002 and Marymount College from 2001 through 2002;
Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the
Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since
1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 71
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from
Salomon Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
19
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member NASD 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, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING
Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES
Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE
John J. Walker, EVP, CHIEF FINANCIAL OFFICER
20
[This page intentionally left blank.]
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER NASD AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to
portfolio securities during the most recently disclosed 12-month period
ended June 30 is available without charge (i) through the Fund's website
at http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
- --------------------------------------------------------------------------------
[GE logo omitted]
GE Investments Funds, Inc.
Real Estate Securities Fund
Semi-Annual Report
JUNE 30, 2007
[GE LOGO OMITTED]
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 ................................................ 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, 2007 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains distributions, if any. Investment returns and net
asset value on an investment will fluctuate and you may have a gain or loss when
you sell your shares. Periods less than one year are not annualized.
Current performance may be lower or higher than that shown. You may call
toll-free (800) 242-0134 for performance information as of the most recent month
end.
Total returns do not reflect expenses associated with the separate account such
as administrative fees, account charges and surrender charges, which, if
reflected, would reduce the total returns for all periods shown.
Shares of the Fund are neither insured nor guaranteed by the U.S. Government,
and their prices will fluctuate with market conditions.
The Wilshire Real Estate Securities Index (Wilshire RES) is an unmanaged index
and do not reflect the actual cost of investing in the instruments that comprise
the index. The Wilshire RES Index is a market capitalization-weighted index
comprised of publicly traded real estate securities, such as real estate
investment trusts (REITs) and real estate operating companies (REOCs). NAREIT
Equity Index is an unmanaged index of all tax-qualified real estate investment
trusts (REITs) listed on the New York Stock Exchange, American Stock Exchange
and NASDAQ which have 75% or more of their gross invested book assets invested
directly or indirectly in the equity ownership of real estate. The results shown
for the foregoing indices assume the reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer ranking
calculation is based on the blend of Lipper peer categories, as shown. Lipper is
an independent mutual fund rating service. A Fund's performance may be compared
to or ranked within a universe of mutual funds with investment objectives and
policies similar but not necessarily identical to the Fund's. Such comparisons
or rankings are made on the basis of several factors, including the Fund's
objectives and policies, management style and strategy, and portfolio
composition, and may change over time if any of those factors change.
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 COMPANY, INC. (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 TODD BRIDDELL, CFA, DEAN
FRANKEL, CFA AND ERIC ROTHMAN, CFA.
TODD BRIDDELL IS A MANAGING DIRECTOR OF REAL ESTATE SECURITIES AND SERVES AS
SENIOR PORTFOLIO MANAGER TO THE FUND. HE CO-FOUNDED URDANG SECURITIES MANAGEMENT
IN 1995 AND HAS 14 YEARS OF REAL ESTATE INDUSTRY EXPERIENCE.
DEAN FRANKEL JOINED THE FIRM IN 1997 AND IS A PORTFOLIO MANAGER. HE MANAGES THE
FIRM'S PROPRIETARY RESEARCH EFFORT AND OVERSEES THE FIRM'S TRADING ACTIVITIES.
ERIC ROTHMAN JOINED THE FIRM IN 2006 AND IS A PORTFOLIO MANAGER. IN HIS ROLE AS
PORTFOLIO MANAGER, MR. ROTHMAN IS RESPONSIBLE FOR ASSISTING MR. FRANKEL FOR THE
STRATEGY FOR U.S. REITS, INCLUDING MARKET RESEARCH AND ANALYSIS OF REAL ESTATE
SECURITIES. PRIOR TO JOINING URDANG, MR. ROTHMAN WAS AN EQUITY RESEARCH ANALYST
AT AEW CAPITAL MANAGEMENT, L.P. FROM AUGUST 2006 TO NOVEMBER 2006 AND WACHOVIA
SECURITIES FROM FEBRUARY 2001 TO AUGUST 2006.
Q. HOW DID THE REAL ESTATE SECURITIES FUND PERFORM COMPARED TO ITS BENCHMARK
AND LIPPER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007?
A. For the six-month period ended June 30, 2007, the Real Estate Securities
Fund returned -6.28%. The NAREIT Equity Index, the Fund's benchmark,
returned -5.89% and the Fund's Lipper peer group of 60 Real Estate funds
returned an average of -5.04% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. M&A activity negatively impacted the Fund's performance during the past
six-month period because the Fund was underweight in those stocks that were
targets of M&A activity. Overall, M&A activity cost the Fund approximately
-1.20%, erasing some solid stock and sector selections over the period.
Fundamentally however, strong execution and great sector selection together
with a number of good stock picks helped the Fund to overcome losses as a
result of the Fund's underweight in companies involved in M&A activities.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund's performance was aided .63% by solid sector selection, but
negatively impacted by poor stock selection -.54%. From a sector standpoint,
the Fund's underweight to specialty, mostly timber companies, adversely
impacted the Fund by -.39%; while the underweight to health care and
overweight to hotels added .23% and .24%, respectively. Stock selection was
most negatively affected by the Fund's underweight in companies that were
targets of M&A activity, costing the Fund -1.20% versus the benchmark.
Outside of such stocks affected by M&A activity, the Fund fared about
equally well in stock selection and sector selection. Selection of hotel
stocks most negatively affected the Fund -.45%, of which approximately -.30%
of underperformance coming from losses as a result of M&A activities alone.
Stock selection in the apartment sector was also poor due to M&A activities,
as a large underweight in Archstone Communites cost the Fund -.63%, while
the rest of the apartment sector only added .26% to Fund performance.
However, stock selection in the industrial and office sectors added to the
performance of the Fund by .16% and .19%, respectively.
2
Q&A
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. During the period, we added to hotels and apartments, and cut our retail
allocation. Both apartments and hotels have solid fundamental and are
trading at significant discounts to underlying private market asset
valuations. Most apartment companies trade at 15-20% discounts, and hotel
discounts are even larger. Both sectors should hold up well in a down
market, as M&A will provide a floor. We reduced the Fund's weighting on
Retail because it had been a relative out-performer in the first quarter,
notwithstanding the fact that consumer spending had shown signs of
weakening. In addition, retail companies trade closer to their private
market valuations and will likely offer less of a floor in a down market.
3
Real Estate Securities Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service 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,
2007.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 937.18 4.56
- ------------------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,020.17 4.46
- ------------------------------------------------------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.89% (FROM
PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH
PERIOD).
**ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: -6.28%.
4
Real Estate Securities Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
REAL ESTATE NAREIT
SECURITIES EQUITY INDEX
06/97 $ 10000.00 $ 10000.00
12/97 11005.63 11377.13
12/98 9059.31 9385.89
12/99 9039.61 8952.26
12/00 11981.20 11312.56
12/01 13399.47 12888.72
12/02 13219.13 13381.17
12/03 18170.71 18350.10
12/04 24038.00 24144.60
12/05 26869.98 27081.27
12/06 35744.38 36576.15
6/07 33498.92 34422.30
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2007
- ------------------------------------------------------------------------------------------------------------
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
- ------------------------------------------------------------------------------------------------------------
Real Estate Securities Fund -6.28% 11.75% 18.43% 12.85%
- ------------------------------------------------------------------------------------------------------------
NAREIT Equity Index -5.89% 12.57% 18.63% 13.16%
- ------------------------------------------------------------------------------------------------------------
Lipper peer group average* -5.04% 14.03% 19.21% 13.44%
- ------------------------------------------------------------------------------------------------------------
Inception date 5/1/95
- ------------------------------------------------------------------------------------------------------------
Real Estate Securities Fund (ending value $33,499)
NAREIT Equity Index (ending value $34,422)
INVESTMENT PROFILE
A fund designed for investors who seek maximum total return through current
income and capital appreciation by investing at least 80% of its net assets in
equity securities and debt securities of U.S. issuers that are principally
engaged in or related to the real estate industry, including those that own
significant real estate assets, under normal circumstances.
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2007
as a % of Market Value
- ------------------------------------------------------------------
Simon Property Group, Inc. 7.15%
- ------------------------------------------------------------------
Equity Residential 6.21%
- ------------------------------------------------------------------
Brookfield Properties Corp. 4.53%
- ------------------------------------------------------------------
AvalonBay Communities, Inc. 4.31%
- ------------------------------------------------------------------
Prologis 4.06%
- ------------------------------------------------------------------
Essex Property Trust, Inc. 4.04%
- ------------------------------------------------------------------
SL Green Realty Corp. 3.98%
- ------------------------------------------------------------------
BRE Properties, Inc. 3.72%
- ------------------------------------------------------------------
Vornado Realty Trust 3.71%
- ------------------------------------------------------------------
Kimco Realty Corp. 3.56%
- ------------------------------------------------------------------
PORTFOLIO COMPOSITION
AS OF JUNE 30, 2007
as a % of Market Value
- ------------------------------------------------------------------
Market Value of $136,099 (in thousands)
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
MULTIFAMILY 21.6%
OFFICE 18.1%
HOTEL 13.1%
REGIONAL MALLS 12.7%
SHOPPING CENTERS 8.0%
INDUSTRIAL 6.1%
DIVERSIFIED 4.5%
SPECIALTY 4.3%
HEALTHCARE 4.1%
OFFICE/INDUSTRIAL 2.8%
SELF STORAGE 2.7%
FREESTANDING 1.6%
SHORT-TERM 0.4%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE
REAL ESTATE FUNDS PEER GROUP CONSISTING OF 59, 59, 30 AND 10 UNDERLYING
ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE
DO NOT REFLECT THE DEDUCTION OF TAXES.
5
REAL ESTATE SECURITIES FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK (REIT) -- 88.0%+
- --------------------------------------------------------------------------------
DIVERSIFIED -- 4.4%
Cousins Properties, Inc. 35,510 $ 1,030,145
Vornado Realty Trust 45,980 5,050,443
6,080,588
FREESTANDING -- 1.6%
National Retail Properties, Inc. 97,860 2,139,220
HEALTHCARE -- 4.0%
Nationwide Health Properties Inc. 52,260 1,421,472
Ventas, Inc. 112,650 4,083,562
5,505,034
HOTEL -- 8.6%
Ashford Hospitality Trust, Inc. 115,330 1,356,281
DiamondRock Hospitality Co. 38,080 726,566
FelCor Lodging Trust Inc. 36,480 949,574
Host Hotels & Resorts Inc. 206,548 4,775,390
LaSalle Hotel Properties 31,390 1,362,954
Sunstone Hotel Investors, Inc. 91,290 2,591,723
11,762,488
INDUSTRIAL -- 6.1%
AMB Property Corp. 53,130 2,827,579
Prologis 97,230 5,532,387
8,359,966
MULTIFAMILY -- 21.5%
American Campus Communities, Inc. 32,300 913,767
AvalonBay Communities, Inc. 49,380 5,870,294
BRE Properties, Inc. 85,350 5,060,401
Equity Residential 185,196 8,450,493
Essex Property Trust, Inc. 47,220 5,491,686
Post Properties, Inc. 17,900 933,127
UDR, Inc. 101,980 2,682,074
29,401,842
OFFICE -- 13.5%
Alexandria Real Estate Equities,
Inc. 45,280 4,384,010
Boston Properties, Inc. 30,430 3,107,816
Douglas Emmett, Inc. 41,320 1,022,257
Highwoods Properties, Inc. 75,840 2,844,000
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Kilroy Realty Corp. 16,690 $ 1,182,320(c)
Republic Property Trust 46,700 572,075
SL Green Realty Corp. 43,680 5,411,515
18,523,993
OFFICE/INDUSTRIAL -- 2.8%
Duke Realty Corp. 28,860 1,029,436
Liberty Property Trust 63,620 2,794,827
3,824,263
REGIONAL MALLS -- 12.7%
CBL & Associates Properties, Inc. 39,240 1,414,602
General Growth Properties, Inc. 45,260 2,396,517
Macerich Co. 33,450 2,756,949
Simon Property Group, Inc. 104,650 9,736,636
Taubman Centers, Inc. 20,780 1,030,896
17,335,600
SELF STORAGE -- 2.7%
Public Storage, Inc. 47,540 3,652,023
SHOPPING CENTERS -- 8.0%
Acadia Realty Trust 55,220 1,432,959
Federal Realty Investment Trust 42,200 3,260,372
Kimco Realty Corp. 127,112 4,839,154
Regency Centers Corp. 19,830 1,398,015
10,930,500
SPECIALTY -- 2.1%
Digital Realty Trust, Inc. 19,570 737,398
Plum Creek Timber Company, Inc. 52,170 2,173,402
2,910,800
TOTAL COMMON STOCK (REIT)
(COST $115,072,329) 120,426,317
- --------------------------------------------------------------------------------
COMMON STOCK -- 11.1%
- --------------------------------------------------------------------------------
HOTEL -- 4.5%
Hilton Hotels Corp. 103,690 3,470,504
Starwood Hotels & Resorts
Worldwide, Inc. 39,530 2,651,277
6,121,781
OFFICE -- 4.5%
Brookfield Properties Corp. 253,395 6,160,032
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
<page>
REAL ESTATE SECURITIES FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SPECIALTY -- 2.1%
American Tower Corp. (Class A) 68,990 $ 2,897,580(a)
TOTAL COMMON STOCK
(COST $15,435,197) 15,179,393
TOTAL INVESTMENTS IN SECURITIES
(COST $130,507,526) 135,605,710
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.4%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
5.55%
(COST $493,088) 493,088 493,088(b,d)
TOTAL INVESTMENTS
(COST $131,000,614) 136,098,798
OTHER ASSETS AND LIABLITIES,
NET-- 0.5% 680,720
------------
NET ASSETS-- 100.0% $136,779,518
============
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
<page>
Notes to Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) At June 30, 2007, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(d) GEAM, the investment advisor of the fund, serves as investment advisor of
the GEI Short Term Investment Fund.
+ Percentages are based on net assets as of June 30, 2007.
Abbreviations:
REGD. Registered
REIT Real Estate Investment Trust
SPDR Standard & Poors Depository Receipts
8
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 5/1/95
Net asset value, beginning of period .............. $21.49 $19.20 $19.54 $16.78 $13.14 $14.78
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.28 0.65 0.70 0.65 0.50 0.80
Net realized and unrealized
gains/(losses) on investments .............. (1.63) 5.68 1.62 4.76 4.42 (1.01)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS .... (1.35) 6.33 2.32 5.41 4.92 (0.21)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .......................... -- 0.48 0.75 0.52 0.41 0.66
Net realized gains ............................. -- 3.56 1.91 2.13 0.87 0.77
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... -- 4.04 2.66 2.65 1.28 1.43
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD .................... $20.14 $21.49 $19.20 $19.54 $16.78 $13.14
====================================================================================================================================
TOTAL RETURN (A) .................................. (6.28)% 33.03% 11.78% 32.29% 37.38% (1.35)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ....... $136,780 $178,317 $143,801 $146,221 $98,294 $70,164
Ratios to average net assets:
Net investment income* ...................... 2.16% 3.08% 3.21% 4.15% 4.65% 4.81%
Expenses* ................................... 0.89% 0.88% 0.89% 0.90% 0.89% 0.89%
Portfolio turnover rate ........................ 49% 92% 52% 78% 52% 90%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited.
See Notes to Financial Statements.
9
<page>
Statement of Assets
and Liabilities JUNE 30, 2007 (UNAUDITED)
REAL ESATE
SECURITIES
FUND
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $130,507,526) ..................................... $135,605,710
Short-term affiliated investments (at amortized cost) ......................................... 493,088
Receivable for investments sold ............................................................... 540,569
Income receivables ............................................................................ 500,895
Receivable for fund shares sold ............................................................... 3,541
Other assets .................................................................................. 1,616
- --------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS .............................................................................. 137,145,419
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ............................................................. 186,042
Payable for fund shares redeemed .............................................................. 43,664
Payable to GEAM ............................................................................... 136,195
- --------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ......................................................................... 365,901
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS ....................................................................................... $136,779,518
==========================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ............................................................................... 100,004,664
Undistributed (distribution in excess of) net investment income ............................... 2,177,778
Accumulated net realized gain (loss) .......................................................... 29,498,892
Net unrealized appreciation/(depreciation) on:
Investments ................................................................................ 5,098,184
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS ....................................................................................... $136,779,518
==========================================================================================================================
NET ASSETS ....................................................................................... 136,779,518
Shares outstanding ($0.01 par value; unlimited shares authorized) ................................ 6,790,979
Net asset value per share ........................................................................ $20.14
See Notes to Financial Statements.
10
<page>
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)
REAL ESATE
SECURITIES
FUND
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ....................................................................... $ 2,548,238
Interest from affliated investments ............................................ 60,161
Less: Foreign taxes withheld ................................................ (10,481)
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ..................................................................... 2,597,918
- --------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ............................................... 707,387
Transfer agent ................................................................. 15
Trustee's fees ................................................................. 2,370
Custody and accounting expenses ................................................ 16,415
Professional fees .............................................................. 14,607
Registration expenses .......................................................... 2,242
Other expenses ................................................................. 15,149
- --------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ................................................................... 758,185
- --------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ..................................................... 1,839,733
- -=========================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ................................................................. 25,156,109
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ................................................................. (35,398,123)
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ......................... (10,242,014)
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................. $ (8,402,281)
- --------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
11
<page>
Statements of
Changes in Net Assets
REAL ESTATE
SECURITIES
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007 DECEMBER 31,
(UNAUDITED) 2006
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) .................................................... $ 1,839,733 $ 4,078,747
Net realized gain (loss) on investments, futures, written options,
foreign currency transactions and swaps ........................................ 25,156,109 24,153,309
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign
currency translation ........................................................... (35,398,123) 15,955,603
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations .......................................... (8,402,281) 44,187,659
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................................ -- (3,335,137)
Net realized gains ............................................................... -- (24,834,755)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................ -- (28,169,892)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ................ (8,402,281) 16,017,767
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ..................................................... 3,796,451 20,203,690
Value of distributions reinvested ................................................ -- 28,169,892
Cost of shares redeemed .......................................................... (36,932,133) (29,874,788)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ................................. (33,135,682) 18,498,794
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................ (41,537,963) 34,516,561
NET ASSETS
Beginning of period ................................................................ 178,317,481 143,800,920
- ------------------------------------------------------------------------------------------------------------------------------------
End of period ...................................................................... $136,779,518 $178,317,481
- ------------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ....... $ 2,177,778 $ 338,045
====================================================================================================================================
CHANGES IN FUND SHARES
Shares sold ...................................................................... 164,019 870,622
Issued for distributions reinvested .............................................. -- 1,316,352
Shares redeemed .................................................................. (1,669,167) (1,380,231)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ................................................ (1,505,148) 806,743
====================================================================================================================================
See Notes to Financial Statements.
12
<page>
Notes to Financial Statements June 30, 2007 (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 thirteen 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, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and
Real Estate Securities Fund (the "Fund").
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions at the date of the financial statements. Actual
results may differ from those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sales occurred on
that day, at the last quoted bid price. Securities listed on the NASDAQ will be
valued at the NASDAQ's official close price. Certain fixed income securities are
valued by a dealer or by a pricing service based upon a matrix system, which
considers market transactions as well as dealer supplied valuations. Short-term
investments maturing within sixty days are valued at amortized cost. If
quotations are not readily available for a portfolio security, or if it is
believed that a quotation or other market 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 procedures require that the fair value of a security be
established by the valuation committee. The fair value committee follows
different protocols for different types of investments and 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. 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. GE Asset Management may also
separately monitor portfolio securities and, consistent with the Fund's fair
value procedures, apply a different value to a portfolio security than would be
applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which a Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
In September 2006, FASB issued Statement of Financial Accounting Standards No.
157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single
authoritative definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. FAS 157
applies to fair value measurements already required or permitted by existing
standards. The change to current generally accepted accounting principles from
the application of FAS 157 relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. Management of the Fund does not believe the adoption of FAS 157
will materially impact the financial statement amounts, however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period.
13
<page>
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
FAS 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal years.
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 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 at
period end. Purchases and sales of securities, income receipts and expense
payments denominated in foreign currencies are translated into U.S. dollars at
the prevailing exchange rate on the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
14
<page>
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
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.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2007, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- -----------------------------------------------------------------------------------------------------------------------------
$131,107,535 $10,961,186 $(5,969,923) $4,991,263
As of December 31, 2006, the Fund has no capital loss carryovers.
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, 2006.
The tax composition of distributions paid (other than return of capital
distributions for the year) during the year ended December 31, 2006 was as
follows:
Ordinary Long-Term
Income Capital Gains Total
- ----------------------------------------------------------------
$4,582,222 $23,587,670 $28,169,892
15
<page>
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) distributions
from Real Estate Investment Trusts (REITS), and losses deferred due to wash sale
transactions. Reclassifications due to permanent book/tax differences are made
to the Fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryovers) under income tax
regulations. These reclassifications have no impact on net investment income,
realized gains or losses, or the net asset value of the Fund. The calculation of
net investment income per share in the Financial Highlights table excludes these
adjustments.
The reclassifications for the year ended December 31, 2006 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated Paid in
Income Net Realized Gain Capital
- --------------------------------------------------------------------------------
$(514,828) $514,828 $--
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax return to determine whether the tax positions
are "more likely than not" of being sustained by the applicable tax authority.
The adoption of FIN48 did not have an impact on the Fund's net assets and
financial statements.
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 Expenses of the Company which are directly identifiable to one of the
Funds are allocated to that portfolio. Expenses which are not directly
identifiable to one of the Funds are allocated in such a manner as deemed
equitable, taking into consideration the nature and type of expenses and
relative sizes of the Funds. All expenses of the Fund are paid by GEAM and
reimbursed by the Fund.
3. LINE OF CREDIT
The Fund shares a revolving credit facility of up to $25 million with a number
of its affiliates. The credit facility is with its custodian bank, State Street
Bank and Trust Company. The revolving credit facility requires the payment of a
commitment fee equal to 0.09% per annum on the daily unused portion of the
credit facility, payable quarterly. The portion borne by the Funds generally is
borne proportionally based upon net assets. Generally, borrowings under the
credit facility would accrue interest at the Federal Funds Rate plus 50 basis
points and is borne by each of the borrowing Funds. The maximum amount allowed
to be borrowed by any one of the Funds is the lesser of its prospectus
limitation, 20% of its net assets, or $25 million. The credit facility was not
utilized by the Fund during the period ended June 30, 2007.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund. The
advisory and administrative fee is stated in the following schedule:
Annualized based on
average daily net assets
- ------------------------------------------------------------------
Average Daily Advisory and
Net Assets Administration
of Fund Fees
- ------------------------------------------------------------------
First $100 million .85%
Next $100 million .80%
Over $200 million .75%
16
<page>
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2007, $1,330 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. SUB-ADVISORY FEES
Pursuant to an investment sub-advisory agreement with GEAM, Urdang Securities
Management, Inc. ("Urdang") is the Sub-Adviser to the Real Estate Securities
Fund. Urdang is responsible for the day-to-day portfolio management of the
assets of the Fund, including the responsibility for making decisions to buy,
sell or hold a particular security, under the general supervision of GEAM and
the Board.
For their services, GEAM pays Urdang monthly sub-advisory fees which are
calculated as a percentage of the average daily net assets of the Fund.
6. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2007 were as follows:
Purchases Sales
- ----------------------------------------------------------------
$82,367,866 $108,072,253
17
<page>
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 58
POSITION(S) HELD WITH FUND Chairman of the Board and President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
ualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM
since February 1997; President and Chief Executive Officer - Mutual Funds at
GEAM since 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,
since March 1993; Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their
inception; Trustee of Elfun Funds, GE Savings & Security Funds and General
Electric Pension Trust since 1988; Trustee of Fordham University since 2003;
Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset
Management (Ireland) since February 1999; Director, GE Asset Management Funds
Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 46
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
18
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and
GE Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years (Vice President); less than one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General
Counsel - Marketing and Client Services (formerly Asset Management Services) at
GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE
Institutional Funds and GE LifeStyle Funds since September 2003; Vice President
and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since
October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary
since July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
19
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
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 - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds and GE LifeStyle Funds since their inception; Trustee of
Fordham University since 2002 and Marymount College from 2001 through 2002;
Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the
Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since
1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 71
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
20
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member NASD 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, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING
Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES
Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS
AND REAL ESTATE
John J. Walker, EVP, CHIEF FINANCIAL OFFICER
21
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<page>
[This page intentionally left blank.]
<page>
[This page intentionally left blank.]
<page>
[This page intentionally left blank.]
<page>
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER NASD AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating
to portfolio securities during the most recently disclosed 12-month
period ended June 30 is available without charge (i) through the Fund's
website at http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
International Equity Fund
Semi-Annual Report
JUNE 30, 2007
[GE logo omitted]
<page>
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 .................................................. 19
INVESTMENT TEAM ......................................................... 22
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.
<page>
Notes to Performance June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains distributions, if any. Investment returns and net
asset value on an investment will fluctuate and you may have a gain or loss when
you sell your shares. Periods less than one year are not annualized.
Current performance may be lower or higher than that shown. You may call
toll-free (800) 242-0134 for performance information as of the most recent month
end.
Total returns do not reflect expenses associated with the separate account such
as administrative fees, account charges and surrender charges, which, if
reflected, would reduce the total returns for all periods shown.
Shares of the Fund are neither insured nor guaranteed by the U.S. Government,
and their prices will fluctuate with market conditions.
The Morgan Stanley Capital International EAFE Index (MSCI EAFE) is an unmanaged
index and do not reflect the actual cost of investing in the instruments that
comprise the index. The MSC(R) EAFE(R) Index is a market capitalization-weighted
index of equity securities of companies domiciled in various countries. The
Index is designed to represent the performance of developed stock markets
outside the U.S. and Canada and excludes certain market segments unavailable to
U.S. based investors. The results shown for the foregoing index assume the
reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer ranking
calculation is based on the blend of Lipper peer categories, as shown. Lipper is
an independent mutual fund rating service. A Fund's performance may be compared
to or ranked within a universe of mutual funds with investment objectives and
policies similar but not necessarily identical to the Fund's. Such comparisons
or rankings are made on the basis of several factors, including the Fund's
objectives and policies, management style and strategy, and portfolio
composition, and may change over time if any of those factors change.
1
International Equity Fund
- --------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT
INCLUDES BRIAN HOPKINSON, RALPH R. LAYMAN, PAUL NESTRO, JONATHAN L. PASSMORE,
MICHAEL J. SOLECKI AND MAKOTO SUMINO. AS OF FEBRUARY 1, 2007, PAUL NESTRO AND
MAKOTO SUMINO WILL ASSUME MS. STUDER'S RESPONSIBILITIES IN THE FUND. AS LEAD
PORTFOLIO MANAGER FOR THE FUND, MR. LAYMAN (PICTURED BELOW) OVERSEES THE ENTIRE
TEAM AND ASSIGNS A PORTION OF THE FUND TO EACH MANAGER, INCLUDING HIMSELF.
RALPH R. LAYMAN IS A DIRECTOR AND EXECUTIVE VICE PRESIDENT OF GE ASSET
MANAGEMENT AND PRESIDENT - INTERNATIONAL EQUITIES AT GE ASSET MANAGEMENT. HE
MANAGES THE OVERALL INTERNATIONAL EQUITY INVESTMENTS FOR GE ASSET MANAGEMENT.
MR. LAYMAN HAS LED THE TEAM OF PORTFOLIO MANAGERS FOR THE 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.
BRIAN HOPKINSON IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A
PORTFOLIO MANAGER FOR THE FUND SINCE OCTOBER 1996. PRIOR TO JOINING GE ASSET
MANAGEMENT, MR. HOPKINSON WORKED FOR FIDUCIARY TRUST INTERNATIONAL IN BOTH
LONDON AND NEW YORK.
PAUL NESTRO IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE JOINED GE ASSET
MANAGEMENT IN JANUARY 1993 AND HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT
TEAM FOR THE GE INTERNATIONAL EQUITY FUND SINCE FEBRUARY 2007.
JONATHAN L. PASSMORE IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS
SERVED AS A PORTFOLIO MANAGER OF THE 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 OF GE ASSET MANAGEMENT. HE HAS
SERVED AS A PORTFOLIO MANAGER OF THE FUND SINCE SEPTEMBER 1997 HE JOINED GE
ASSET MANAGEMENT IN 1990 AS AN INTERNATIONAL EQUITY ANALYST. HE BECAME A VICE
PRESIDENT FOR INTERNATIONAL EQUITY PORTFOLIOS IN 1996 AND SENIOR VICE PRESIDENT
IN 2000.
MAKOTO SUMINO IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS SERVED
ON THE PORTFOLIO MANAGEMENT TEAM FOR THE GE INTERNATIONAL EQUITY FUND SINCE
FEBRUARY 2007. MR. SUMINO JOINED GE ASSET MANAGEMENT IN SEPTEMBER 1996 AS A
SECURITIES ANALYST AND PORTFOLIO MANAGER. HE BECAME DEPUTY DIRECTOR OF THE
INTERNATIONAL EQUITY RESEARCH TEAM IN JANUARY 2001 AND DIRECTOR IN APRIL 2005.
Q. HOW DID THE INTERNATIONAL EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND
LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007?
A. For the six-month period ended June 30, 2007, the International Equity Fund
returned 12.43%. The MSCI EAFE Index, the Fund's benchmark, returned 10.74%
and the Fund's Lipper peer group of 136 International Core funds returned an
average of 10.65% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. Strong absolute returns were driven by a combination of attractive
valuations (even after several strong quarters), mergers and acquisitions
activity, a weak US Dollar and continued acceptance of risk.
[photo omitted]
2
Q&A
Sentiment stayed positive on the back of strong first quarter results that
showed significant cash flow generation and more progress on efficiency.
Q. WHAT DOMESTIC OR WORLD EVENTS HAD A MAJOR IMPACT ON THE FINANCIAL MARKETS?
A. The recovery of Continental Europe after years of sluggish performance has
been of increasing importance as it gathers momentum. Falling unemployment
in the crucial markets of Germany and France is having a positive effect on
consumer sentiment. In addition, France is benefiting from the election of
Center-Right candidate Sarkozy to the Presidency, increasing the likelihood
of a major change in France's hitherto outdated approach to regional and
global economics. Japan continued to disappoint although the background
indications of corporate performance and consumer trends are encouraging.
Q. WHICH STOCKS & SECTORS SIGNIFICANTLY AFFECTED FUND PERFORMANCE?
A. A significant positive contribution came from holdings in the materials
sector, from both metals and mining and chemical stocks. In addition,
industrial holdings in the conglomerate and infrastructure equipment
segments performed well as did holdings in telecom services, especially
wireless. Among the top performers in the Fund were BHP Billiton (UK -
mining), Potash (Canada - fertilizers), CVRD (Brazil - mining) and Siemens
(Germany - industrial). Holdings in IT were a modest drag on performance as
stocks including Nidec (Japan) and Samsung Electronics (Korea)
underperformed due to cyclical pricing issues.
Q. DID THE WEIGHTINGS/COUNTRY ALLOCATIONS OF THE FUND CHANGE? WHY?
A. We have continued to trim industrial holdings where valuations or
qualitative issue demand but have selectively introduced new holdings that
specialize in new, essential technologies such as pollution filters and
enzymes, for example. We have added to our underweight positions in consumer
stocks through autos, watches and clothing retail, as we see opportunities
in the consumer space for well-positioned, global companies. The funds for
these additions came from reductions in weightings with respect to
healthcare, financials and the equipment segment of IT.
Q. WHAT WERE THE MAJOR BUYS AND SELLS FOR THE PERIOD AND WHY?
A. New positions were adopted in Orkla (Norway), an industrial company
specializing in aluminum technology and silicon preparation for the solar
industry; Esprit, (Hong Kong), a clothing retailer that has a large market
share in the fast-growing market of Germany, supplied by lower cost products
from Asia; and Ibiden (Japan), a manufacturer of high-tech diesel
particulate filters for the US market. Disposals included Ericsson (Sweden),
a wireless equipment manufacturer for valuation reasons, and Mitsui Sumitomo
Insurance (Japan) on concerns over local business practices and a regulatory
response.
3
International Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service 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,
2007.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,124.29 5.86
- ------------------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,019.06 5.61
- ------------------------------------------------------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.12% (FROM
PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH
PERIOD).
**ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 12.43%.
4
International Equity Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
International Equity Fund MSCI EAFE Index
06/97 $10,000.00 $10,000.00
12/97 9,372.93 9,151.81
12/98 11,008.06 10,981.61
12/99 14,346.71 13,942.78
12/00 12,521.90 11,967.47
12/01 9,910.05 9,380.83
12/02 7,548.46 7,885.52
12/03 10,409.89 10,928.21
12/04 12,059.73 13,140.86
12/05 14,253.97 14,919.55
12/06 17,773.53 18,849.44
06/07 19,982.59 20,873.97
International Equity Fund (ending value $19,983)
MSCI EAFE (ending value $20,874)
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2007
- --------------------------------------------------------------------------------------------------
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
- --------------------------------------------------------------------------------------------------
International Equity Fund 12.43% 28.28% 16.00% 7.17%
- --------------------------------------------------------------------------------------------------
MSCI EAFE Index 10.74% 27.00% 17.73% 7.64%
- --------------------------------------------------------------------------------------------------
Lipper peer group average* 10.65% 26.16% 16.42% 7.76%
- --------------------------------------------------------------------------------------------------
Inception date 5/1/95
- --------------------------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital by investing
at least 80% of its net assets in equity securities under normal circumstances.
The Fund invests primarily in developed and developing countries outside the
United States.
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
BHP Billiton PLC 2.17%
- --------------------------------------------------------------------------------
Saipem S.p.A. 1.93%
- --------------------------------------------------------------------------------
Roche Holding AG 1.93%
- --------------------------------------------------------------------------------
Nomura Holdings, Inc. 1.90%
- --------------------------------------------------------------------------------
Vodafone Group, PLC 1.88%
- --------------------------------------------------------------------------------
Nokia OYJ 1.84%
- --------------------------------------------------------------------------------
Telenor ASA 1.77%
- --------------------------------------------------------------------------------
Koninklijke Philips Electronics N.V. 1.74%
- --------------------------------------------------------------------------------
Cia Vale do Rio Doce ADR 1.60%
- --------------------------------------------------------------------------------
BNP Paribas 1.52%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $104,267 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Continental Europe 40.7%
Japan 15.9%
United States 15.9%
United Kingdom 12.3%
Latin America 3.8%
Pacific Rim 3.6%
Emerging Asia 3.6%
Canada 2.5%
Emerging Europe 1.7%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE
INTERNATIONAL CORE PEER GROUP CONSISTING OF 136, 132, 107 AND 45 UNDERLYING
ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE
DO NOT REFLECT THE DEDUCTION OF TAXES.
5
INTERNATIONAL EQUITY FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 96.2%+
- --------------------------------------------------------------------------------
AUSTRALIA -- 0.8%
Brambles Ltd. 20,481 $ 211,295(a)
Paladin Resources Ltd. 74,515 518,141(a,f)
729,436
BRAZIL -- 1.1%
Petroleo Brasileiro S.A. ADR 9,529 1,016,554(f)
CANADA -- 2.9%
Canadian National Railway Co. 20,352 1,036,971(f)
Potash Corp of Saskatchewan 19,973 1,563,658
2,600,629
CHINA -- 0.6%
China Petroleum & Chemical Corp. 518,000 578,678(f)
DENMARK -- 0.8%
Group 4 Securicor PLC 99,047 416,121
Novozymes (Series B) 2,812 325,218
741,339
EGYPT -- 0.7%
Orascom Construction Industries 9,469 619,840
FINLAND -- 2.2%
Nokia OYJ 68,512 1,920,048(f)
FRANCE -- 10.6%
Accor S.A. 3,197 282,011(f)
Alstom 4,347 723,318(a)
AXA S.A. 18,755 804,465(f)
BNP Paribas 13,372 1,584,965(e,f)
Credit Agricole S.A. 21,421 867,356(f)
Groupe Danone 3,407 274,580
LVMH Moet Hennessy
Louis Vuitton S.A. 6,206 712,559(f)
Renault S.A. 2,076 332,253(f)
Schneider Electric S.A. 3,382 472,829
Suez S.A. 8,621 491,791(f)
Total S.A. 16,577 1,341,149(f)
Veolia Environnement 15,560 1,219,475(f)
Vinci S.A. 4,516 336,337
9,443,088
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
GERMANY -- 8.6%
Allianz AG (Regd.) 3,662 $ 857,023(f)
Bayer AG 15,476 1,169,292(f)
DaimlerChrysler AG (Regd.) 5,435 501,724
E.ON AG 8,255 1,383,107
Linde AG 9,070 1,092,333(f)
Metro AG 7,652 633,979(f)
RWE AG 4,774 508,429
Siemens AG (Regd.) 10,566 1,517,224
7,663,111
GREECE -- 0.9%
Hellenic Telecommunications
Organization S.A. 24,967 772,169
HONG KONG -- 1.8%
Esprit Holdings Ltd. 14,000 177,906
Hongkong Land Holdings Ltd. 102,999 464,134
Jardine Matheson Holdings Ltd. 15,741 374,926
Sun Hung Kai Properties Ltd. 45,930 553,339(f)
1,570,305
INDIA -- 0.7%
ICICI Bank Ltd. ADR 10,670 524,430(f)
Larsen & Toubro Ltd. 1,005 54,075
Reliance Capital Ltd. ADR 1,702 45,503(a,b)
624,008
ITALY -- 5.4%
Banca Intesa S.p.A. 131,014 974,710(f)
ENI S.p.A. 7,137 258,214(f)
Saipem S.p.A. 59,220 2,016,275(f)
UniCredito Italiano S.p.A. 173,734 1,548,392
4,797,591
JAPAN -- 18.6%
Asahi Glass Company Ltd. 49,003 658,748(f)
Bank of Yokohama Ltd. 76,506 534,225
Chiyoda Corp. 31,618 600,671
East Japan Railway Co. 126 967,947
Hoya Corp. 16,100 532,487
Ibiden Company Ltd. 13,566 872,703(f)
Komatsu Ltd. 27,811 803,633
Mitsubishi Estate Company Ltd. 56,982 1,541,326
Mitsubishi Heavy Industries Ltd. 82,000 523,598
Mitsubishi UFJ Financial Group, Inc. 144 1,582,223
Nidec Corp. 14,962 875,175(f)
Nomura Holdings, Inc. 102,199 1,979,099(f)
Sekisui Chemical Company Ltd. 11,998 92,449
Seven & I Holdings Company Ltd. 22,000 626,994(f)
Shiseido Company Ltd. 42,000 893,863(f)
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
6
INTERNATIONAL EQUITY FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Sumitomo Realty & Development
Company Ltd. 15,000 $ 487,033(f)
Toray Industries Inc. 202,999 1,495,549(f)
Toyota Motor Corp. 24,504 1,540,749
16,608,472
MEXICO -- 1.2%
America Movil S.A. de C.V.
ADR (Series L) 16,776 1,038,938(f)
NETHERLANDS -- 3.0%
ING Groep N.V. 20,367 894,505
Koninklijke Philips Electronics N.V. 42,981 1,817,495
2,712,000
NORWAY -- 3.6%
Acergy S.A. 40,189 903,323
Orkla ASA 23,711 446,357
Telenor ASA 94,549 1,845,197
3,194,877
RUSSIA -- 0.5%
Mobile Telesystems OJSC ADR 7,632 462,270(a)
SINGAPORE -- 1.6%
CapitaLand Ltd. 132,000 699,940
Singapore Telecommunications Ltd. 333,314 741,927
1,441,867
SOUTH AFRICA -- 0.8%
MTN Group, Ltd. 51,630 703,343
SOUTH KOREA -- 1.8%
Hyundai Motor Co. 3,630 286,414
Kookmin Bank ADR 6,843 600,268
Samsung Electronics
Company Ltd. 120 73,358
Samsung Electronics
Company Ltd. GDR 2,135 660,782(b)
1,620,822
SPAIN -- 1.4%
Banco Santander Central
Hispano S.A. (Regd.) 67,310 1,234,635(f)
SWEDEN -- 1.0%
Sandvik AB 44,688 898,263(f)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SWITZERLAND -- 10.2%
ABB Ltd. (Regd.) 53,044 $ 1,192,023
Adecco S.A. (Regd.) 5,924 456,760
Credit Suisse Group, (Regd.) 18,563 1,313,399(e)
Holcim Ltd. (Regd.) 3,465 372,960
Nestle S.A. (Regd.) 4,171 1,579,567(e)
Novartis AG (Regd.) 10,617 594,051
Roche Holding AG 11,393 2,011,932
Swatch Group AG 1,129 319,641
Swiss Reinsurance 4,083 371,124
Syngenta AG (Regd) 4,396 854,136
9,065,593
TAIWAN -- 1.0%
Taiwan Semiconductor
Manufacturing Company Ltd. 405,061 867,495
UNITED KINGDOM -- 14.4%
BG Group, PLC 34,981 572,924
BHP Billiton PLC 81,602 2,264,817(e)
Diageo PLC 43,061 894,242
GlaxoSmithKline PLC 19,629 510,886(e)
Group 4 Securicor PLC 83,026 349,786
Lloyds TSB Group, PLC 48,594 539,713
National Grid PLC 38,832 572,463
Prudential PLC 68,485 973,979
Reed Elsevier PLC 37,924 489,696
Rio Tinto PLC (Regd.) 13,152 1,005,294
Royal Bank of Scotland Group, PLC 116,842 1,477,159
Smiths Group PLC 13,965 330,899
Tesco PLC 102,127 853,715
Vodafone Group, PLC 584,127 1,955,579
12,791,152
TOTAL COMMON STOCK
(COST $58,757,262) 85,716,523
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 2.2%
- --------------------------------------------------------------------------------
All America Latina Logistica S.A. 19,300 264,548
Cia Vale do Rio Doce ADR 44,151 1,664,493
TOTAL PREFERRED STOCK
(COST $1,131,028) 1,929,041
- --------------------------------------------------------------------------------
RIGHTS -- 0.0%*
- --------------------------------------------------------------------------------
Veolia Environnement
(COST $0) 15,560 22,065(a)
TOTAL INVESTMENTS IN SECURITIES
(COST $59,888,290) 87,667,629
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
7
INTERNATIONAL EQUITY FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 18.6%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.7%
GEI Short Term Investment Fund
5.55% 1,521,205 $ 1,521,205(c,g)
SHORT-TERM SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN -- 16.9%
State Street Navigator Securities
Lending Prime Portfolio
5.36% 15,078,355 15,078,355(c,d)
TOTAL SHORT-TERM INVESTMENTS
(COST $16,599,560) 16,599,560
TOTAL INVESTMENTS
(COST $76,487,850) 104,267,189
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (17.0)% (15,133,502)
-------------
NET ASSETS-- 100.0% $ 89,133,687
=============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI International Equity had the following long futures contracts open at
June 30, 2007 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE APPRECIATION
- --------------------------------------------------------------------------------
DJ Euro Stoxx 50
Index Futures September 2007 9 $548,796 $3,526
FTSE 100 Index
Futures September 2007 2 266,363 2,769
Topix Index
Futures September 2007 2 287,461 3,320
------
$9,615
======
The GEI International Equity was invested in the following sectors at
June 30, 2007 (unaudited):
SECTOR PERCENTAGE (BASED ON MARKET VALUE)
- --------------------------------------------------------------------------------
Financials 21.89%
Short-Term 15.92%
Industrials 12.35%
Materials 11.33%
Telecommunication Services 7.21%
Energy 6.91%
Consumer Discretionary 6.28%
Information Technology 5.57%
Consumer Staples 5.52%
Utilities 4.03%
Healthcare 2.99%
---------
100.00%
=========
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
8
Notes to Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may be
resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 2007, these securities amounted to
$706,285 or 0.79%, of net assets for the GE Investments International Equity
Fund. These securities have been determined to be liquid using procedures
established by the Board of Trustees.
(c) Coupon amount represents effective yield.
(d) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(e) At June 30, 2007, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(f) All or a portion of the security is out on loan.
(g) GEAM, the investment advisor of the fund, serves as investment advisor of
the GEI Short Term Investment Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2007.
Abbreviations:
ADR American Depository Receipt
GDR Global Depository Receipt
REGD. Registered
REIT Real Estate Investment Trust
SPDR Standard & Poors Depository Receipts
9
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 5/1/95
Net asset value, beginning of period .............. $14.08 $11.42 $9.76 $8.52 $6.23 $8.28
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.19 0.15 0.13 0.11 0.07 0.07
Net realized and unrealized
gains/(losses) on investments ............... 1.56 2.67 1.65 1.24 2.29 (2.04)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS .... 1.75 2.82 1.78 1.35 2.36 (1.97)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .......................... -- 0.16 0.12 0.11 0.07 0.08
Net realized gains ............................. -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... -- 0.16 0.12 0.11 0.07 0.08
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD .................... $15.83 $14.08 $11.42 $9.76 $8.52 $6.23
====================================================================================================================================
TOTAL RETURN (A) .................................. 12.43% 24.69% 18.19% 15.85% 37.91% (23.83)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ....... $89,134 $80,648 $65,450 $55,714 $45,198 $31,683
Ratios to average net assets:
Net investment income* ...................... 2.57% 1.16% 1.19% 1.31% 1.13% 0.88%
Expenses* ................................... 1.12% 1.13% 1.25% 1.15% 1.07% 1.09%
Portfolio turnover rate ........................ 15% 34% 53% 38% 35% 42%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited.
See Notes to Financial Statements.
10
Statement of Assets
and Liabilities JUNE 30, 2007 (UNAUDITED) INTERNATIONAL
EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $59,888,290) ............................................... $87,667,629
Short-term Investments (at amortized cost) ............................................................. 15,078,355
Short-term affiliated investments (at amortized cost) .................................................. 1,521,205
Foreign cash (cost $208,487) ........................................................................... 209,023
Receivable for investments sold ........................................................................ 247,940
Income receivables ..................................................................................... 403,084
Variation margin receivable ............................................................................ 15,188
Other assets ........................................................................................... 131,540
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ....................................................................................... 105,273,964
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned ............................................................... 15,078,355
Payable for investments purchased ...................................................................... 361,151
Payable for fund shares redeemed ....................................................................... 582,774
Payable to GEAM ........................................................................................ 117,997
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES .................................................................................. 16,140,277
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................................................ $89,133,687
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ........................................................................................ 56,182,281
Undistributed (distribution in excess of) net investment income ........................................ 1,068,197
Accumulated net realized gain (loss) ................................................................... 4,086,949
Net unrealized appreciation/(depreciation) on:
Investments ........................................................................................ 27,779,339
Futures ............................................................................................ 9,615
Foreign currency related transactions .............................................................. 7,306
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................................................ $89,133,687
====================================================================================================================================
NET ASSETS ................................................................................................ 89,133,687
Shares outstanding ($0.01 par value; unlimited shares authorized) ......................................... 5,631,071
Net asset value per share ................................................................................. $15.83
* Includes $14,471,785 of securities out on loan.
See Notes to Financial Statements.
11
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)
INTERNATIONAL
EQUITY FUND
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend .................................................................................. $1,649,870
Interest* ................................................................................. 43,281
Interest from affliated investments ....................................................... 31,558
Less: Foreign taxes withheld .............................................................. (176,260)
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ................................................................................ 1,548,449
- --------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees .......................................................... 419,698
Transfer agent ............................................................................ 31
Trustee's fees ............................................................................ 1,112
Custody and accounting expenses ........................................................... 32,286
Professional fees ......................................................................... 9,727
Registration expenses ..................................................................... 1,573
Other expenses ............................................................................ 3,863
- --------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .............................................................................. 468,290
- --------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ................................................................ 1,080,159
==========================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ............................................................................ 3,963,387
Futures ................................................................................ 5,611
Foreign currency transactions .......................................................... (9,105)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ............................................................................ 4,842,504
Futures ................................................................................ 7,414
Foreign currency transactions .......................................................... 3,153
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments ......................................................................... 8,812,964
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................. $9,893,123
==========================================================================================================================
* Income attributable to security lending activity, net of rebate expenses, was
$40,255.
See Notes to Financial Statements.
12
Statements of
Changes in Net Assets
INTERNATIONAL
EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007 DECEMBER 31,
(UNAUDITED) 2006
- -----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) .............................................................. $ 1,080,159 $ 847,096
Net realized gain (loss) on investments, futures, written options,
foreign currency transactions and swaps .................................................. 3,959,893 7,318,705
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation ................... 4,853,071 7,918,422
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations .................................................... 9,893,123 16,084,223
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ...................................................................... -- (903,051)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .......................................................................... -- (903,051)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions .......................... 9,893,123 15,181,172
- -----------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ............................................................... 16,354,523 18,473,402
Value of distributions reinvested .......................................................... -- 903,051
Cost of shares redeemed .................................................................... (17,761,813) (19,359,985)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ............................................ (1,407,290) 16,468
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ...................................................... 8,485,833 15,197,640
NET ASSETS
Beginning of period .......................................................................... 80,647,854 65,450,214
- -----------------------------------------------------------------------------------------------------------------------------------
End of period ................................................................................ $89,133,687 $ 80,647,854
===================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD .................. $ 1,068,197 $ (11,962)
- -----------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ................................................................................ 1,099,627 1,476,929
Issued for distributions reinvested ........................................................ (2) 64,322
Shares redeemed ............................................................................ (1,197,237) (1,544,654)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .......................................................... (97,612) (3,403)
===================================================================================================================================
See Notes to Financial Statements.
13
Notes to Financial Statements June 30, 2007 (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 thirteen 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, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund (the "Fund"), Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions at the date of the financial statements. Actual
results may differ from those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS for which exchange quotations are readily
available are valued at the last sale price, or if no sales occurred on that
day, at the last quoted bid price. Securities listed on the NASDAQ will be
valued at the NASDAQ's official close price. Certain fixed income securities are
valued by a dealer or by a pricing service based upon a matrix system, which
considers market transactions as well as dealer supplied valuations. Short-term
investments maturing within sixty days are valued at amortized cost. If
quotations are not readily available for a portfolio security, or if it is
believed that a quotation or other market 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 procedures require that the fair value of a security be
established by the valuation committee. The fair value committee follows
different protocols for different types of investments and 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. 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. GE Asset Management may also
separately monitor portfolio securities and, consistent with the Fund's fair
value procedures, apply a different value to a portfolio security than would be
applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which a Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
In September 2006, FASB issued Statement of Financial Accounting Standards No.
157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single
authoritative definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. FAS 157
applies to fair value measurements already required or permitted by existing
standards. The change to current generally accepted accounting principles from
the application of FAS 157 relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. Management of the Fund does not believe the adoption of FAS 157
will materially impact the financial statement amounts, however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period.
14
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
FAS 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal years.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
obectives or policies. The Fund's 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 at
period end. Purchases and sales of securities, income receipts and expense
payments denominated in foreign currencies are translated into U.S. dollars at
the prevailing exchange rate on the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values.
15
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
Writing puts and buying calls tend to increase the Fund's exposure to the
underlying instrument while buying puts and writing calls tend to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
The Fund will not enter into a transaction involving options for speculative
purposes. The Fund's risks in using these contracts include changes in the value
of the underlying instruments, non-performance of the counterparties under the
contracts' terms and changes in the liquidity of the secondary market for the
contracts. Options are valued at the last sale price, or if no sales occurred on
that day, at the last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts to facilitate transactions in foreign
denominated securities and to manage the Fund's currency exposure. Forward
foreign currency exchange contracts are valued at the mean between the bid and
the offered forward rates as last quoted by a recognized dealer. The aggregate
principal amounts of the contracts are not recorded in the Fund's financial
statements. Such amounts appear under the caption forward foreign currency
contracts in the Schedule of Investments. Fluctuations in the value of the
contracts are recorded in the Statement of Assets and Liabilities as an asset
(or liability) and in the Statement of Operations as unrealized appreciation
(depreciation) until the contracts are closed, when they are recorded as
realized gains or losses on foreign currency related transactions. The Fund's
risks in using these contracts include changes in the value of foreign currency
or the possibility that the counterparties do not perform under the contracts'
terms. When the Fund enters into a forward foreign currency exchange contract,
it is required to segregate cash or liquid securities with its custodian in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract. If the value of the segregated securities
declines, additional cash or securities is segregated so that the value of the
account will equal the amount of the Fund's commitment with respect to the
contract.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2007, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- ------------------------------------------------------------------------------------------------------------------------------------
$76,633,158 $28,275,570 $(641,539) $27,634,031
16
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
As of December 31, 2006, the Fund has no capital loss carryovers. Capital loss
carryovers are available to offset future realized capital gains to the extent
provided in the Internal Revenue Code and regulations thereunder. To the extent
that these carryover losses are used to offset future capital gains, it is
probable that the gains so offset will not be distributed to shareholders
because they would be taxable as ordinary income.
During the year ended December 31, 2006, the Fund utilized approximately
$6,931,084 of capital loss carryovers.
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, 2006 as follows:
Capital Currency
- --------------------------------------------------------------------------------
$-- $6,230
The tax composition of distributions paid (other than return of capital
distributions for the year) during the year ended December 31, 2006 was as
follows:
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
$892,355 $10,696 $903,051
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures,
treatment of realized gains and losses on foreign currency contracts, and losses
deferred due to wash sale transactions. Reclassifications due to permanent
book/tax differences are made to the Fund's capital accounts to reflect income
and gains available for distribution (or available capital loss carryovers)
under income tax regulations. These reclassifications have no impact on net
investment income, realized gains or losses, or the net asset value of the Fund.
The calculation of net investment income per share in the Financial Highlights
table excludes these adjustments.
The reclassifications for the year ended December 31, 2006 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated Paid in
Income Net Realized Gain Capital
- --------------------------------------------------------------------------------
$17,009 $(17,009) $--
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax return to determine whether the tax positions
are "more likely than not" of being sustained by the applicable tax authority.
The adoption of FIN48 did not have an impact on the Fund's net assets and
financial statements.
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 Expenses of the Company which are directly identifiable to one of the
Funds are allocated to that portfolio. Expenses which are not directly
identifiable to one of the Funds are allocated in such a manner as deemed
equitable, taking into consideration the nature and type of expenses and
relative sizes of the Funds. All expenses of the Fund are paid by GEAM and
reimbursed by the Fund.
3. LINE OF CREDIT
The Fund shares a revolving credit facility of up to $25 million with a number
of its affiliates. The credit facility is with its custodian bank, State Street
Bank and Trust Company. The revolving credit facility requires the payment of a
commitment fee equal to 0.09% per annum on the daily unused portion of the
credit facility, payable quarterly. The portion borne by the Funds generally is
borne proportionally based upon net assets. Generally,
17
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
borrowings under the credit facility would accrue interest at the Federal Funds
Rate plus 50 basis points and is borne by each of the borrowing Funds. The
maximum amount allowed to be borrowed by any one of the Funds is the lesser of
its prospectus limitation, 20% of its net assets, or $25 million. The credit
facility was not utilized by the Fund during the period ended June 30, 2007.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. Compensation of GEAM for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund. The
advisory and administrative fee is stated in the following schedule:
Annualized based on
average daily net assets
- --------------------------------------------------------------------------------
Average Daily Advisory and
Net Assets Administration
of Fund Fees
- --------------------------------------------------------------------------------
First $100 million 1.00%
Next $100 million .95%
Over $200 million .90%
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2007, $653 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$12,675,803 $13,480,541
SECURITY LENDING At June 30, 2007, the Fund participated in securities lending:
Loaned
securities at Cash
market value collateral*
- --------------------------------------------------------------------------------
$14,471,785 $15,078,355
* COLLATERAL OF $15,001,767 INCREASED BY $76,588 ON JULY 1, 2007 TO REFLECT THE
JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN.
18
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 58
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 - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM
since February 1997; President and Chief Executive Officer - Mutual Funds at
GEAM since 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,
since March 1993; Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their
inception; Trustee of Elfun Funds, GE Savings & Security Funds and General
Electric Pension Trust since 1988; Trustee of Fordham University since 2003;
Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset
Management (Ireland) since February 1999; Director, GE Asset Management Funds
Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 46
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
19
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years (Vice President); less than one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General
Counsel - Marketing and Client Services (formerly Asset Management Services) at
GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE
Institutional Funds and GE LifeStyle Funds since September 2003; Vice President
and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since
October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary
since July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
20
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
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 - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds and GE LifeStyle Funds since their inception; Trustee of
Fordham University since 2002 and Marymount College from 2001 through 2002;
Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the
Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since
1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 71
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
21
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member NASD 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, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING
Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES
Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS
AND REAL ESTATE
John J. Walker, EVP, CHIEF FINANCIAL OFFICER
22
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<page>
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER NASD AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to
portfolio securities during the most recently disclosed 12-month period
ended June 30 is available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE logo omitted]
GE Investments Funds, Inc.
Premier Growth Equity Fund
Semi-Annual Report
JUNE 30, 2007
[GE LOGO OMITTED]
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 ......................................... 7
FINANCIAL STATEMENTS
Financial Highlights ................................................ 8
Statement of Assets and Liabilities ................................. 9
Statement of Operations ............................................. 10
Statements of Changes in Net Assets ................................. 11
Notes to Financial Statements ....................................... 12
ADDITIONAL INFORMATION ................................................... 17
INVESTMENT TEAM .......................................................... 20
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, 2007 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains distributions, if any. Investment returns and net
asset value on an investment will fluctuate and you may have a gain or loss when
you sell your shares. Periods less than one year are not annualized.
Current performance may be lower or higher than that shown. You may call
toll-free (800) 242-0134 for performance information as of the most recent month
end.
Total returns do not reflect expenses associated with the separate account such
as administrative fees, account charges and surrender charges, which, if
reflected, would reduce the total returns for all periods shown.
Shares of the Fund are neither insured nor guaranteed by the U.S. Government,
and their prices will fluctuate with market conditions.
The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500) is
an unmanaged index and do not reflect the actual cost of investing in the
instruments that comprise the index. The S&P 500 is a market
capitalization-weighted index of stocks of 500 large U.S. companies, which is
widely used as a measure of large-cap stock market performance. The results
shown for the foregoing index assume the reinvestment of net dividends or
interest.
The peer universe of the underlying annuity funds used in our peer ranking
calculation is based on the blend of Lipper peer categories, as shown. Lipper is
an independent mutual fund rating service. A Fund's performance may be compared
to or ranked within a universe of mutual funds with investment objectives and
policies similar but not necessarily identical to the Fund's. Such comparisons
or rankings are made on the basis of several factors, including the Fund's
objectives and policies, management style and strategy, and portfolio
composition, and may change over time if any of those factors change.
1
Premier Growth Equity Fund
- -------------------------------------------------------------------------------
DAVID B. CARLSON IS A SENIOR VICE PRESIDENT AND CHIEF INVESTMENT OFFICER - U.S.
EQUITIES OF GE ASSET MANAGEMENT. HE MANAGES THE OVERALL U.S. EQUITY INVESTMENTS
FOR GE ASSET MANAGEMENT. MR. CARLSON IS PORTFOLIO MANAGER FOR THE PREMIER GROWTH
EQUITY FUND AND HAS SERVED IN THAT CAPACITY SINCE THE FUND'S COMMENCEMENT. MR.
CARLSON JOINED GE ASSET MANAGEMENT IN 1982 AS A SECURITIES ANALYST FOR
INVESTMENT OPERATIONS. HE BECAME A VICE PRESIDENT FOR MUTUAL FUND PORTFOLIOS IN
1987, A SENIOR VICE PRESIDENT IN 1989.
Q. HOW DID THE PREMIER GROWTH EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK
AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007?
A. For the six-month period ended June 30, 2007, the Premier Growth Equity Fund
returned 5.78%. The S&P 500 Index, the Fund's benchmark, returned 6.96% and
the Fund's Lipper peer group of 196 Large-Cap Growth funds returned an
average of 7.43% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The period continued a rally that had propelled the U.S. equity markets
higher over the past year. While first-quarter `07 earnings growth moderated
into the single digit range for the first time in three years, corporate
profits did climb +9%, surprising market-watchers to the upside. Despite a
backdrop of slowing economic growth, a weakening dollar and rising oil
prices, stocks rallied amid the strong corporate earnings, record M&A
activity, cooling inflation worries and the absence of Fed tightening. By
early June, several key U.S. equity indices reached new highs. However, the
period ended with a whimper -- during the month of June each broad measure
of U.S. equity market performance retreated. The S&P 500's June decline was
just its second in 13 months, and its second down month in 2007. The
pullback was brought on by renewed inflation fears, and concern that the
Fed might need to raise interest rates this year to keep inflation in check.
New liquidity and credit concerns also spooked the markets, amid the near
collapse of two large sub-prime hedge funds.
During the six-month period, S&P 500 sectors tilted toward global
infrastructure investment outperformed, including energy (+17%), materials
(+17%) and industrials (+11%). Telecom (+16%) also rallied on the strength
of continued restructuring improvements and sector consolidation. Financials
(-1%) offered the only negative sector return, facing credit cycle headwinds
and anxiety stemming from leveraged speculation in the debt market. Consumer
discretionary (+3%), consumer staples (+5%) and health care (+6%) also
lagged.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. While the Fund picked up significant performance relative to the S&P 500
during the second half of the period -- helped by a strategic underweight in
financials amid increasing concerns about the aging credit cycle -- the Fund
still lagged the benchmark year-to-date. As a growth oriented portfolio, the
overweight in technology and healthcare negatively
[photo omitted]
2
Q&A
impacted performance of the Fund during the period. The Fund was underweight
in industrials, and had no holdings in utilities or telecom. The energy
weight was modest at 6% of the Fund's holdings.
Looking at individual holdings, media stocks did well, and Liberty Global
and Liberty Capital were up +40% and +20%, respectively. Strength in the
Fund's oil services holdings more than offset the energy underweight, as
Schlumberger rallied +35% and Transocean was up +31% during the period.
Monsanto (+29%) was another notable gainer, as a materials stock leveraged
the global development trends.
On the downside, Amgen, the world's largest biotechnology company, declined
-19% during the period amid increased FDA scrutiny. While we have lowered
our `07 earnings estimates, we continue to like its innovative product
pipeline. Western Union (-7%) also dragged, due to a Mexican-market slowdown
caused by immigration concerns. However, we continued to believe in the
strength of Western Union's agency business model, its attractive growth
rate outside the Americas, and its industry-leading return on invested
capital. Bed Bath & Beyond (-5%), UnitedHealth (-5%) and Molex (-4%)
represented other key detractors, however we believed the fundamentals
remained intact and continue to maintain a conviction towards each company's
long-term growth prospects.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. There were no significant changes in the Fund's holdings during the period.
We had a swap in the retail sector from Home Depot to Lowes. We initiated a
position in PepsiCo and eliminated First Data. We also eliminated student
lender, Sallie Mae, after a +40% rally on a buyout bid. We ended the period
with 33 names in the Fund. Technology stocks made up about 30% of the Fund,
with consumer and healthcare at about 20% each.
With economic growth slowing, the forecast for corporate profits has slowed
significantly. This change in the macro environment may lead to a change in
stock market leadership where the more cyclically tied companies cool off,
and the steady growers start to outperform. Our stock selection continues to
be focused on industry leaders, with financial strength and above average
long-term growth prospects. We believe these characteristics will lead to
strong performance over the long term.
3
Premier Growth Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service 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,
2007.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,057.81 3.66
- ---------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,021.00 3.61
- ---------------------------------------------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.72% (FROM
PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH
PERIOD).
**ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 5.78%.
4
Premier Growth Equity Fund (unaudited)
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CHANGE IN VALUE
OF A $10,000 INVESTMENT
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[Line chart omitted -- plot points are as follows:]
Premier Growth Equity Fund S&P 500 Index
12/97 $10,000.00 $10,000.00
12/97 10,345.74 10,168.40
12/98 14,125.24 13,086.53
12/99 19,247.20 15,843.58
12/00 18,240.70 14,388.59
12/01 16,573.75 12,674.62
12/02 13,090.75 9,873.29
12/03 16,875.83 12,709.71
12/04 18,062.45 14,092.69
12/05 18,295.86 14,785.84
12/06 19,955.08 17,120.88
06/07 21,108.62 18,312.76
Premier Growth Equity Fund (ending value $21,109)
S&P 500 Index (ending value $18,313)
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2007
- --------------------------------------------------------------------------------
SIX ONE FIVE SINCE
MONTHS YEAR YEAR INCEPTION
- --------------------------------------------------------------------------------
Premier Growth Equity Fund 5.78% 16.78% 7.53% 8.14%
- --------------------------------------------------------------------------------
S&P 500 Index 6.96% 20.59% 10.72% 6.52%
- --------------------------------------------------------------------------------
Lipper peer group average* 7.43% 16.96% 8.51% N/A
- --------------------------------------------------------------------------------
Inception date 12/12/97
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INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital and future
income rather than current income by investing at least 80% of its net assets in
equity securities under normal circumstances. The Fund invests primarily in a
limited number of large- and medium-sized companies that the portfolio manager
believes have above-average growth histories and/or growth potential.
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
State Street Corp. 3.90%
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Cisco Systems, Inc. 3.89%
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Schlumberger Ltd. 3.74%
- --------------------------------------------------------------------------------
Dover Corp. 3.50%
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Liberty Global, Inc. (Series C) 3.49%
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Paychex, Inc. 3.45%
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Medtronic Inc. 3.35%
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Carnival Corp. 3.30%
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Comcast Corp. (Class A) 3.28%
- --------------------------------------------------------------------------------
Monsanto Co. 3.27%
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PORTFOLIO COMPOSITION
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $112,534 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Information Technology 30.2%
Consumer Discretionary 19.4%
Healthcare 15.4%
Financials 10.9%
Short-Term 7.8%
Energy 6.8%
Industrials 3.5%
Materials 3.3%
Consumer Staples 2.7%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR AND FIVE-YEAR PERIODS INDICATED IN THE LARGE-CAP
GROWTH FUNDS PEER GROUP CONSISTING OF 196, 194 AND 143 UNDERLYING ANNUITY
FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
5
PREMIER GROWTH EQUITY FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
PREMIER GROWTH EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.0%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 20.6%
Bed Bath & Beyond, Inc. 91,944 $ 3,309,065(a)
Carnival Corp. 76,217 3,717,103
Comcast Corp. (Class A) 131,868 3,687,015(a,e)
Liberty Global, Inc. (Series C) 99,928 3,927,170(a,e)
Liberty Media Holding Corp -
Capital (Series A) 27,825 3,274,446(a)
Liberty Media Holding Corp -
Interactive (Series A) 70,168 1,566,851(a)
Lowe's Companies, Inc. 77,427 2,376,235
21,857,885
CONSUMER STAPLES -- 2.9%
PepsiCo, Inc. 47,182 3,059,753
ENERGY -- 7.2%
Schlumberger Ltd. 49,601 4,213,109
Transocean Inc. 32,664 3,461,731(a)
7,674,840
FINANCIALS -- 11.6%
AFLAC Incorporated 58,070 2,984,798
CB Richard Ellis Group, Inc.
(Class A) 82,266 3,002,709(a,e)
Federal National Mortgage Assoc. 29,035 1,896,857
State Street Corp. 64,119 4,385,740(c)
12,270,104
HEALTHCARE -- 16.4%
Amgen, Inc. 44,762 2,474,891(a)
Johnson & Johnson 24,196 1,490,957
Lincare Holdings Inc. 64,119 2,555,142(a)
Medtronic Inc. 72,588 3,764,414
UnitedHealth Group, Inc. 67,264 3,439,881
Zimmer Holdings, Inc. 42,343 3,594,497(a)
17,319,782
INDUSTRIALS -- 3.7%
Dover Corp. 76,942 3,935,583
INFORMATION TECHNOLOGY -- 32.1%
Analog Devices, Inc. 60,489 2,276,806
Cisco Systems, Inc. 157,273 4,380,053(a,d)
eBay, Inc. 78,636 2,530,506(a)
Intuit Inc. 116,140 3,493,491(a,d)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Linear Technology Corp. 31,454 $ 1,138,006
Microsoft Corp. 110,091 3,244,382
Molex, Inc. (Class A) 114,930 3,051,391(d)
Paychex, Inc. 99,203 3,880,821
QUALCOMM, Inc. 84,685 3,674,482
Western Union Co. 153,643 3,200,384
Yahoo! Inc. 113,720 3,085,224(a)
33,955,546
MATERIALS -- 3.5%
Monsanto Co. 54,440 3,676,878
TOTAL INVESTMENTS IN SECURITIES
(COST $86,345,484) 103,750,371
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 8.3%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.4%
GEI Short Term Investment Fund
5.55% 2,524,729 2,524,729(b,f)
SHORT-TERM SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN -- 5.9%
State Street Navigator Securities
Lending Prime Portfolio
5.36% 6,259,394 6,259,394(b,c)
TOTAL SHORT-TERM INVESTMENTS
(COST $8,784,123) 8,784,123
TOTAL INVESTMENTS
(COST $95,129,607) 112,534,494
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (6.3)% (6,678,750)
------------
NET ASSETS-- 100.0% $105,855,744
============
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OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Premier Growth Equity had the following long futures contracts open at
June 30, 2007 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
S&P 500 Index
Futures September 2007 1 $378,850 $(2,163)
See Notes to Schedule of Investments on page 7 and Notes to Financial
Statements.
6
Notes to Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(d) At June 30, 2007, 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) All or a portion of the security is out on loan.
(f) GEAM, the investment advisor of the fund, serves as investment advisor of
the GEI Short Term Investment Fund.
+ Percentages are based on net assets as of June 30, 2007.
7
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- -----------------------------------------------------------------------------------------------------------------------------------
PREMIER GROWTH EQUITY FUND
6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
- -----------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 12/12/97
Net asset value, beginning of period ........... $82.17 $75.65 $74.95 $70.46 $54.74 $69.34
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ....................... 0.07 0.35 0.24 0.47 0.11 0.03
Net realized and unrealized
gains/(losses) on investments ............ 4.68 6.51 0.73 4.48 15.72 (14.60)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS . 4.75 6.86 0.97 4.95 15.83 (14.57)
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ....................... -- 0.34 0.27 0.46 0.11 0.03
Net realized gains .......................... -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................ -- 0.34 0.27 0.46 0.11 0.03
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ................. $86.92 $82.17 $75.65 $74.95 $70.46 $54.74
===================================================================================================================================
TOTAL RETURN (A) ............................... 5.78% 9.07% 1.29% 7.03% 28.91% (21.02)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .... $105,856 $110,538 $126,682 $137,801 $143,202 $87,569
Ratios to average net assets:
Net investment income* ................... 0.15% 0.41% 0.30% 0.62% 0.20% 0.05%
Expenses* ................................ 0.72% 0.71% 0.71% 0.71% 0.70% 0.67%
Portfolio turnover rate ..................... 15% 27% 34% 22% 24% 25%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited.
See Notes to Financial Statements.
8
Statement of Assets
and Liabilities JUNE 30, 2007 (UNAUDITED)
PREMIER
GROWTH
EQUITY FUND
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $86,345,484) ................................................ $103,750,371
Short-term Investments (at amortized cost) .............................................................. 6,259,394
Short-term affiliated investments (at amortized cost) ................................................... 2,524,729
Receivable for investments sold ......................................................................... 96,580
Income receivables ...................................................................................... 38,843
Receivable for fund shares sold ......................................................................... 630
Variation margin receivable ............................................................................. 1,540
Other assets ............................................................................................ 1,414
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TOTAL ASSETS ........................................................................................ 112,673,501
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LIABILITIES
Payable upon return of securities loaned ................................................................ 6,259,394
Payable for investments purchased ....................................................................... 281,812
Payable for fund shares redeemed ........................................................................ 186,258
Payable to GEAM ......................................................................................... 90,293
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TOTAL LIABILITIES ................................................................................... 6,817,757
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................................................. $105,855,744
================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ......................................................................................... 84,842,132
Undistributed (distribution in excess of) net investment income ......................................... 101,529
Accumulated net realized gain (loss) .................................................................... 3,509,359
Net unrealized appreciation/ (depreciation) on:
Investments ......................................................................................... 17,404,887
Futures ............................................................................................. (2,163)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................................................. $105,855,744
================================================================================================================================
NET ASSETS ................................................................................................. 105,855,744
Shares outstanding ($0.01 par value; unlimited shares authorized) .......................................... 1,217,918
Net asset value per share .................................................................................. $86.92
* Includes $6,098,297 of securities on loan.
See Notes to Financial Statements.
9
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)
PREMIER
GROWTH
EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ................................................................................. $ 418,128
Interest* ................................................................................ 3,613
Interest from affliated investments ...................................................... 49,947
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ............................................................................... 471,688
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EXPENSES:
Advisory and administrative fees ......................................................... 351,400
Transfer agent ........................................................................... 40
Trustee's fees ........................................................................... 1,433
Custody and accounting expenses .......................................................... 17,045
Professional fees ........................................................................ 10,206
Registration expenses .................................................................... 2,000
Other expenses ........................................................................... 5,999
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ............................................................................. 388,123
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ............................................................... 83,565
===========================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments .............................................................................. 5,889,617
Futures .................................................................................. (33,865)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ........................................................................... 160,286
Futures ............................................................................... (2,200)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ................................... 6,013,838
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................ $6,097,403
===========================================================================================================================
* Income attributable to security lending activity, net of rebate expenses, was
$3,423.
See Notes to Financial Statements.
10
Statements of
Changes in Net Assets
PREMIER
GROWTH
EQUITY FUND
- --------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007 DECEMBER 31,
(UNAUDITED) 2006
- --------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) ..................................................... $ 83,565 $ 478,425
Net realized gain (loss) on investments, futures, written options,
foreign currency transactions and swaps ......................................... 5,855,752 6,381,334
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation .......... 158,086 2,887,353
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ........................................... 6,097,403 9,747,112
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................................. -- (460,461)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................. -- (460,461)
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ................. 6,097,403 9,286,651
- --------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ...................................................... 1,225,716 2,711,181
Value of distributions reinvested ................................................. -- 460,457
Cost of shares redeemed ........................................................... (12,005,553) (28,602,300)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ................................... (10,779,837) (25,430,662)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................. (4,682,434) (16,144,011)
NET ASSETS
Beginning of period ................................................................. 110,538,178 126,682,189
- --------------------------------------------------------------------------------------------------------------------------------
End of period ....................................................................... $105,855,744 $110,538,178
================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ......... $101,529 $ 17,964
- --------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ....................................................................... 14,674 34,867
Issued for distributions reinvested ............................................... -- 5,588
Shares redeemed ................................................................... (141,932) (369,756)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ................................................. (127,258) (329,301)
================================================================================================================================
See Notes to Financial Statements.
11
Notes to Financial Statements June 30, 2007 (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 thirteen 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"), Value Equity Fund, Mid-Cap Equity Fund, Small-Cap
Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions at the date of the financial statements. Actual
results may differ from those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTION Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sales occurred on
that day, at the last quoted bid price. Securities listed on the NASDAQ will be
valued at the NASDAQ's official close price. Certain fixed income securities are
valued by a dealer or by a pricing service based upon a matrix system, which
considers market transactions as well as dealer supplied valuations. Short-term
investments maturing within sixty days are valued at amortized cost. If
quotations are not readily available for a portfolio security, or if it is
believed that a quotation or other market 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 procedures require that the fair value of a security be
established by the valuation committee. The fair value committee follows
different protocols for different types of investments and 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. 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. GE Asset Management may also
separately monitor portfolio securities and, consistent with the Fund's fair
value procedures, apply a different value to a portfolio security than would be
applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which a Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
In September 2006, FASB issued Statement of Financial Accounting Standards No.
157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single
authoritative definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. FAS 157
applies to fair value measurements already required or permitted by existing
standards. The change to current generally accepted accounting principles from
the application of FAS 157 relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. Management of the Fund does not believe the adoption of FAS 157
will materially impact the financial statement amounts, however, additional
12
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period. FAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's or a third party custodian takes possession
of the collateral pledged for investments in repurchase agreements on behalf of
the Fund. The Fund values the underlying collateral daily on a mark-to-market
basis to determine that the value, including accrued interest, is at least equal
to 102% of the repurchase price. In the event the seller defaults and the value
of the security declines, or if the seller enters an insolvency proceeding,
realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange at
period end. Purchases and sales of securities, income receipts and expense
payments denominated in foreign currencies are translated into U.S. dollars at
the prevailing exchange rate on the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/ depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
13
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
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.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2007, information on the tax cost of investments is as follows:
Net Tax
Cost of Gross Tax Gross Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- ---------------------------------------------------------------------------------------------------------------------------
$97,496,065 $18,681,857 $(3,643,428) $15,038,429
As of December 31, 2006, the Fund has no capital loss carryovers as indicated
below. Capital loss carryovers are available to offset future realized capital
gains to the extent provided in the Internal Revenue Code and regulations
thereunder. To the extent that these carryover losses are used to offset future
capital gains, it is probable that the gains so offset will not be distributed
to shareholders because they would be taxable as ordinary income.
During the year ended December 31, 2006, the Fund utilized approximately
$3,350,016 of capital loss carryovers.
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.
14
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The Fund incurred no such losses after October 31, 2006.
The tax composition of distributions paid (other than return of capital
distributions for the year) during the year ended December 31, 2006 was as
follows:
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
$460,461 $-- $460,461
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures and
losses deferred due to wash sale transactions. Reclassifications due to
permanent book/tax differences are made to the Fund's capital accounts to
reflect income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. These reclassifications have no impact
on net investment income, realized gains or losses, or the net asset value of
the Fund. The calculation of net investment income per share in the Financial
Highlights table excludes these adjustments.
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax return to determine whether the tax positions
are "more likely than not" of being sustained by the applicable tax authority.
The adoption of FIN48 did not have an impact on the Fund's net assets and
financial statements.
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 Expenses of the Company which are directly identifiable to one of the
Funds are allocated to that portfolio. Expenses which are not directly
identifiable to one of the Funds are allocated in such a manner as deemed
equitable, taking into consideration the nature and type of expenses and
relative sizes of the Funds. All expenses of the Fund are paid by GEAM and
reimbursed by the Fund.
3. LINE OF CREDIT
The Fund shares a revolving credit facility of up to $25 million with a number
of its affiliates. The credit facility is with its custodian bank, State Street
Bank and Trust Company. The revolving credit facility requires the payment of a
commitment fee equal to 0.09% per annum on the daily unused portion of the
credit facility, payable quarterly. The portion borne by the Funds generally is
borne proportionally based upon net assets. Generally, borrowings under the
credit facility would accrue interest at the Federal Funds Rate plus 50 basis
points and is borne by each of the borrowing Funds. The maximum amount allowed
to be borrowed by any one of the Funds is the lesser of its prospectus
limitation, 20% of its net assets, or $25 million. The credit facility was not
utilized by the Fund during the period ended June 30, 2007.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund at an
annualized rate of .65%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2007, $840 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of
15
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
the mutual fund platforms and share classes served by the directors, including
the Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$15,946,192 $26,305,996
SECURITY LENDING At June 30, 2007, the Fund participated in securities lending:
Loaned
securities at Cash
market value collateral*
- --------------------------------------------------------------------------------
$6,098,297 $6,259,394
* COLLATERAL OF $6,275,463 DECREASED BY $16,069 ON JULY 1, 2007 TO REFLECT THE
JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN.
16
Additional Information
- --------------------------------------------------------------------------------
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 58
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 - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM
since February 1997; President and Chief Executive Officer - Mutual Funds at
GEAM since 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,
since March 1993; Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their
inception; Trustee of Elfun Funds, GE Savings & Security Funds and General
Electric Pension Trust since 1988; Trustee of Fordham University since 2003;
Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset
Management (Ireland) since February 1999; Director, GE Asset Management Funds
Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 46
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
17
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years (Vice President); less than one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General
Counsel - Marketing and Client Services (formerly Asset Management Services) at
GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE
Institutional Funds and GE LifeStyle Funds since September 2003; Vice President
and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since
October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary
since July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
18
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
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 - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds and GE LifeStyle Funds since their inception; Trustee of
Fordham University since 2002 and Marymount College from 2001 through 2002;
Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the
Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since
1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 71
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
19
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member NASD 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, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING
Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES
Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS
AND REAL ESTATE
John J. Walker, EVP, CHIEF FINANCIAL OFFICER
20
[This page intentionally left blank.]
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER NASD AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE logo omitted]
GE Investments Funds, Inc.
Money Market Fund
Semi-Annual Report
JUNE 30, 2007
[GE LOGO OMITTED]
<Page>
GE Investments Funds, Inc.
Money Market Fund Contents
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE ........................................................ 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS .................................. 2
NOTES TO SCHEDULE OF INVESTMENTS ............................................ 6
FINANCIAL STATEMENTS
Financial Highlights ................................................... 7
Statement of Assets and Liabilities .................................... 8
Statement of Operations ................................................ 9
Statements of Changes in Net Assets .................................... 10
Notes to Financial Statements .......................................... 11
ADDITIONAL INFORMATION ...................................................... 15
INVESTMENT TEAM ............................................................. 18
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.
<page>
Notes to Performance June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains distributions, if any. Investment returns and net
asset value on an investment will fluctuate and you may have a gain or loss when
you sell your shares. Periods less than one year are not annualized.
Current performance may be lower or higher than that shown. You may call
toll-free (800) 242-0134 for performance information as of the most recent month
end.
Total returns do not reflect expenses associated with the separate account such
as administrative fees, account charges and surrender charges, which, if
reflected, would reduce the total returns for all periods shown.
Shares of the Fund are neither insured nor guaranteed by the U.S. Government,
and their prices will fluctuate with market conditions.
The 90 Day T-Bill is an unmanaged measure/index of the performance of U.S.
Treasury bills currently available in the marketplace having a remaining
maturity of 90 days.
The peer universe of the underlying annuity funds used in our peer ranking
calculation is based on the blend of Lipper peer categories, as shown. Lipper is
an independent mutual fund rating service. A Fund's performance may be compared
to or ranked within a universe of mutual funds with investment objectives and
policies similar but not necessarily identical to the Fund's. Such comparisons
or rankings are made on the basis of several factors, including the Fund's
objectives and policies, management style and strategy, and portfolio
composition, and may change over time if any of those factors change.
1
<Page>
Money Market Fund
- --------------------------------------------------------------------------------
Q&A
DONALD J. DUNCAN IS A VICE PRESIDENT OF GE ASSET MANAGEMENT AND PORTFOLIO
MANAGER OF THE MONEY MARKET FUND. MR. DUNCAN JOINED GE ASSET MANAGEMENT IN 1988
IN TRADE SUPPORT AND HELD SEVERAL POSITIONS INCLUDING MUTUAL FUND CONTROLLER. HE
WAS APPOINTED INVESTMENT MANAGER - SHORT TERM SECURITIES IN 1990 AND VICE
PRESIDENT - MONEY MARKETS IN 2002.
Q. HOW DID THE MONEY MARKET FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007?
A. For the six-month period ended June 30, 2007, the Money Market Fund returned
2.44%. The 90-day Treasury Bill, the Fund's benchmark, returned 2.44% and
the Fund's Lipper peer group of 108 Money Market funds returned an average
of 2.39% for the same period.
Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE SIX-MONTH PERIOD
ENDING JUNE 30, 2007.
A. After slumping to a 0.7% growth rate (annualized) in the first quarter, U.S.
GDP bounced back in the second quarter with a median estimate of 3.0%
(Bloomberg survey of leading economists' forecast). The soft housing market
weighed heavily on the economy and there was a curtailment in inventory
building in the first quarter of 2007. Employment growth remained healthy
through the first half. Monthly change in non-farm payrolls averaged 145,000
for the first six months. Inflation drifted lower but remains on the high
side of the Fed's 1-2% comfort zone. The latest reading for the Year-over
year Personal Consumption Expenditure Core Price Index (the Fed's preferred
measure) was 1.9%.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The primary driver of performance is our positioning of the average maturity
of the Fund given our view on fed policy and its effect on the short end of
the yield curve. We extended the average maturity of the Fund early in the
year (50 days at June 30th) as we viewed the Fed on hold from raising Fed
funds, with a possible chance of a rate cut.
[PHOTO OMITTED]
2
<Page>
Money Market Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service 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,
2007.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,024.39 2.46
- ------------------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,022.12 2.46
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.49% (FROM
PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH
PERIOD) .
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 2.44%.
3
<Page>
Money Market Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
[LINE CHART OMITTED -- PLOT POINTS AS FOLLOWS:]
GEI MONEY MARKET 90 DAY T-BILL
06/97 $10000.00 $10000.00
12/97 10267.29 10259.19
12/98 10807.37 10761.88
12/99 11348.01 11275.72
12/00 12055.65 11952.86
12/01 12536.20 12366.68
12/02 12722.34 12568.33
12/03 12821.68 12697.40
12/04 12942.88 12874.86
12/05 13304.50 13289.02
12/06 13922.83 13931.19
6/07 14262.47 14271.76
Money Market Fund (ending value $14,262)
90-Day T-Bill (ending value $14,272)
INVESTMENT PROFILE
A fund designed for investors who seek a high level of current income consistent
with the preservation of capital and maintenance of liquidity by investing
primarily in short-term U.S. dollar-denominated money market instruments.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2007
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Money Market Fund 2.44% 4.95% 2.45% 3.61%
- --------------------------------------------------------------------------------
90 Day T-Bill 2.44% 5.00% 2.73% 3.62%
- --------------------------------------------------------------------------------
Lipper peer group average* 2.39% 4.87% 2.33% 3.49%
- --------------------------------------------------------------------------------
Inception date 7/1/85
- --------------------------------------------------------------------------------
FUND YIELD AT JUNE 30, 2007
- --------------------------------------------------------------------------------
FUND IBC'S MONEY FUND**
- --------------------------------------------------------------------------------
7-DAY CURRENT 4.77%+ 4.70%
- --------------------------------------------------------------------------------
7-DAY EFFECTIVE 4.89% 4.81%
- --------------------------------------------------------------------------------
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, 2007.
** 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.
*LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN
THE MONEY MARKET FUNDS PEER GROUP CONSISTING OF 108, 107, 91 AND 67
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AND
EXPLANATION OF LIPPER PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND
TABLE DO NOT REFLECT THE DEDUCTION OF TAXES.
4
MONEY MARKET FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
MONEY MARKET FUND
Portfolio Composition based on a Market Value of $313,369
(in thousands) as of June 30, 2007
[PIE CHART OMITTED -- PLOT POINTS AS FOLLOWS:]
Certificates of Deposit 37.2%
Commercial Paper 37.2%
Repurchase Agreements 15.3%
Corporate Notes 5.8%
Time Deposit 4.5%
PRINCIPAL AMORTIZED
AMOUNT COST
SHORT-TERM INVESTMENTS -- 99.6%+
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 37.1%
ABN AMRO North America
5.24% 09/21/07 $ 12,450,000 $ 12,301,402
Bank of America Corp.
5.24% 08/31/07 15,200,000 15,065,041
Barclays PLC
5.24% 08/15/07 15,280,000 15,179,916
Citigroup Funding Inc.
5.25% 09/19/07 15,860,000 15,674,967
Goldman Sachs Group
5.17% 10/22/07 11,000,000 10,821,491
Greenwich Capital Holdings Inc.
5.28% 11/09/07 11,150,000 11,150,000
HBOS PLC
5.23% 07/26/07 10,650,000 10,611,337
ING Group
5.25% 07/11/07 15,000,000 14,978,125
UBS AG
5.19% 12/06/07 11,190,000 10,935,111
116,717,390
REPURCHASE AGREEMENTS -- 15.3%
Deutsche Bank
5.35% dated 06/29/07, to
be repurchased at $24,010,700
on 07/02/07 collateralized by
$24,480,000 U.S. Government
agency bonds, coupon rate
4.26%, 5.29%, 5.00%, 5.47%,
6.50% and 5.49% maturing 09/01/34,
08/01/34, 03/01/33, 12/01/35,
03/01/37 and 07/01/36,
respectively 24,000,000 24,000,000
PRINCIPAL AMORTIZED
AMOUNT COST
5.40% dated 06/29/07, to
be repurchased at $24,010,800
on 07/02/07 collateralized by
$24,480,000 U.S. Government
agency bonds, coupon rate 4.26%,
5.29%, 5.00%, 5.47%, 6.50% and
5.49% maturing 09/01/34,
08/01/34, 03/01/33, 12/01/35,
03/01/37 and 07/01/36
respectively $ 24,000,000 $ 24,000,000
48,000,000
CORPORATE NOTES -- 5.7%
American Express Credit Corp.
5.42% 03/05/08 6,940,000 6,941,747(i)
Morgan Stanley Group Inc.
5.36% 08/01/08 11,130,000 11,130,000(i)
18,071,747
TIME DEPOSIT -- 4.5%
Calyon
5.38% 07/02/07 13,870,000 13,870,000
State Street Corp.
4.85% 07/02/07 150,476 150,476(e)
14,020,476
CERTIFICATES OF DEPOSIT -- 37.0%
Bank of Montreal
5.28% 06/06/08 14,000,000 14,000,000
BNP Paribas
5.31% 10/09/07 15,580,000 15,580,000
Canadian Imperial Bank
5.32% 07/23/08 10,580,000 10,580,000
Credit Suisse
5.29% 04/14/08 15,430,000 15,430,000
Deutsche Bank A.G.
5.35% 08/07/07 8,000,000 8,000,000
Dresdner Bank AG
5.30% 10/9/07 - 01/10/08 9,120,000 9,120,000
Fortis Bank
5.28% 07/13/07 15,630,000 15,630,000
HBOS Tre Svc PLC.
5.28% 09/04/07 4,000,000 3,999,113
Societe Generale
5.38% 03/27/08 13,000,000 13,000,000
Toronto-Dominion Bank
5.31% 07/09/07 11,220,000 11,220,000
116,559,113
TOTAL SHORT-TERM INVESTMENTS
(COST $313,368,726) 313,368,726
OTHER ASSETS AND LIABLITES,
NET-- 0.4% 1,295,407
------------
NET ASSETS-- 100.0% $314,664,133
============
See Notes to Schedule of Investments on page 6 and Notes to Financial
Statements.
5
<Page>
Notes to Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(b) Variable or floating rate security. The stated rate represents the rate
at June 30, 2007.
+ Percentages are based on net assets as of June 30, 2007.
6
<Page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND
6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE ................................... -- -- -- -- -- 7/1/85
Net asset value, beginning of period ............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.02 0.05 0.03 0.01 0.01 0.01
Net realized and unrealized
gains on investments ....................... -- -- -- -- 0.00(b) 0.00(b)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS .......... 0.02 0.05 0.03 0.01 0.01 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ......................... 0.02 0.05 0.03 0.01 0.01 0.01
Return of capital ............................. -- -- 0.00(b) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............................. 0.02 0.05 0.03 0.01 0.01 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) ................................. 2.44% 4.65% 2.79% 0.95% 0.78% 1.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ...... $314,664 $279,622 $250,149 $278,703 $392,533 $685,353
Ratios to average net assets:
Net investment income* ..................... 4.87% 4.58% 2.74% 0.92% 0.80% 1.46%
Net expenses* .............................. 0.49% 0.49% 0.49% 0.47% 0.43% 0.40%
Gross expenses* ............................ 0.49% 0.49% 0.49% 0.47% 0.43% 0.40%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges. Had the adviser not absorbed a portion of
the expense, total returns would have been lower.
(b) Less than $0.01 per share.
* Annualized for periods less than one year.
+ Unaudited.
See Notes to Financial Statements.
7
<Page>
Statement of Assets
and Liabilities JUNE 30, 2007 (UNAUDITED)
MONEY
MARKET
FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Short-term Investments (at amortized cost) ....................................................... $313,368,726
Income receivables ............................................................................... 1,400,353
Receivable for fund shares sold .................................................................. 61,071
Other assets ..................................................................................... 2,021
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ................................................................................. 314,832,171
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed ................................................................. 7,307
Payable to GEAM .................................................................................. 160,731
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ............................................................................ 168,038
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS .......................................................................................... $314,664,133
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in .................................................................................. 314,728,002
Undistributed (distribution in excess of) accumulated net realized gain (loss) ................... (63,869)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS .......................................................................................... $314,664,133
- ---------------------------------------------------------------------------------------------------------------------------
Shares outstanding ($0.01 par value; unlimited shares authorized) ................................... 314,717,836
Net asset value per share ........................................................................... $1.00
See Notes to Financial Statements.
8
<Page>
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)
MONEY
MARKET
FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Interest ......................................................................................... $7,941,366
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ....................................................................................... 7,941,366
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ................................................................. 667,795
Transfer agent ................................................................................... 23
Trustee's fees ................................................................................... 4,159
Custody and accounting expenses .................................................................. 18,934
Professional fees ................................................................................ 16,398
Registration expenses ............................................................................ 3,365
Other expenses ................................................................................... 12,336
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ..................................................................................... 723,010
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ....................................................................... 7,218,356
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................................... $7,218,356
- ---------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
9
<Page>
Statements of
Changes in Net Assets
MONEY
MARKET
FUND
- -------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007 DECEMBER 31,
(UNAUDITED) 2006
- -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) .................................................. $ 7,218,356 $ 12,896,680
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ........................................ 7,218,356 12,896,680
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .......................................................... (7,218,356) (12,896,680)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............................................................. (7,218,356) (12,896,680)
- -------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ................................................... 121,453,936 176,527,442
Value of distributions reinvested .............................................. 7,218,355 12,896,680
Cost of shares redeemed ........................................................ (93,630,586) (159,950,239)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ................................ 35,041,705 29,473,883
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .......................................... 35,041,705 29,473,883
NET ASSETS
Beginning of period .............................................................. 279,622,428 250,148,545
- -------------------------------------------------------------------------------------------------------------------------------
End of period .................................................................... $314,664,133 $ 279,622,428
- -------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ...... $ -- $ --
CHANGES IN FUND SHARES
Shares sold .................................................................... 121,453,933 176,527,116
Issued for distributions reinvested ............................................ 7,218,355 12,897,006
Shares redeemed ................................................................ (93,630,586) (159,950,239)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares .............................................. 35,041,702 29,473,883
- -------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
10
<page>
Notes to Financial Statements June 30, 2007 (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 thirteen 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, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund, Total Return Fund, Income Fund, Money Market Fund
(the "Fund") and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions at the date of the financial statements. Actual
results may differ from those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sales occurred on
that day, at the last quoted bid price. Securities listed on the NASDAQ will be
valued at the NASDAQ's official close price. Certain fixed income securities are
valued by a dealer or by a pricing service based upon a matrix system, which
considers market transactions as well as dealer supplied valuations. Short-term
investments maturing within sixty days are valued at amortized cost. If
quotations are not readily available for a portfolio security, or if it is
believed that a quotation or other market 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 procedures require that the fair value of a security be
established by the valuation committee. The fair value committee follows
different protocols for different types of investments and 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. 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. GE Asset Management may also
separately monitor portfolio securities and, consistent with the Fund's fair
value procedures, apply a different value to a portfolio security than would be
applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which a Fund could
sell the affected portfolio security.
In accordance with Rule 2a-7 of the 1940 Act, GE Money Market Fund values
securities initially at cost and, thereafter, securities are assumed to have a
constant amortization to maturity of any discount or premium. Amortized cost
approximates fair value.
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.
In September 2006, FASB issued Statement of Financial Accounting Standards No.
157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single
authoritative definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. FAS 157
applies to fair value measurements already required or permitted by existing
standards. The change to current generally accepted accounting principles from
the application of FAS 157 relate to the definition of fair value, the methods
used to
11
<Page>
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
measure fair value, and the expanded disclosures about fair value measurements.
Management of the Fund does not believe the adoption of FAS 157 will materially
impact the financial statement amounts, however, additional disclosures may be
required about the inputs used to develop the measurements and the effect of
certain of the measurements on changes in net assets for the period. FAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's or a third party custodian takes possession
of the collateral pledged for investments in repurchase agreements on behalf of
the Fund. The Fund values the underlying collateral daily on a mark-to-market
basis to determine that the value, including accrued interest, is at least equal
to 102% of the repurchase price. In the event the seller defaults and the value
of the security declines, or if the seller enters an insolvency proceeding,
realization of the collateral by the Fund may be delayed or limited.
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 at
period end. Purchases and sales of securities, income receipts and expense
payments denominated in foreign currencies are translated into U.S. dollars at
the prevailing exchange rate on the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2007, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- ----------------------------------------------------------------------------------------------------------------------------------
$313,368,726 $ -- $ -- $ --
12
<Page>
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
As of December 31, 2006, the Fund has capital loss carryovers as indicated
below. Capital loss carryovers are available to offset future realized capital
gains to the extent provided in the Internal Revenue Code and regulations
thereunder. To the extent that these carryover losses are used to offset future
capital gains, it is probable that the gains so offset will not be distributed
to shareholders because they would be taxable as ordinary income.
Amount Expires
- --------------------------------------------------------------------------------
$63,869 12/31/2010
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, 2006.
The tax composition of distributions paid during the year ended December 31,
2006 was as follows:
Long-Term
Ordinary Capital
Income Gains Total
- --------------------------------------------------------------------------------
$12,896,680 $ -- $12,896,680
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.
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax return to determine whether the tax positions
are "more likely than not" of being sustained by the applicable tax authority.
The adoption of FIN48 did not have an impact on the Fund's net assets and
financial statements.
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 Expenses of the Company which are directly identifiable to one of the
Funds are allocated to that portfolio. Expenses which are not directly
identifiable to one of the Funds are allocated in such a manner as deemed
equitable, taking into consideration the nature and type of expenses and
relative sizes of the Funds. All expenses of the Fund are paid by GEAM and
reimbursed by the Fund.
3. LINE OF CREDIT
The Fund shares a revolving credit facility of up to $25 million with a number
of its affiliates. The credit facility is with its custodian bank, State Street
Bank and Trust Company. The revolving credit facility requires the payment of a
commitment fee equal to 0.09% per annum on the daily unused portion of the
credit facility, payable quarterly. The portion borne by the Funds generally is
borne proportionally based upon net assets. Generally, borrowings under the
credit facility would accrue interest at the Federal Funds Rate plus 50 basis
points and is borne by each of the borrowing Funds. The maximum amount allowed
to be borrowed by any one of the Funds is the lesser of its prospectus
limitation, 20% of its net assets, or $25 million. The credit facility was not
utilized by the Fund during the period ended June 30, 2007.
4. AMOUNTS PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was
retained by the Company's Board of Directors effective May 1, 1997 to act as
investment adviser and administrator of the Fund. Compensation of
13
<Page>
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
GEAM for investment advisory and administrative services is paid monthly based
on the average daily net assets of the Fund. The advisory and administrative fee
is stated in the following schedule:
Annualized based on
average daily net assets
-------------------------------------
Average Daily Advisory and
Net Assets Administration
of Fund Fees
- ---------------------------------------------------------------------------
Money Market Fund First $100 million .50%
Next $100 million .45%
Next $100 million .40%
Next $100 million .35%
Over $400 million .30%
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2007, $2,308 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
14
<Page>
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 58
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 - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM
since February 1997; President and Chief Executive Officer - Mutual Funds at
GEAM since 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,
since March 1993; Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their
inception; Trustee of Elfun Funds, GE Savings & Security Funds and General
Electric Pension Trust since 1988; Trustee of Fordham University since 2003;
Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset
Management (Ireland) since February 1999; Director, GE Asset Management Funds
Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 46
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
15
<Page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds OperatTions
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years (Vice President); less than one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General
Counsel - Marketing and Client Services (formerly Asset Management Services) at
GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE
Institutional Funds and GE LifeStyle Funds since September 2003; Vice President
and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since
October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary
since July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
16
<Page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
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 - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds and GE LifeStyle Funds since their inception; Trustee of
Fordham University since 2002 and Marymount College from 2001 through 2002;
Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the
Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since
1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 71
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
17
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member NASD 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, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING
Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES
Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS
AND REAL ESTATE
John J. Walker, EVP, CHIEF FINANCIAL OFFICER
18
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<Page>
[This page intentionally left blank.]
<Page>
[This page intentionally left blank.]
<Page>
INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER NASD AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to
portfolio securities during the most recently disclosed 12-month period
ended June 30 is available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
Mid-Cap Equity Fund
Semi-Annual Report
JUNE 30, 2007
[GE logo omitted]
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 ......................................... 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, 2007 (unaudited)
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains distributions, if any. Investment returns and net
asset value on an investment will fluctuate and you may have a gain or loss when
you sell your shares. Periods less than one year are not annualized.
Current performance may be lower or higher than that shown. You may call
toll-free (800) 242-0134 for performance information as of the most recent month
end.
Total returns do not reflect expenses associated with the separate account such
as administrative fees, account charges and surrender charges, which, if
reflected, would reduce the total returns for all periods shown.
Shares of the Fund are neither insured nor guaranteed by the U.S. Government,
and their prices will fluctuate with market conditions.
The Russell Mid Cap Index (Russell Mid Cap) is an unmanaged index and does not
reflect the actual cost of investing in the instruments that comprise each
index.
Russell Mid Cap is a market capitalization-weighted index of the smallest 800
companies included in the Russell 1000 Index that represent approximately 25% of
the total market capitalization of the Russell 1000 Index. The results shown for
the foregoing index assume the reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer ranking
calculation is based on the blend of Lipper peer categories, as shown. Lipper is
an independent mutual fund rating service. A Fund's performance may be compared
to or ranked within a universe of mutual funds with investment objectives and
policies similar but not necessarily identical to the Fund's. Such comparisons
or rankings are made on the basis of several factors, including the Fund's
objectives and policies, management style and strategy, and portfolio
composition, and may change over time if any of those factors change.
1
Mid-Cap Equity Fund
- --------------------------------------------------------------------------------
DIANE M. WEHNER IS A VICE PRESIDENT OF GE ASSET MANAGEMENT AND PORTFOLIO MANAGER
OF THE MID-CAP EQUITY FUND. SHE HAS SERVED IN THIS CAPACITY SINCE SEPTEMBER
2004. BEFORE JOINING GE ASSET MANAGEMENT, MS. WEHNER WAS A VICE PRESIDENT AND
SENIOR PORTFOLIO MANAGER FROM JANUARY 1997 TO JUNE 2001, AND ASSOCIATE PORTFOLIO
MANAGER FROM MAY 1995 TO JANUARY 1997, WITH BENEFIT CAPITAL MANAGEMENT
CORPORATION. MS. WEHNER HAS SERVED AS AN ANALYST/PORTFOLIO MANAGER IN THE
INVESTMENT MANAGEMENT INDUSTRY SINCE 1985.
Q. HOW DID THE MID-CAP EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007?
A. For the six-month period ended June 30, 2007, the Mid-Cap Equity Fund
returned 11.00%. The Russell Mid-Cap Index, the Fund's benchmark, returned
9.91% and the Fund's Lipper peer group of 153 Mid-Cap Growth funds returned
an average of 12.52% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. During the first half of 2007, the growth style of investing outperformed
value. The Fund's growth bias and its overweight in the faster growing
information technology and healthcare sectors contributed to performance. In
addition, the Fund benefited from an underweight in financials, which
continued to be weak due to the flat yield curve environment and increasing
concerns about credit risk. In particular, we remained underweight REITs and
regional bank stocks, which underperformed the benchmark, thus adding to
performance. Mergers and acquisition activity remained robust during the
first half of the year, driven in part by relatively low interest rates and
private equity's appetite for mid-cap companies. The Fund had two companies
that were the target of M&A activity, Affiliated Computer Services and HCR
Manor Care.
Commodity prices boomed during the first half of 2007, and while the Fund
was hurt by an underweight in metals and mining stocks, this
underperformance was more than offset by the overweight in energy stocks
which benefited from the rise in oil prices. Problems in the housing market
persisted through the first half of the year as inventories of unsold homes
continued to climb. Concerns about the spillover effects of declining home
prices on consumer spending resulted in our remaining underweight the
consumer discretionary sector, and in particular homebuilding stocks, which
positively impacted performance.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund outperformed during the six-month period, largely due to solid
stock selection within the information technology, healthcare, energy,
consumer staples and materials sectors. Specifically Sunpower (+52%), a
leading manufacturer of solar cells and panels for electricity generation,
rose as investors continued their interest in the high-growth alternative
energy space. Meanwhile, the graphic semiconductor chip company Nvidia
(+32%) benefited from strong sales and earnings growth. Within healthcare,
the Fund was positively impacted by HCR Manor Care
[Photo omitted]
2
- --------------------------------------------------------------------------------
Q&A
(+40%), which saw strong occupancy rates for its nursing homes, and
benefited from takeout speculation (company has since announced a buyout by
private equity firm Carlyle Group). Energy service companies Dresser-Rand
(+61%) and Weatherford International (+32%) performed well due to strong
demand fundamentals for this group. Within the materials sector, Martin
Marietta Materials (+57%) gained from a strong pricing environment.
Within the industrial sector, consulting services firm Corporate Executive
Board (-25%) detracted from performance, as sales were weaker than expected
due to a slowdown in corporate spending and difficulties in building their
sales force. Within information technology, detracting from performance was
BigBand Networks (-23%) as concerns rose about the deployment of their video
switching technology. Fortress Investment Group (-22%) corrected due to
discussions of a Senate-proposed tax bill, which would seek to increase the
tax on publicly-traded partnerships. Finally, Vertex Pharmaceuticals (-24%)
was negatively impacted by uncertainty surrounding the timing of a major
drug approval. Believing the fundamentals remain sound, we took advantage of
the correction in these four names to add to our existing positions during
the period.
Q. WERE THERE AND SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. During the period we increased the Fund's weighting in the healthcare,
energy and telecommunications services sectors and we reduced our exposure
to the financial and industrials sectors. We are focused on investing in
attractively valued companies with solid earnings prospects, strong market
share and superior long-term fundamentals. With an emphasis on growth, we
continue to look to invest in innovative companies that provide prospects
for above-average earnings growth. Therefore, healthcare and information
technology companies represent a meaningful percentage of the Fund's
holdings.
3
Mid-Cap Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service 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,
2007.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007
- -----------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- -----------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,109.95 3.68
- -----------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,021.10 3.51
- -----------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.70% (FROM
PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 11.00%.
4
Mid-Cap Equity Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
Mid-Cap Equity Fund Russell Midcap Index
6/97 $10,000.00 $10,000.00
12/97 11,576.97 11,448.16
12/98 12,351.04 12,599.03
12/99 14,483.31 14,891.44
12/00 15,683.72 16,121.16
12/01 15,734.84 15,211.37
12/02 13,568.99 12,750.93
12/03 18,038.41 17,863.48
12/04 20,928.68 21,466.46
12/05 23,385.61 24,182.17
12/06 25,349.67 27,879.55
06/07 28,136.88 30,642.69
- -------------------------------------------
Mid-Cap Equity Fund (ending value $28,137)
Russell MidCap Index (ending value $30,643)
- -------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2007
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Mid-Cap Equity Fund 11.00% 17.62% 12.34% 10.90%
- --------------------------------------------------------------------------------
Russell MidCap Index 9.91% 20.84% 16.39% 11.85%
- --------------------------------------------------------------------------------
Lipper peer group
average* 12.52% 19.18% 13.17% 8.60%
- --------------------------------------------------------------------------------
Inception date 5/1/97
================================================================================
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital and future
income by investing at least 80% of its net assets in equity securities of mid
cap companies under normal circumstances. The Fund invests primarily in mid-cap
companies that the portfolio manager believes are undervalued by the market and
have above-average growth potential.
TOP TEN LARGEST HOLDINGS
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
CB Richard Ellis Group, Inc. (Class A) 1.90%
- --------------------------------------------------------------------------------
Thermo Electron Corp. 1.76%
- --------------------------------------------------------------------------------
Macrovision Corp. 1.62%
- --------------------------------------------------------------------------------
Psychiatric Solutions Inc. 1.62%
- --------------------------------------------------------------------------------
Harsco Corp. 1.60%
- --------------------------------------------------------------------------------
Neustar, Inc. (Class A) 1.58%
- --------------------------------------------------------------------------------
NII Holdings Inc. (Class B) 1.49%
- --------------------------------------------------------------------------------
Liberty Global, Inc. (Series C) 1.38%
- --------------------------------------------------------------------------------
ITC Holdings Corp. 1.37%
- --------------------------------------------------------------------------------
Weatherford International Ltd. 1.35%
================================================================================
PORTFOLIO COMPOSITION
AS OF JUNE 30, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $228,686 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Information Technology 17.7%
Healthcare 15.9%
Short Term Investments 15.4%
Financials 11.1%
Industrials 9.2%
Consumer Discretionary 8.8%
Energy 6.5%
Telecommunication Services 4.5%
Materials 4.2%
Utilities 3.5%
Consumer Staples 3.2%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE
MID-CAP GROWTH FUNDS PEER GROUP CONSISTING OF 153, 151, 135 AND 27
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES.
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO
NOT REFLECT THE DEDUCTION OF TAXES.
5
MID-CAP EQUITY FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
MID-CAP EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.5%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 10.2%
Bed Bath & Beyond, Inc. 50,453 $ 1,815,803(a,d)
Coach, Inc. 16,072 761,652(a)
Dick's Sporting Goods, Inc. 14,380 836,485(a,e)
Liberty Global, Inc. (Series C) 80,338 3,157,283(a)
Life Time Fitness, Inc. 54,990 2,927,118(a,e)
O'Reilly Automotive, Inc. 79,476 2,904,848(a)
Pulte Homes, Inc. 33,439 750,706
Regal Entertainment Group,
(Class A) 80,257 1,760,036(e)
Starwood Hotels & Resorts
Worldwide, Inc. 25,118 1,684,664
The Cheesecake Factory 70,383 1,725,791(a,e)
Weight Watchers
International Inc. 33,987 1,727,899(e)
20,052,285
CONSUMER STAPLES -- 3.8%
Alberto-Culver Co. 94,415 2,239,524
Brown-Forman Corp. (Class B) 7,937 580,036(e)
Clorox Co. 35,280 2,190,888
McCormick & Company, Inc. 43,986 1,679,385
The Kroger Co. 24,062 676,864
7,366,697
ENERGY -- 7.6%
Dresser-Rand Group, Inc. 58,416 2,307,432(a)
EOG Resources, Inc. 24,037 1,756,143
GlobalSantaFe Corp. 32,154 2,323,127
Hess Corp. 33,853 1,995,973
Nexen, Inc. 55,383 1,714,104
Peabody Energy Corp. 34,760 1,681,689
Weatherford International Ltd. 56,044 3,095,871(a)
14,874,339
FINANCIALS -- 12.9%
Affiliated Managers Group, Inc. 17,229 2,218,406(a,e)
CB Richard Ellis Group, Inc.
(Class A) 118,985 4,342,953(a,d)
CVB Financial Corp. 179,504 1,996,084(e)
Douglas Emmett, Inc. (REIT) 52,853 1,307,583
Fortress Investment
Group LLC (Class A) 78,655 1,873,562(e)
Greenhill & Company, Inc. 33,212 2,281,997(e)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Hartford Financial Services
Group, Inc. 18,563 $ 1,828,641
HCC Insurance Holdings, Inc. 83,640 2,794,412
Legg Mason, Inc. 27,602 2,715,485
SL Green Realty Corp. (REIT) 17,764 2,200,782
Zions Bancorporation 22,162 1,704,479
25,264,384
HEALTHCARE -- 18.5%
Alcon, Inc. 13,873 1,871,606
Amylin Pharmaceuticals, Inc. 65,911 2,712,897(a,e)
Barr Pharmaceuticals, Inc. 55,351 2,780,281(a)
DENTSPLY International, Inc. 65,752 2,515,672
Gen-Probe Inc. 34,681 2,095,426(a)
Gilead Sciences, Inc. 42,668 1,654,238(a)
Henry Schein, Inc. 35,926 1,919,526(a)
Hologic, Inc. 54,983 3,041,110(a,e)
Lifecell Corp. 57,520 1,756,661(a,e)
Manor Care, Inc. 42,845 2,797,350
Psychiatric Solutions Inc. 101,869 3,693,770(a)
Resmed, Inc. 44,632 1,841,516(a,e)
Smith & Nephew PLC ADR 31,822 1,973,919(e)
Thermo Electron Corp. 77,808 4,024,230(a,d)
Vertex Pharmaceuticals, Inc. 59,353 1,695,122(a,e)
36,373,324
INDUSTRIALS -- 10.8%
Corporate Executive Board Co. 39,262 2,548,496
CoStar Group, Inc. 43,341 2,291,872(a,e)
Dover Corp. 23,080 1,180,542
Harsco Corp. 70,261 3,653,572
Hexcel Corp. 93,591 1,971,962(a,e)
Joy Global, Inc. 28,561 1,665,963
SAIC, Inc. 99,138 1,791,424(a,e)
Spirit Aerosystems
Holdings, Inc. (Class A) 33,553 1,209,586(a)
Stericycle, Inc. 12,437 552,949(a)
Textron Inc. 21,993 2,421,649
WESCO International, Inc. 30,452 1,840,823(a)
21,128,838
INFORMATION TECHNOLOGY -- 20.6%
Activision, Inc. 159,431 2,976,577(a,d)
Citrix Systems, Inc. 54,983 1,851,278(a)
Cogent, Inc. 117,421 1,724,914(a,e)
Comverse Technology, Inc. 83,073 1,732,072(a,d)
DST Systems, Inc. 28,796 2,280,931(a)
Electronic Arts, Inc. 8,459 400,280(a)
Global Cash Access
Holdings, Inc. 153,012 2,451,252(a)
Harris Corp. 43,656 2,381,435(d)
Hittite Microwave Corp. 38,911 1,662,667(a,e)
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
MID-CAP EQUITY FUND
Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Intuit Inc. 78,734 $ 2,368,319(a)
Juniper Networks, Inc. 114,167 2,873,583(a)
Limelight Networks, Inc. 53,519 1,058,606(a)
Linear Technology Corp. 26,782 968,973(e)
Macrovision Corp. 123,390 3,709,103(a,e)
Mettler Toledo
International Inc. 19,888 1,899,503(a)
Microchip Technology Inc. 57,865 2,143,320
Molex, Inc. (Class A) 76,117 2,020,906
Network Appliance, Inc. 32,014 934,809(a)
Nvidia Corp. 42,294 1,747,165(a)
Paychex, Inc. 55,545 2,172,920
Salesforce.com, Inc. 27,914 1,196,394(a)
40,555,007
MATERIALS -- 4.8%
Cabot Corp. 40,652 1,938,287
Martin Marietta Materials, Inc. 17,594 2,850,580
Monsanto Co. 33,934 2,291,902
Praxair, Inc. 33,717 2,427,287
9,508,056
TELECOMMUNICATION SERVICES -- 5.3%
American Tower Corp. (Class A) 48,399 2,032,758(a)
BigBand Networks, Inc. 100,546 1,318,158(a,e)
Neustar, Inc. (Class A) 124,949 3,619,773(a,e)
NII Holdings Inc. (Class B) 42,141 3,402,464(a)
10,373,153
UTILITIES -- 4.0%
DTE Energy Co. 33,439 1,612,429
ITC Holdings Corp. 76,981 3,127,738(e)
PPL Corp. 35,181 1,646,119
SCANA Corp. 40,793 1,561,964
7,948,250
TOTAL INVESTMENTS IN SECURITIES
(COST $150,737,291) 193,444,333
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 17.9%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.2%
GEI Short Term Investment Fund
5.55% 2,425,205 $ 2,425,205(b,f)
SHORT-TERM SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN -- 16.7%
State Street Navigator Securities
Lending Prime Portfolio
5.36% 32,816,575 32,816,575(b,c)
TOTAL SHORT-TERM INVESTMENTS
(COST $35,241,780) 35,241,780
TOTAL INVESTMENTS
(COST $185,979,071) 228,686,113
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (16.4)% (32,293,471)
--------------
NET ASSETS -- 100.0% $ 196,392,642
==============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Mid-Cap Equity had the following long futures contracts open at June 30,
2007 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
S&P Midcap
400 Futures September 2007 3 $1,356,300 $(4,542)
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
Notes to Schedule of Investments June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(d) At June 30, 2007, 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) All or a portion of the security is out on loan.
(f) GEAM, the investment advisor of the fund, serves as investment advisor of
the GEI Short Term Investment Fund. + Percentages are based on net assets as
of June 30, 2007.
Abbreviations:
ADR American Depository Receipt
GDR Global Depository Receipt
REIT Real Estate Investment Trust
8
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
MID-CAP EQUITY FUND
6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02
- -----------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- -- 5/1/97
Net asset value, beginning of period ............. $18.19 $19.22 $18.33 $17.48 $13.30 $15.66
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.05 0.23 0.05 0.17 0.19 0.12
Net realized and unrealized
gains/(losses) on investments .............. 1.95 1.40 2.11 2.63 4.19 (2.28)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ... 2.00 1.63 2.16 2.80 4.38 (2.16)
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ......................... -- 0.22 0.06 0.14 0.18 0.12
Net realized gains ............................ -- 2.44 1.21 1.81 0.02 0.08
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............................. -- 2.66 1.27 1.95 0.20 0.20
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ................... $20.19 $18.19 $19.22 $18.33 $17.48 $13.30
===================================================================================================================================
TOTAL RETURN (A) ................................. 11.00% 8.40% 11.74% 16.02% 32.94% (13.76)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ...... $196,393 $199,311 $229,097 $239,831 $226,929 $170,422
Ratios to average net assets:
Net investment income* ..................... 0.47% 1.01% 0.24% 0.89% 1.36% 0.82%
Expenses* .................................. 0.70% 0.69% 0.70% 0.70% 0.69% 0.68%
Portfolio turnover rate ....................... 36% 29% 27% 78% 28% 37%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited.
See Notes to Financial Statements.
9
MID-CAP
Statement of Assets EQUITY
and Liabilities JUNE 30, 2007 (UNAUDITED) FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $150,737,291) .............................................. $193,444,333
Short-term Investments (at amortized cost) ............................................................. 32,816,575
Short-term affiliated investments (at amortized cost) .................................................. 2,425,205
Receivable for investments sold ........................................................................ 2,985,072
Income receivables ..................................................................................... 174,507
Receivable for fund shares sold ........................................................................ 2,007
Other assets ........................................................................................... 1,616
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ....................................................................................... 231,849,315
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned ............................................................... 32,816,575
Payable for investments purchased ...................................................................... 2,205,578
Payable for fund shares redeemed ....................................................................... 283,283
Payable to GEAM ........................................................................................ 148,537
Variation margin payable ............................................................................... 2,700
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES .................................................................................. 35,456,673
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................................................ $196,392,642
===========================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ........................................................................................ 132,790,041
Undistributed (distribution in excess of) net investment income ........................................ 478,354
Accumulated net realized gain (loss) ................................................................... 20,421,747
Net unrealized appreciation/(depreciation) on:
Investments ........................................................................................ 42,707,042
Futures ............................................................................................ (4,542)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ................................................................................................ $196,392,642
===========================================================================================================================
NET ASSETS ................................................................................................ 196,392,642
Shares outstanding ($0.01 par value; unlimited shares authorized) ......................................... 9,728,742
Net asset value per share ................................................................................. $20.19
* Includes $31,728,456 of securities on loan.
See Notes to Financial Statements.
10
MID-CAP
Statement of Operations EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) FUND
- --------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend .................................................................................. $1,006,498
Interest* ................................................................................. 71,228
Interest from affliated investments ....................................................... 81,870
Less: Foreign taxes withheld .............................................................. (4,637)
- --------------------------------------------------------------------------------------------------------------
TOTAL INCOME ................................................................................ 1,154,959
- --------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees .......................................................... 642,111
Transfer agent ............................................................................ 23
Trustee's fees ............................................................................ 2,608
Custody and accounting expenses ........................................................... 20,564
Professional fees ......................................................................... 11,957
Registration expenses ..................................................................... 2,838
Other expenses ............................................................................ 13,289
- --------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .............................................................................. 693,390
- --------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ................................................................ 461,569
==============================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ............................................................................ 17,281,138
Futures ................................................................................ (83,280)
Foreign currency transactions .......................................................... 20
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ............................................................................ 3,025,785
Futures ................................................................................ (30,146)
Foreign currency transactions .......................................................... 15
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .................................... 20,193,532
- --------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................. $20,655,101
==============================================================================================================
* Income attributable to security lending activity, net of rebate expenses,
was $71,228.
See Notes to Financial Statements.
11
MID-CAP
Statements of EQUITY
Changes in Net Assets FUND
- -------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2007 DECEMBER 31,
(UNAUDITED) 2006
- -------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) ................................................... $ 461,569 $ 2,107,300
Net realized gain (loss) on investments, futures, written options,
foreign currency transactions and swaps ....................................... 17,197,878 24,149,867
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation ........ 2,995,654 (8,838,212)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ......................................... 20,655,101 17,418,955
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ........................................................... -- (2,123,415)
Net realized gains .............................................................. -- (23,338,915)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................................................... -- (25,462,330)
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ............... 20,655,101 (8,043,375)
- -------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares .................................................... 471,333 1,813,307
Value of distributions reinvested ............................................... -- 25,462,330
Cost of shares redeemed ......................................................... (24,044,529) (49,018,282)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ................................. (23,573,196) (21,742,645)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................................... (2,918,095) (29,786,020)
NET ASSETS
Beginning of period ............................................................... 199,310,737 229,096,757
- -------------------------------------------------------------------------------------------------------------------------
End of period ..................................................................... $196,392,642 $ 199,310,737
=========================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ....... $ 478,354 $ 16,785
- -------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ..................................................................... 24,379 92,067
Issued for distributions reinvested ............................................. -- 1,391,385
Shares redeemed ................................................................. (1,250,974) (2,449,915)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ............................................... (1,226,595) (966,463)
=========================================================================================================================
See Notes to Financial Statements.
12
Notes to Financial Statements June 30, 2007 (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 thirteen 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, Value Equity Fund, Mid-Cap Equity Fund (the "Fund"), Small-Cap
Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions at the date of the financial statements. Actual
results may differ from those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sales occurred on
that day, at the last quoted bid price. Securities listed on the NASDAQ will be
valued at the NASDAQ's official close price. Certain fixed income securities are
valued by a dealer or by a pricing service based upon a matrix system, which
considers market transactions as well as dealer supplied valuations. Short-term
investments maturing within sixty days are valued at amortized cost. If
quotations are not readily available for a portfolio security, or if it is
believed that a quotation or other market 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 procedures require that the fair value of a security be
established by the valuation committee. The fair value committee follows
different protocols for different types of investments and 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. 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. GE Asset Management may also
separately monitor portfolio securities and, consistent with the Fund's fair
value procedures, apply a different value to a portfolio security than would be
applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which a Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
In September 2006, FASB issued Statement of Financial Accounting Standards No.
157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single
authoritative definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. FAS 157
applies to fair value measurements already required or permitted by existing
standards. The change to current generally accepted accounting principles from
the application of FAS 157 relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. Management of the Fund does not believe the adoption of FAS 157
will materially impact the financial statement amounts, however, additional
13
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period. FAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's or a third party custodian takes possession
of the collateral pledged for investments in repurchase agreements on behalf of
the Fund. The Fund values the underlying collateral daily on a mark-to-market
basis to determine that the value, including accrued interest, is at least equal
to 102% of the repurchase price. In the event the seller defaults and the value
of the security declines, or if the seller enters an insolvency proceeding,
realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange at
period end. Purchases and sales of securities, income receipts and expense
payments denominated in foreign currencies are translated into U.S. dollars at
the prevailing exchange rate on the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
14
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
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.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2007, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/
Investments for Unrealized Unrealized (Depreciation)
Tax Purposes Appreciation Depreciation on Investments
- ------------------------------------------------------------------------------------------------------------------
$186,661,507 $46,277,635 $(4,253,029) $42,024,606
As of December 31, 2006, the Fund has no capital loss carryovers. Capital loss
carryovers are available to offset future realized capital gains to the extent
provided in the Internal Revenue Code and regulations thereunder. To the extent
that these carryover losses are used to offset future capital gains, it is
probable that the gains so offset will not be distributed to shareholders
because they would be taxable as ordinary income.
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund incurred no such losses after October 31, 2006.
The tax composition of distributions paid (other than return of capital
distributions for the year) during the year ended December 31, 2006 was as
follows:
Long-Term
Ordinary Capital
Income Gains Total
- --------------------------------------------------------------------------------
$3,072,947 $22,389,383 $25,462,330
15
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net
investment income annually. The Fund declares and pays net realized capital
gains in excess of capital loss carryforwards distributions annually. The
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include (but are not limited to) futures,
distributions from Real Estate Investment Trusts (REITS), and losses deferred
due to wash sale transactions. Reclassifications due to permanent book/tax
differences are made to the Fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryovers) under income
tax regulations. These reclassifications have no impact on net investment
income, realized gains or losses, or the net asset value of the Fund. The
calculation of net investment income per share in the Financial Highlights table
excludes these adjustments.
The reclassifications for the year ended December 31, 2006 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated Paid in
Income Net Realized Gain Capital
- --------------------------------------------------------------------------------
$17,550 $(17,550) $ --
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax return to determine whether the tax positions
are "more likely than not" of being sustained by the applicable tax authority.
The adoption of FIN48 did not have an impact on the Fund's net assets and
financial statements.
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 Expenses of the Company which are directly identifiable to one of the
Funds are allocated to that portfolio. Expenses which are not directly
identifiable to one of the Funds are allocated in such a manner as deemed
equitable, taking into consideration the nature and type of expenses and
relative sizes of the Funds. All expenses of the Fund are paid by GEAM and
reimbursed by the Fund.
3. LINE OF CREDIT
The Fund shares a revolving credit facility of up to $25 million with a number
of its affiliates. The credit facility is with its custodian bank, State Street
Bank and Trust Company. The revolving credit facility requires the payment of a
commitment fee equal to 0.09% per annum on the daily unused portion of the
credit facility, payable quarterly. The portion borne by the Funds generally is
borne proportionally based upon net assets. Generally, borrowings under the
credit facility would accrue interest at the Federal Funds Rate plus 50 basis
points and is borne by each of the borrowing Funds. The maximum amount allowed
to be borrowed by any one of the Funds is the lesser of its prospectus
limitation, 20% of its net assets, or $25 million. The credit facility was not
utilized by the Fund during the period ended June 30, 2007.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund at an
annualized rate of .65%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2007, $1,536 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of
16
Notes to Financial Statements June 30, 2007 (unaudited)
- --------------------------------------------------------------------------------
the mutual fund platforms and share classes served by the directors, including
the Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$69,619,822 $88,722,830
SECURITY LENDING At June 30, 2007, the Fund participated in securities lending:
Loaned securities Cash
at market value collateral*
- --------------------------------------------------------------------------------
$31,728,456 $32,816,575
* COLLATERAL OF $33,133,590 DECREASED BY $317,015 ON JULY 1, 2007 TO REFLECT
THE JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN.
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 58
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 - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM
since February 1997; President and Chief Executive Officer - Mutual Funds at
GEAM since 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,
since March 1993; Director of GEAM since 1988.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE
Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their
inception; Trustee of Elfun Funds, GE Savings & Security Funds and General
Electric Pension Trust since 1988; Trustee of Fordham University since 2003;
Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset
Management (Ireland) since February 1999; Director, GE Asset Management Funds
Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 46
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
18
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 42
POSITION(S) HELD WITH FUND Vice President and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years (Vice President); less than one year (Secretary)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General
Counsel - Marketing and Client Services (formerly Asset Management Services) at
GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE
Institutional Funds and GE LifeStyle Funds since September 2003; Vice President
and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since
October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary
since July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
19
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 61
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC
since 2006; Managing Director, Walden Partners, Ltd., consultants and investors,
since August 1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE
Institutional Funds and GE LifeStyle Funds since their inception; Trustee of
Fordham University since 2002 and Marymount College from 2001 through 2002;
Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the
Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since
1994.
- --------------------------------------------------------------------------------
WILLIAM J. LUCAS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of
Fairfield University since 1983.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
ROBERT P. QUINN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 71
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from
Salomon Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
20
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member NASD 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, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING
Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES
Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES
Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE
John J. Walker, EVP, CHIEF FINANCIAL OFFICER
21
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INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER NASD AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
- --------------------------------------------------------------------------------
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to
portfolio securities during the most recently disclosed 12-month period
ended June 30 is available without charge (i) through the Fund's website
at http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
- --------------------------------------------------------------------------------
[GE logo omitted]
ITEM 2. CODE OF ETHICS.
Applicable only to an annual filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Applicable only to an annual filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Applicable only to an annual filing.
ITEM 5. Audit Committee of Listed Registrants
Applicable only to Closed-End Management Investment Companies.
ITEM 6. Schedule of Investments.
Attached as part of ITEM 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Applicable only to Closed-End Management Investment Companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Applicable only to Closed-End Management Investment Companies.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Applicable only to Closed-End Management Investment Companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No material changes.
ITEM 11. CONTROLS AND PROCEDURES.
The officers providing the certifications in this report in accordance
with Rule 30a-3 under the Investment Company Act of 1940 have concluded,
based on their evaluation of the registrant's disclosure controls and
procedures (as such term is defined in such rule), that such controls and
procedures are adequate and reasonably designed to achieve the purpose
described in paragraph (c) of such rule.
There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent
to the date of their last evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
ITEM 12. EXHIBITS.
(a) Not applicable.
(b) Attached hereto as Exhibit 1 and Exhibit 2 are the Certifications of
Michael J. Cosgrove and Scott Rhodes as principal executive officer and
principal financial officer, respectively, as required by Rule 30a-2 under
the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GE INVESTMENTS FUNDS, INC
By: /S/MICHAEL J. COSGROVE
Michael J. Cosgrove
Chairman, GE INVESTMENTS FUNDS, INC.
Date: September 05, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
By: /S/MICHAEL J. COSGROVE
Michael J. Cosgrove
Chairman, GE INVESTMENTS FUNDS, INC.
Date: September 05, 2007
By: /S/SCOTT RHODES
Scott Rhodes
TREASURER, GE INVESTMENTS FUNDS, INC.
Date: September 05, 2007
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.