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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: : 12/31/07
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<page>
ITEM 1. REPORTS TO STOCKHOLDERS.
GE Investments Funds, Inc.
Income Fund
Annual Report
DECEMBER 31, 2007
{GE LOGO OMITTED]
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 ..................................................................................... 13
FINANCIAL STATEMENTS
Financial Highlights ............................................................................................ 14
Statement of Assets and Liabilities ............................................................................. 15
Statement of Operations ......................................................................................... 16
Statements of Changes in Net Assets ............................................................................. 17
Notes to Financial Statements ................................................................................... 18
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM .............................................................. 24
ADVISORY AND ADMINISTRATIVE AGREEMENT RENEWAL ........................................................................ 25
ADDITIONAL INFORMATION ............................................................................................... 28
INVESTMENT TEAM ...................................................................................................... 31
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 December 31, 2007
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Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
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 Bond Index) 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. This index is designed to
represent the performance of the U.S. investment-grade first rate bond market.
The results shown for the foregoing index assume the reinvestment of net
dividends or interest.
The peer universe of the underlying annuity funds used in our peer 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.
- -----------------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUNDS.
1
<page>
Income Fund
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THE INCOME FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES PAUL M.
COLONNA, WILLIAM M. HEALEY, MARK H. JOHNSON, JAMES F. PALMIERI, LEWIS TATANANNI
AND VITA MARIE PIKE. AS LEAD PORTFOLIO MANAGER FOR THE INCOME FUND, MR. COLONNA
(PICTURED BELOW) IS VESTED WITH OVERSIGHT AUTHORITY. EACH PORTFOLIO MANAGER IS
ASSIGNED A CLASS OF ASSETS, THE SIZE OF WHICH ARE DETERMINED BY TEAM CONSENSUS
AND ADJUSTED ON A MONTHLY BASIS, IF NECESSARY. ALTHOUGH EACH PORTFOLIO MANAGER
MANAGES HIS OR HER ASSET CLASS INDEPENDENT OF THE OTHER TEAM MEMBERS, THE TEAM
IS HIGHLY COLLABORATIVE AND COMMUNICATIVE.
PAUL M. COLONNA IS 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.
WILLIAM M. HEALEY IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS
SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE INCOME FUND SINCE SEPTEMBER
1997. PRIOR TO JOINING GE ASSET MANAGEMENT, MR. HEALEY SPENT OVER 10 YEARS IN
THE FIXED INCOME GROUP AT METLIFE.
MARK H. JOHNSON IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT AND SENIOR
PORTFOLIO MANAGER OF STRUCTURED PRODUCTS. HE HAS BEEN A MEMBER OF THE PORTFOLIO
MANAGEMENT TEAM FOR THE INCOME FUND SINCE SEPTEMBER 2007. MR. JOHNSON JOINED GE
ELECTRIC COMPANY (GE) IN 1998 IN ITS EMPLOYERS REINSURANCE CORPORATION AS A
TAXABLE INCOME PORTFOLIO MANAGER. MR. JOHNSON JOINED GE ASSET MANAGEMENT AS A
VICE PRESIDENT AND PORTFOLIO MANAGER IN 2002 AND BECAME A SENIOR VICE PRESIDENT
AND SENIOR PORTFOLIO MANAGER OF STRUCTURED PRODUCTS IN 2007.
JAMES F. PALMIERI IS A PORTFOLIO MANAGER OF GE ASSET MANAGEMENT. SINCE MARCH
2006, HE HAS MANAGED THE MORTGAGE-BACKED SECURITIES SECTOR FOR THE INCOME FUND.
PRIOR TO JOINING GE ASSET MANAGEMENT, 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.
LEWIS TATANANNI IS A SENIOR CORPORATE TRADER AT GE ASSET MANAGEMENT. HE HAS BEEN
A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE INCOME FUND SINCE DECEMBER
2007. MR. TATANANNI JOINED GE ASSET MANAGEMENT IN OCTOBER 2002 AND WAS
RESPONSIBLE FOR EXECUTING THE INTEREST RATE DERIVATIVE HEDGING PROGRAMS FOR GE
ASSET MANAGEMENT'S INSURANCE CLIENTS. MR. TATANANNI JOINED GE IN 1999 AS AN
ASSOCIATE AT GE CAPITAL TREASURY AND WAS RESPONSIBLE FOR DEBT ORIGINATION AND
DERIVATIVE EXECUTION.
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.
[PHOTO OMITTED]
2
Q&A
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Q. HOW DID THE INCOME FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER
GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the Income Fund
returned 4.83%. The Lehman Brothers Aggregate Bond Index, the Fund's
benchmark, returned 6.97% and the Fund's Lipper peer group of 63
Intermediate Investment Grade Debt Funds returned an average of 6.25% for
the same period.
Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE TWELVE-MONTH PERIOD
ENDING DECEMBER 31, 2007.
A. The U.S. economy will most likely post a GDP growth of approximately 2% in
2007, held back by recessionary conditions in the housing market. Rising
delinquencies and defaults in sub-prime mortgage loans resulted in large
pricing dislocations of securities backed by these loan types. In the
fallout, Wall Street broker/dealers were forced in the third and fourth
quarters to take write-downs in the billions from owning such securities as
well as structured vehicles backed by these security types. Investor's lack
of confidence in valuations of sub-prime mortgages spread to all risky
assets, significantly widening yield spreads in high grade and high yield
credit and emerging market debt. A flight to the safety of U.S. treasuries
pushed interest rates down, which generated a 9% total return for the
treasury sector. By year-end, 2 and 10-year note yields had fallen by 176
and 68 bps to finish at 3.05% and 4.02%, respectively. All other U.S. fixed
income sectors posted positive returns for the year, but less than that of
treasuries. The Fed responded to the housing recession/sub-prime crisis by
reducing the fed funds target by 100 basis points to 4.25% starting in
September, while also injecting reserves into the financial system to
provide liquidity to banks unwilling to lend to each other. At the December
meeting, the FOMC stated "the upside risks to inflation roughly balance the
downside risks to growth". However, market pricing at year-end indicated
further rate cuts in 2008.
Q. WHAT WERE THE PRIMARY DRIVERS OF
FUND PERFORMANCE?
A. Duration and yield curve positioning biased toward lower rates and a steeper
yield curve were positive contributors to Fund performance during the year.
The underweight to investment grade corporate securities also added to
relative performance. Although allocations to high yield and emerging market
debt helped earlier in the year, exposure to these sectors hurt performance
in the final quarter as yield spreads widened quite dramatically. The Fund's
exposure to sub-prime related securities through securities lending and
mortgage-rolls negatively impacted total return for the year.
3
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Income Fund
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Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended December
31, 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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
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ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
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Actual Fund Return** 1,000.00 1,037.72 3.19
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Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,021.85 3.16
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* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.62% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2007 WAS: 3.77%.
4
Income Fund
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CHANGE IN VALUE
OF A $10,000 INVESTMENT
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[LINE CHART OMITTED PLOT POINTS FOLLOWS]
GEI INCOME LB AGGREGATE BOND INDEX
12/97 $10000 $10000
12/98 10795 10869
12/99 10641 10779
12/00 11784 12033
12/01 12659 13049
12/02 13910 14387
12/03 14411 14977
12/04 14904 15627
12/05 15208 16007
12/06 15872 16700
12/07 16638 17864
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
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ONE FIVE TEN
YEAR YEAR YEAR
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Income Fund 4.83% 3.65% 5.22%
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LB Aggregate Bond Index 6.97% 4.42% 5.97%
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Lipper peer group average* 6.25% 4.39% 5.57%
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Inception date 1/3/95
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Income Fund (ending value $16,638)
LB Aggregate Bond Index (ending value $17,864)
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 DECEMBER 31, 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 83.18%
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Aa / AA 3.34%
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A / A 3.71%
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Baa / BBB 4.34%
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Ba / BB and lower 5.43%
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PORTFOLIO COMPOSITION
AS OF DECEMBER 31, 2007
as a % of Market Value
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Market Value of $124,445 (in thousands)
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
Mortgage-Backed 34.3%
Asset-Backed and Other 29.2%
U.S. Treasuries 19.9%
Corporate Notes 15.1%
Federal Agencies 1.5%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE YEAR, FIVE-YEAR AND TEN-YEAR PERIODS INDICATED IN THE INTERMEDIATE
INVESTMENT GRADE DEBT FUNDS PEER GROUP CONSISTING OF 63, 48 AND 17 UNDERLYING
ANNUITY FUNDS, RESPECTIVELY.
** MOODY'S INVESTORS SERVICES INC., STANDARD & POOR'S AND FITCH ARE NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATIONS.
SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF 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 December 31, 2007
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INCOME FUND
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PRINCIPAL
AMOUNT VALUE
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BONDS AND NOTES -- 95.2%+
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U.S. TREASURIES -- 26.5%
U.S. Treasury Bonds
4.50% 02/15/36 $ 135,000 $ 135,730(h)
4.75% 02/15/37 2,896,000 3,030,954(h)
U.S. Treasury Notes
3.63% 10/31/09 2,612,000 2,637,963(h)
4.25% 09/30/12 3,333,000 3,449,422(h)
4.50% 11/15/10 - 05/15/17 1,864,000 1,931,498(h)
4.63% 11/15/09 - 02/15/17 6,870,000 7,141,801(h)
4.75% 08/15/17 6,049,000 6,388,289(h)
4.88% 06/30/12 75,000 79,538(h)
24,795,195
FEDERAL AGENCIES -- 2.0%
Federal Home Loan Mortgage Corp.
4.88% 02/09/10 1,805,000 1,851,627
AGENCY MORTGAGE BACKED -- 25.4%
Federal Home Loan Mortgage Corp.
4.50% 06/01/33 - 02/01/35 271,502 256,785(f)
5.00% 07/01/35 - 10/01/35 427,218 417,130(f)
5.50% 05/01/20 64,511 65,339(f)
6.00% 04/01/17 - 05/01/35 772,033 785,848(f)
6.50% 01/01/27 - 08/01/36 545,343 561,971(f)
7.00% 10/01/16 - 08/01/36 203,919 213,130(f)
7.50% 11/01/09 - 09/01/33 23,216 24,369(f)
8.00% 11/01/30 22,961 24,570(f)
8.50% 04/01/30 - 05/01/30 27,218 29,226(f)
6.00% TBA 755,000 766,089(b)
Federal National Mortgage Assoc.
4.00% 05/01/19 - 06/01/19 259,789 250,637(f)
4.50% 05/01/18 - 12/01/34 1,104,351 1,077,472(f)
5.00% 03/01/34 - 08/01/35 568,509 555,119(f)
5.26% 04/01/37 154,468 155,630(g)
5.44% 04/01/37 14,246 14,380(g)
5.50% 12/01/13 - 08/01/33 690,786 696,550(f)
5.53% 04/01/37 195,438 198,201(g)
5.59% 04/01/37 346,678 352,400(g)
5.62% 03/01/37 12,176 12,328(g)
5.63% 06/01/37 252,081 256,070(g)
5.66% 05/01/37 97,562 99,054(g)
5.68% 04/01/37 127,102 129,220(g)
5.70% 04/01/37 243,654 247,559(g)
5.71% 04/01/37 203,148 206,425(g)
5.72% 04/01/37 63,072 64,213(g)
5.85% 06/01/37 314,794 320,844(g)
6.00% 06/01/14 - 07/01/35 1,627,938 1,656,335(f)
6.04% 10/01/37 150,776 153,682(g)
6.50% 07/01/17 - 02/01/35 1,930,192 1,989,767(f)
PRINCIPAL
AMOUNT VALUE
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7.00% 03/01/15 - 06/01/36 $ 655,215 $ 685,209 (f)
7.50% 12/01/09 - 03/01/34 166,228 175,640 (f)
8.00% 12/01/12 - 11/01/33 124,912 133,349 (f)
8.50% 05/01/31 6,093 6,556 (f)
9.00% 04/01/16 - 12/01/22 19,321 20,627 (f)
5.00% TBA 5,836,000 5,714,049 (b)
5.50% TBA 1,515,000 1,513,106 (b)
6.00% TBA 1,295,000 1,314,829 (b)
Government National
Mortgage Assoc.
4.50% 08/15/33 - 09/15/34 478,662 460,566 (f)
6.00% 04/15/27 - 09/15/36 470,711 482,817 (f)
6.13% 11/20/22 - 12/20/24 5,137 5,200(f,g)
6.38% 02/20/23 - 02/20/26 13,605 13,781(f,g)
6.50% 04/15/19 - 08/15/36 430,915 446,061 (f)
7.00% 03/15/12 - 10/15/36 282,475 297,265 (f)
7.50% 11/15/31 - 10/15/33 10,009 10,660 (f)
8.00% 12/15/29 3,682 3,984 (f)
8.50% 10/15/17 21,268 22,929 (f)
9.00% 11/15/16 - 12/15/21 52,612 56,595 (f)
5.50% TBA 785,000 788,189 (b)
23,731,755
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 5.2%
Federal Home Loan Mortgage Corp.
1.42% 04/15/37 499,381 37,759(e,g)
1.72% 05/15/37 688,833 50,058(e,g)
1.79% 04/25/37 394,189 29,872(e,g)
2.12% 12/15/30 862,350 53,897(e,f,g)
2.75% 09/15/36 418,823 46,463(e,f,g)
4.30% 12/15/33 150,000 125,682(f,g)
4.50% 04/15/13 - 03/15/19 630,647 53,597(e,f)
5.00% 04/15/14 - 12/01/34 4,492,015 896,160(e,f)
5.50% 04/15/17 - 06/15/33 534,107 108,087(e,f)
5.50% 04/15/26 486,311 492,700
7.50% 01/15/16 43,203 44,761 (f)
7.50% 07/15/27 13,441 2,359(e,f)
8.00% 02/01/23 - 07/01/24 6,696 1,519(e,f)
8.25% 06/01/26 60,000 79,774(f,i)
8.61% 11/15/37 223,875 166,492(c,d)
21.57% 09/25/43 1,603,878 18,076(c,e,f,g)
Federal Home Loan
Mortgage STRIPS
6.04% 08/01/27 1,648 1,338(c,d,f)
Federal National Mortgage Assoc.
1.59% 05/25/37 - 06/25/37 5,989,345 396,902(e,f,g)
1.91% 03/25/37 399,308 37,622(e,f,g)
2.14% 10/25/29 464,308 28,100(e,f,g)
2.24% 12/25/30 437,654 22,178(e,f,g)
2.34% 07/25/37 955,028 88,789(e,g)
2.64% 05/25/18 765,156 57,815(e,f,g)
2.74% 09/25/42 1,113,098 87,309(e,f,g)
2.79% 04/25/17 - 10/25/17 947,374 67,411(e,f,g)
2.84% 08/25/16 267,436 13,957(e,f,g)
3.24% 06/25/42 378,440 28,631(e,f,g)
4.00% 02/25/28 19,836 19,635 (f)
4.50% 05/25/18 117,760 9,918(e,f)
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
6
INCOME FUND
Schedule of Investments December 31, 2007
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PRINCIPAL
AMOUNT VALUE
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4.75% 11/25/14 $ 58,624 $ 2,358(e,f)
5.00% 08/25/17 - 02/25/32 182,998 18,295(e,f)
5.00% 10/25/35 65,000 58,473
5.50% 03/25/29 - 01/25/33 563,179 559,448(f)
8.00% 07/25/14 75,164 75,825(f)
39.31% 12/25/42 108,110 3,176(c,e,f,g)
Federal National Mortgage
Assoc. (Class 2)
5.50% 12/01/33 93,866 22,375(e,f)
Federal National Mortgage
Assoc. (Class S)
2.24% 02/25/31 411,769 21,345(e,f,g)
Federal National Mortgage
Assoc. REMIC
4.50% 11/25/13 114,853 3,324(e,f)
5.00% 10/25/22 120,205 17,862(e,f)
5.91% 03/25/31 392,115 401,837(f,g)
7.00% 09/25/20 908 938(f)
Federal National Mortgage
Assoc. REMIC (Class B)
4.49% 12/25/22 432 376(c,d,f)
Federal National Mortgage
Assoc. REMIC (Class J)
1080.91% 03/25/22 4 15(e,f)
Federal National Mortgage
Assoc. REMIC (Class K)
1008.00% 05/25/22 10 206(e,f)
Federal National Mortgage Assoc.
STRIPS (Class 1)
5.31% 11/01/34 358,933 271,237(c,d,f)
Federal National Mortgage Assoc.
STRIPS (Class 2)
5.00% 08/01/34 1,144,664 292,605(e,f)
7.50% 11/01/23 41,782 11,738(e,f)
8.00% 08/01/23 - 07/01/24 14,742 3,470(e,f)
8.50% 07/25/22 687 169(e,f)
9.00% 05/25/22 446 122(e,f)
4,832,055
ASSET BACKED -- 4.4%
Capital One Master Trust (Class C)
6.70% 06/15/11 200,000 201,506(a,f)
Carmax Auto Owner Trust
4.35% 03/15/10 131,000 130,548(f)
Chase Funding Mortgage Loan
Asset-Backed Certificates
5.15% 02/25/33 61,254 60,555(f,g)
5.75% 05/25/32 29,870 19,415(f)
Citibank Credit Card Issuance Trust
4.45% 04/07/10 274,000 273,592(f)
Countrywide Asset-Backed
Certificates
5.30% 05/25/33 16,436 16,241(f,g)
GSAA Trust
4.93% 10/25/36 1,251,879 1,235,033(f,g)
PRINCIPAL
AMOUNT VALUE
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Honda Auto Receivables
Owner Trust (Class A)
4.15% 10/15/10 $ 146,000 $ 145,543(f)
JP Morgan Mortgage
Acquisition Corp.
5.02% 03/01/37 1,000,000 896,690(g)
Mid-State Trust
7.54% 07/01/35 2,464 2,626(f)
Option One Mortgage Loan Trust
5.00% 06/25/37 1,000,000 913,082(g)
Peco Energy Transition Trust
6.52% 12/31/10 192,000 203,563(f)
Residential Asset Securities Corp.
5.37% 07/25/32 7,325 6,835(f,g)
Wells Fargo Home Equity Trust
3.97% 05/25/34 50,095 47,048(f,g)
4,152,277
CORPORATE NOTES -- 19.6%
Abbey National PLC
7.95% 10/26/29 65,000 74,547(f)
AES Ironwood LLC
8.86% 11/30/25 255,779 280,078(f)
Air Jamaica Ltd.
9.38% 07/08/15 130,000 139,490(a,f)
American Electric Power
Company, Inc. (Series D)
5.25% 06/01/15 90,000 86,612(f)
American International Group, Inc.
5.85% 01/16/18 116,000 116,836
American Railcar Industries, Inc.
7.50% 03/01/14 60,000 56,700(f)
Amgen Inc.
5.85% 06/01/17 65,000 66,017(a,f)
Archer-Daniels-Midland Co.
6.45% 01/15/38 77,000 78,723
Arizona Public Service Co.
6.25% 08/01/16 165,000 167,915(f)
BAC CAP TRUST V
5.63% 03/08/35 180,000 152,710(f)
Banco Santander Chile
5.38% 12/09/14 215,000 215,126(a,f)
Basell AF SCA
8.38% 08/15/15 300,000 242,250(a)
Bear Stearns Companies Inc.
5.85% 07/19/10 115,000 114,871(f)
6.95% 08/10/12 200,000 205,640(f)
BellSouth Corp.
4.20% 09/15/09 100,000 99,384(f)
6.55% 06/15/34 85,000 87,579(f)
Bertin Ltd.
10.25% 10/05/16 100,000 104,380(a,f)
BJ Services Co.
5.75% 06/01/11 165,000 169,381(f)
Bristol-Myers Squibb Co.
5.88% 11/15/36 100,000 98,797(f)
British Telecommunications PLC
8.63% 12/15/10 65,000 71,161(f)
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
7
INCOME FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Capital One Bank
6.50% 06/13/13 $ 75,000 $ 73,936(f)
Cargill Inc.
6.00% 11/27/17 195,000 194,555(a)
Carolina Power & Light Co.
5.15% 04/01/15 80,000 79,355(f)
5.70% 04/01/35 45,000 43,417(f)
6.13% 09/15/33 135,000 137,861(f)
Chubb Corp.
6.00% 05/11/37 140,000 134,178(f)
Citigroup Capital
8.30% 12/21/57 39,000 41,188(g)
Citigroup, Inc.
5.13% 02/14/11 100,000 100,652(f)
Clarendon Alumina Production Ltd.
8.50% 11/16/21 255,000 265,837(a,f)
Consumers Energy Co.
5.15% 02/15/17 125,000 119,445(f)
COX Communications, Inc.
7.13% 10/01/12 120,000 128,324(f)
7.75% 11/01/10 130,000 139,052(f)
CSX Transportation, Inc.
9.75% 06/15/20 105,000 135,562(f)
Dominion Resources, Inc. (Series B)
6.30% 09/30/66 395,000 382,884(f,g)
Dover Corp.
6.50% 02/15/11 90,000 93,733(f)
DP WORLD Ltd.
6.85% 07/02/37 100,000 95,064(a,f)
Duke Energy Corp.
5.38% 01/01/09 50,000 50,340(f)
EI Du Pont de Nemours & Co.
4.88% 04/30/14 110,000 107,316(f)
El Paso Electric Co.
6.00% 05/15/35 90,000 84,137(f)
Empresa Energetica de Sergipe
and Sociedade Anonima de
Eletrificaao da Paraiba
10.50% 07/19/13 115,000 124,200(a,f)
FirstEnergy Corp. (Series B)
6.45% 11/15/11 125,000 129,077(f)
Galaxy Entertainment Finance
Company Ltd.
9.88% 12/15/12 100,000 107,000(f)
Globo Comunicacoes e
Participacoes S.A.
7.25% 04/26/22 100,000 96,750(a)
GMAC LLC
5.63% 05/15/09 234,000 220,771
Goldman Sachs Group, Inc.
6.60% 01/15/12 200,000 212,731(f)
6.88% 01/15/11 100,000 105,815
GTE Corp.
6.94% 04/15/28 240,000 257,072(f)
Hexion US Finance Corp.
9.75% 11/15/14 260,000 280,800
HSBC Bank USA NA
4.63% 04/01/14 150,000 142,116
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
HSBC Capital Funding LP (Series 1)
9.55% 12/31/49 $ 65,000 $ 71,044(a,f,g)
HSBC Finance Corp.
6.75% 05/15/11 95,000 100,410
HSBC Holdings PLC
6.50% 05/02/36 100,000 97,313(f)
Hydro Quebec
8.50% 12/01/29 75,000 106,483(f)
Idearc, Inc.
8.00% 11/15/16 260,000 238,550
IIRSA Norte Finance Ltd.
8.75% 05/30/24 156,388 177,110(a,f)
ING Capital Funding TR III
8.44% 12/29/49 175,000 186,421(g)
ING Groep N.V.
5.78% 12/29/49 85,000 79,065(g)
Intergen N.V.
9.00% 06/30/17 197,000 207,342(a)
International Steel Group Inc.
6.50% 04/15/14 145,000 148,866
Interoceanica IV Finance Ltd.
4.03% 11/30/18 150,000 97,095(a,c)
4.21% 11/30/25 150,000 71,175(a,c)
iStar Financial, Inc. (REIT)
7.00% 03/15/08 40,000 39,931(f)
JBS S.A.
9.38% 02/07/11 140,000 137,032
JP Morgan Chase Bank
5.88% 06/13/16 25,000 25,402
Kansas Gas & Electric
5.65% 03/29/21 103,230 99,748(f)
Kazkommerts International BV
7.00% 11/03/09 10,000 9,350(a)
Libbey Glass Inc.
11.91% 06/01/11 145,000 152,794(g)
Lippo Karawaci Finance BV
8.88% 03/09/11 150,000 143,583
Lukoil International Finance BV
6.36% 06/07/17 110,000 104,137(a)
Majestic Star Casino LLC
9.50% 10/15/10 300,000 283,500(f)
Marfrig Overseas Ltd.
9.63% 11/16/16 140,000 139,125(a)
Markel Corp.
7.35% 08/15/34 60,000 63,172(f)
McDonald's Corp.
5.80% 10/15/17 80,000 82,507
Mediacom LLC
9.50% 01/15/13 230,000 213,612(f)
Merck & Company, Inc.
5.75% 11/15/36 70,000 69,604(f)
Midamerican Energy Holdings Co.
6.13% 04/01/36 115,000 114,726(f)
Mizuho Financial Group Cayman Ltd.
8.38% 12/29/49 75,000 75,783
Morgan Stanley
5.95% 12/28/17 100,000 99,755
Munich Re America Corp. (Series B)
7.45% 12/15/26 105,000 116,851(f)
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
8
INCOME FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
NAK Naftogaz Ukrainy
8.13% 09/30/09 $100,000 $ 94,750
Nakilat Inc.
6.07% 12/31/33 215,000 196,177(a,f)
6.27% 12/31/33 130,000 118,201(a,f)
Nelnet, Inc.
5.13% 06/01/10 205,000 196,461(f)
Nevada Power Co. (Series N)
6.65% 04/01/36 75,000 75,930(f)
NGPL PipeCo LLC
7.12% 12/15/17 81,000 83,053(a)
Nisource Finance Corp.
7.88% 11/15/10 50,000 53,075(f)
Norfolk Southern Corp.
8.63% 05/15/10 155,000 168,578(f)
Norfolk Southern Railway Co.
9.75% 06/15/20 170,000 231,990(f)
Northern States Power Co.
6.25% 06/01/36 65,000 67,542(f)
NorthWestern Corp.
5.88% 11/01/14 85,000 83,779(f)
Ohio Power Co. (Series E)
6.60% 02/15/33 65,000 65,296(f)
OPTI Canada Inc.
8.25% 12/15/14 132,000 130,680(a)
Pacific Bell
7.13% 03/15/26 85,000 90,027(f)
Pacific Gas & Electric Co.
5.80% 03/01/37 105,000 100,552
PanAmSat Corp.
9.00% 08/15/14 240,000 241,200(f)
Pemex Finance Ltd.
9.03% 02/15/11 42,250 45,143(f)
Pemex Project Funding Master Trust
7.88% 02/01/09 53,000 54,605
Petrobras International Finance Co.
5.88% 03/01/18 115,000 115,044
PNC Preferred Funding Trust I
6.52% 12/31/49 225,000 202,361(a,g)
Potomac Edison Co.
5.35% 11/15/14 95,000 92,162(f)
Puget Sound Energy, Inc.
5.48% 06/01/35 110,000 94,983(f)
Puget Sound Energy, Inc. (Series A)
6.97% 06/01/67 210,000 188,235(g)
Rabobank Capital Funding Trust
5.25% 12/29/49 130,000 116,354(a,f,g)
Rede Empresas de Energia
Eletrica S.A.
11.13% 04/02/49 150,000 147,000(a)
Rock-Tenn Co.
8.20% 08/15/11 285,000 294,975
Royal Bank of Scotland Group PLC
5.00% 10/01/14 115,000 110,327(f)
RSHB Capital S.A.
6.30% 05/15/17 100,000 94,750(a)
Sabine Pass LNG LP
7.25% 11/30/13 185,000 176,675
7.50% 11/30/16 265,000 253,075
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Security Benefit Life Insurance
8.75% 05/15/16 $120,000 $ 138,165(a)
Sierra Pacific Resources
8.63% 03/15/14 450,000 480,839
Skandinaviska Enskilda
Banken AB
7.50% 03/29/49 250,000 257,347(a,f,g)
Southern Copper Corp.
7.50% 07/27/35 29,000 30,713
Sovereign Capital Trust VI
7.91% 06/13/36 320,000 309,329(f)
Sprint Capital Corp.
7.63% 01/30/11 400,000 415,788
Stallion Oilfield Finance Corp.
9.75% 02/01/15 208,000 191,360(a)
Standard Chartered Bank
Hong Kong Ltd.
4.38% 12/03/14 210,000 207,942(g)
Stewart Enterprises, Inc.
6.25% 02/15/13 135,000 126,900(f)
Telecom Italia Capital S.A.
6.20% 07/18/11 95,000 97,744
Telefonica Emisiones SAU
5.86% 02/04/13 150,000 154,339
Titan Petrochemicals Group Ltd.
8.50% 03/18/12 100,000 88,500(a)
TNK-BP Finance S.A.
6.63% 03/20/17 100,000 91,250(a)
Tronox Worldwide LLC
9.50% 12/01/12 180,000 173,700(f)
UBS Preferred Funding Trust I
8.62% 10/29/49 125,000 133,580(g)
Valspar Corp.
5.63% 05/01/12 110,000 111,230
Verizon Global Funding Corp.
7.25% 12/01/10 220,000 235,569
Verizon Pennsylvania, Inc.
8.35% 12/15/30 70,000 83,789(f)
8.75% 08/15/31 110,000 137,127(f)
VTB Capital S.A.
5.49% 08/01/08 115,000 113,850(a,f,g)
Weatherford International, Inc.
5.95% 06/15/12 70,000 72,216(a)
Wells Fargo & Co.
5.63% 12/11/17 40,000 40,278
Westar Energy, Inc.
7.13% 08/01/09 100,000 102,716(f)
Westlake Chemical Corp.
6.63% 01/15/16 250,000 236,250(f)
Wisconsin Electric Power
5.70% 12/01/36 40,000 38,296(f)
18,314,648
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 11.8%
Banc of America Commercial
Mortgage Inc.
4.13% 07/10/42 200,000 197,021(f)
5.32% 10/10/11 148,000 148,339(f)
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
9
INCOME FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Banc of America Commercial
Mortgage Inc. (Class A)
5.79% 05/11/35 $ 280,926 $ 287,023(f)
Banc of America Commercial
Mortgage Inc. (Class C)
5.70% 04/10/17 100,000 90,566(f)
Banc of America Funding Corp.
5.74% 03/20/36 69,583 71,920(f,g)
5.82% 02/20/36 174,275 170,423(f,g)
Banc of America Mortgage
Securities (Class B)
5.38% 01/25/36 74,476 72,598(f,g)
Bank of America Alternative
Loan Trust
6.50% 07/25/35 69,739 69,305(f)
Bear Stearns Commercial
Mortgage Securities
5.48% 10/12/41 245,000 246,796(f,g)
5.53% 10/12/41 245,000 245,120(f,g)
6.02% 02/14/31 290,512 292,516(f)
Bear Stearns Commercial Mortgage
Securities (Class A)
5.66% 06/11/40 600,000 609,496(f,g)
Bear Stearns Commercial Mortgage
Securities (Class D)
5.99% 09/11/42 20,000 16,442(a,g)
Countrywide Alternative Loan Trust
5.98% 05/25/36 24,545 16,399(f,g)
6.00% 03/25/36 - 08/25/36 132,003 29,192(d,e,f)
Countrywide Alternative Loan Trust
(Class B)
6.00% 05/25/36 - 08/25/36 64,142 33,942(f)
Credit Suisse Mortgage
Capital Certificates
5.47% 09/15/39 217,000 218,696(f)
Credit Suisse Mortgage Capital
Certificates (Class C)
5.65% 02/25/36 39,167 33,190(f,g)
Crusade Global Trust (Class A)
5.16% 09/18/34 94,216 94,044(f,g)
CS First Boston Mortgage
Securities Corp.
1.39% 03/15/35 3,159,415 85,615(a,d,e,f,g)
5.25% 08/25/34 63,384 62,610(f)
5.33% 10/25/35 73,771 59,325 (f,g)
5.37% 07/15/37 2,378,727 51,420(a,c,f,g)
6.13% 04/15/37 175,000 181,496(f)
CS First Boston Mortgage
Securities Corp. (Class A)
5.44% 09/15/34 198,455 200,763(f)
6.53% 06/15/34 200,000 208,363(f)
DLJ Commercial Mortgage
Corp. (Class A)
7.18% 11/10/33 179,717 188,058(f)
First Union-Lehman Brothers-
Bank of America
6.56% 11/18/35 94,363 94,294(f)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
GMAC Commercial Mortgage
Securities, Inc.
6.42% 05/15/35 $ 277,554 $ 278,302(f)
6.47% 04/15/34 158,697 164,580(f)
GMAC Commercial Mortgage
Securities, Inc. (Class X)
5.29% 12/10/41 3,713,937 67,373(c,f,g)
Greenwich Capital Commercial
Funding Corp.
5.12% 04/10/37 301,000 301,511(f)
Indymac INDA Mortgage Loan Trust
5.14% 01/25/36 99,765 89,714(f,g)
Indymac INDA Mortgage
Loan Trust (Class B)
5.14% 01/25/36 99,765 94,118(f,g)
JP Morgan Chase Commercial
Mortgage Securities Corp.
1.11% 01/12/39 2,509,194 66,076(a,f,g)
6.20% 02/12/51 40,000 34,353(a,g)
6.47% 11/15/35 190,000 198,443 (f)
LB-UBS Commercial
Mortgage Trust
4.06% 09/15/27 495,000 488,702(f,g)
5.20% 01/18/12 3,234,344 68,407(c,f,g)
5.26% 09/15/39 150,000 150,562(f)
6.23% 03/15/26 130,000 131,287(f)
7.70% 10/15/35 760,647 30,489(a,c,f,g)
8.47% 03/15/36 3,176,164 83,066(a,c,f,g)
8.57% 02/15/40 2,695,535 54,166(a,c,f,g)
LB-UBS Commercial Mortgage
Trust (Class A)
6.13% 12/15/30 172,000 178,247(f)
LB-UBS Commercial Mortgage
Trust (Class B)
6.65% 07/14/16 34,000 36,124(a,f)
LB-UBS Commercial Mortgage
Trust (Class F)
6.24% 07/15/40 70,000 60,182(g)
LB-UBS Commercial Mortgage
Trust (Class X)
5.56% 09/15/39 6,676,493 193,089(c,f,g)
Master Alternative Loans Trust
5.00% 08/25/18 157,068 24,100(e,f)
6.50% 08/25/34 - 05/25/35 436,388 431,999(f)
Master Alternative Loans
Trust (Class 3)
6.50% 01/25/35 116,782 116,544(f)
MLCC Mortgage Investors, Inc.
5.37% 02/25/36 59,995 57,541(f,g)
Morgan Stanley Capital I
5.28% 12/15/43 102,000 102,564(f,g)
5.33% 12/15/43 102,000 101,848(f,g)
5.39% 11/12/41 280,000 262,979(f,g)
5.44% 02/12/44 250,000 249,425(a,g)
5.69% 04/15/49 600,000 611,568(g)
5.71% 07/12/44 100,000 101,596(f)
7.11% 04/15/33 460,870 471,530(f)
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
10
INCOME FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Morgan Stanley Capital I (Class A)
5.36% 02/12/44 $ 175,000 $ 175,650(g)
Morgan Stanley Dean Witter
Capital I
7.20% 10/15/33 179,142 186,603(f)
Morgan Stanley Dean Witter
Capital I (Class A)
6.54% 02/15/31 14,452 14,957(f)
Nomura Asset Securities Corp.
(Class A)
6.59% 03/15/30 230,759 231,294(f)
PNC Mortgage Acceptance Corp.
(Class A)
6.36% 03/12/34 300,000 311,097
Residential Funding Mortgage
Security I
5.75% 01/25/36 195,976 162,248(f)
Wachovia Bank Commercial
Mortgage Trust
5.42% 04/15/47 400,000 400,032
Wells Fargo Mortgage Backed
Securities Trust
5.39% 08/25/35 106,105 105,194(f,g)
5.50% 01/25/36 149,993 123,202(f)
11,085,734
SOVEREIGN BONDS -- 0.3%
Government of Bahamas
6.63% 05/15/33 125,000 142,937(a,f)
Government of Panama
6.70% 01/26/36 105,000 110,775
253,712
TOTAL BONDS AND NOTES
(COST $89,650,766) 89,017,003
- --------------------------------------------------------------------------------
SECURITIES PURCHASED WITH COLLATERAL FROM
SECURITIES ON LOAN -- 17.1%
- --------------------------------------------------------------------------------
ASSET BACKED -- 13.3%
Bear Stearns Asset Backed
Securities Inc.
5.09% 11/25/35 2,000,000 1,930,067(f,g)
Countrywide Asset-Backed
Certificates
4.98% 06/25/35 493,553 485,465(f,g)
Fleet Home Equity Loan Trust
(Class A)
5.20% 01/20/33 252,434 239,362(f,g)
Nissan Auto Lease Trust
5.10% 02/15/13 1,340,000 1,320,109(g)
RAAC Series (Class A)
5.04% 08/25/36 4,353,000 4,064,184(f,g)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Residential Asset Mortgage
Products, Inc.
5.07% 04/25/35 $4,741,061 $ 4,396,771(f,g)
5.20% 12/25/33 8,530 8,521(f,g)
Residential Asset Mortgage
Products, Inc. (Class A)
5.43% 06/25/32 30,339 29,926(f,g)
12,474,405
CORPORATE NOTES -- 0.6%
Morgan Stanley
4.93% 05/07/09 550,000 543,185(g)
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.2%
Granite Mortgages PLC (Class 1)
5.54% 01/20/43 330,435 330,362(f,g)
JP Morgan Alternative Loan Trust
4.93% 08/25/36 830,912 829,413(f,g)
Puma Finance Ltd. (Class A)
5.44% 10/11/34 136,795 135,969(f,g)
Residential Accredit Loans, Inc.
5.05% 07/25/36 2,016,267 1,699,323(f,g)
2,995,067
TOTAL SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN
(COST $17,083,405) 16,012,657
TOTAL INVESTMENT IN SECURITIES
(COST $106,734,171) 105,029,660
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 20.8%*
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 14.5%
GEI Short Term Investment Fund
4.96% 13,525,888 13,525,888(c,j)
SHORT-TERM SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN -- 6.3%
GEI Short Term Investment Fund
4.96% 5,889,475 5,889,475(c,j)
TOTAL SHORT-TERM INVESTMENTS
(COST $19,415,363) 19,415,363
TOTAL INVESTMENTS
(COST $126,149,534) 124,445,023
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (33.1)% (30,964,925)
-------------
NET ASSETS-- 100.0% $ 93,480,098
=============
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
11
INCOME FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Income Fund had the following long futures contracts open at December
31, 2007:
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE APPRECIATION
- --------------------------------------------------------------------------------
U.S. Treasury
Notes 2 Yr.
Futures March 2008 37 $7,779,250 $10,945
U.S. Treasury
Notes 10 Yr.
Futures March 2008 31 3,515,109 8,503
-------
$19,448
=======
* The financial statement figure presented above for Short-Term Investments
includes collateral received from transactions such as loans of portfolio
securities and amounts held pending settlement of securities transactions. In
evaluating the Fund's net cash level, portfolio management takes into account
certain of the Fund's liabilities in excess of other assets, such as
liabilities associated with loans of portfolio securities and securities
pending settlement, and equitized cash. The Fund's net cash level is not
expected to exceed 5%.
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
12
Notes to Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
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 December 31,2007 , these securities amounted to $
5,512,930 or 5.90%of net assets. 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 December 31, 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
December 31, 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) GE Asset Management (GEAM), the investment advisor of the Fund, also serves
as investment advisor of the GEI Short-Term Investment Fund.
+ Percentages are based on net assets as of December 31, 2007.
Abbreviations:
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
STRIPS Separate Trading of Registered Interest and Principal of Security
TBA To Be Announced
13
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FUND
12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
- ------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- 1/3/95
Net asset value, beginning of period $11.80 $11.84 $12.25 $12.61 $12.93
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.81 0.56 0.61 0.55 0.51
Net realized and unrealized
gains/(losses) on investments (0.25) (0.04) (0.36) (0.12) (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS 0.56 0.52 0.25 0.43 0.47
LESS DISTRIBUTIONS FROM:
Net investment income 0.86 0.56 0.61 0.57 0.56
Net realized gains -- -- 0.05 0.22 0.23
Return of capital -- -- 0.00(b) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.86 0.56 0.66 0.79 0.79
NET ASSET VALUE, END OF PERIOD $11.50 $11.80 $11.84 $12.25 $12.61
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) 4.83% 4.37% 2.04% 3.42% 3.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $93,480 $126,732 $116,558 $135,172 $189,318
Ratios to average net assets:
Net investment income 5.07% 5.07% 4.49% 3.82% 3.24%
Expenses 0.61% 0.61% 0.60% 0.59% 0.55%
Portfolio turnover rate 448% 270% 311% 343% 419%
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.
See Notes to Financial Statements.
14
Statement of Assets
and Liabilities DECEMBER 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $106,734,171) .................................... $105,029,660
Short-term affiliated investments (at amortized cost) ........................................ 19,415,363
Cash ......................................................................................... 10,654
Foreign cash (cost $225,534) ................................................................. 237,244
Income receivables ........................................................................... 937,837
Variation margin receivable .................................................................. 14,710
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................................................................. 125,645,468
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned ..................................................... 21,902,109
Payable for investments purchased ............................................................ 10,157,359
Payable for fund shares redeemed ............................................................. 40,027
Payable to GEAM .............................................................................. 65,772
Variation margin payable ..................................................................... 103
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................................................ 32,165,370
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................................................... $ 93,480,098
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in .............................................................................. 99,616,389
Undistributed (distribution in excess of) net investment income .............................. (332)
Accumulated net realized gain (loss) ......................................................... (4,462,605)
Net unrealized appreciation/(depreciation) on:
Investments .............................................................................. (1,704,511)
Futures .................................................................................. 19,448
Foreign currency related transactions .................................................... 11,709
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................................................... $ 93,480,098
====================================================================================================================================
NET ASSETS ...................................................................................... 93,480,098
Shares outstanding ($0.01 par value; unlimited shares authorized) ............................... 8,132,122
Net asset value per share ....................................................................... $11.50
* Includes $21,462,938 of securities on loan.
See Notes to Financial Statements.
15
Statement of Operations
FOR THE YEAR ENDED DECEMBER 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Interest* ....................................................................... $ 5,632,475
Interest from affiliated investments ............................................ 1,159,497
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ...................................................................... 6,791,972
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ................................................ 600,505
Transfer agent .................................................................. 62
Director's fees ................................................................. 3,379
Custody and accounting expenses ................................................. 84,943
Professional fees ............................................................... 20,768
Registration expenses ........................................................... 4,422
Other expenses .................................................................. 14,757
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .................................................................... 728,836
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ............................................................. 6,063,136
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments .................................................................. (1,857,778)
Futures ...................................................................... (5,772)
Options ...................................................................... (3,220)
Foreign currency transactions ................................................ 30,473
INCREASE IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments .................................................................. 780,680
Futures ...................................................................... 74,861
Foreign currency transactions ................................................ 13,585
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized (loss) on investments ............................... (967,171)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................. $ 5,095,965
====================================================================================================================================
* Income attributable to security lending, net of rebate expenses was $166,172.
See Notes to Financial Statements.
16
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income ............................................................ $ 6,063,136 $ 5,771,592
Net realized (loss) on investments, futures, written options,
foreign currency transactions and swaps ......................................... (1,836,297) (1,197,380)
Net increase in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation .......... 869,126 326,388
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations ........................................ 5,095,965 4,900,600
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................................. (6,474,080) (5,692,439)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................. (6,474,080) (5,692,439)
- ------------------------------------------------------------------------------------------------------------------------------------
(Decrease) in net assets from operations and distributions .......................... (1,378,115) (791,839)
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ...................................................... 17,556,568 20,048,467
Value of distributions reinvested ................................................. 6,474,080 5,692,439
Cost of shares redeemed ........................................................... (55,904,876) (14,774,800)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ................................... (31,874,228) 10,966,106
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................. (33,252,343) 10,174,267
NET ASSETS
Beginning of period ................................................................. 126,732,441 116,558,174
- ------------------------------------------------------------------------------------------------------------------------------------
End of period ....................................................................... $ 93,480,098 $126,732,441
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ......... $ (332) $ 74,783
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ....................................................................... 1,471,130 1,659,946
Issued for distributions reinvested ............................................... 567,904 482,819
Shares redeemed ................................................................... (4,649,537) (1,241,749)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ................................................. (2,610,503) 901,016
====================================================================================================================================
See Notes to Financial Statements.
17
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Any short-term
securities held by the Fund with remaining maturities of sixty days or less at
the time of purchase are valued on the basis of amortized costs, which
approximates market value.
All assets and liabilities of the Fund's initially expressed in foreign currency
values will be converted into U.S. dollars at the WM exchange rate computed at
11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
18
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
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 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 custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying
19
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
futures tends to increase the Fund's exposure to the underlying instrument while
selling futures tends to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments. The Fund will not enter into a
transaction involving futures for speculative purposes. The Fund's risks in
using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Futures
contracts are valued at the settlement price established each day by the board
of trade or exchange on which they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. The Fund will not enter
into a transaction involving options for speculative purposes. The Fund's risks
in using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Options
are valued at the last sale price, or if no sales occurred on that day, at the
last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
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
20
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
"cover" for the transaction. Unsettled commitments are valued at the current
market value of the underlying security. Daily fluctuations in the value of such
contracts are recorded as unrealized gains or losses. The Fund will not enter
into such commitments for the purpose of investment leverage.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts to facilitate transactions in foreign
denominated securities and to manage the Fund's currency exposure. Forward
foreign currency exchange contracts are valued at the mean between the bid and
the offered forward rates as last quoted by a recognized dealer. The aggregate
principal amounts of the contracts are not recorded in the Fund's financial
statements. Such amounts appear under the caption forward foreign currency
contracts in the Schedule of Investments. Fluctuations in the value of the
contracts are recorded in the Statement of Assets and Liabilities as an asset
(or liability) and in the Statement of Operations as unrealized appreciation
(depreciation) until the contracts are closed, when they are recorded as
realized gains or losses on foreign currency related transactions. The Fund's
risks in using these contracts include changes in the value of foreign currency
or the possibility that the counterparties do not perform under the contracts'
terms. When the Fund enters into a forward foreign currency exchange contract,
it is required to segregate cash or liquid securities with its custodian in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract.
If the value of the segregated securities declines, additional cash or
securities is segregated so that the value of the account will equal the amount
of the Fund's commitment with respect to the contract.
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 December 31, 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
- ------------------------------------------------------------------------------------------------------------------------------------
$126,252,540 $1,188,094 $(2,995,611) $(1,807,517)
Net Tax Appreciation/ Undistributed Undistributed Post
(Depreciation) on Income/ Long-Term Gains/ October
Derivatives, Currency (Accumulated (Accumulated Losses
and Other Net Assets Ordinary Loss) Capital Loss) (see Detail Below)
- ------------------------------------------------------------------------------------------------------------------------------------
$11,781 $-- $(3,693,201) $(647,354)
21
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
As of December 31, 2007, the Fund has capital loss carryovers as indicated
below. Capital loss carryovers are available to offset future realized capital
gains to the extent provided in the Internal Revenue Code and regulations
thereunder. To the extent that these carryover losses are used to offset future
capital gains, it is probable that the gains so offset will not be distributed
to shareholders because they would be taxable as ordinary income.
Amount Expires
- --------------------------------------------------------------------------------
$1,055,894 12/31/13
1,322,182 12/31/14
1,315,125 12/31/15
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, 2007 as follows:
Capital Currency
- --------------------------------------------------------------------------------
$647,022 $332
The tax composition of distributions paid during the years ended December 31,
2007 and December 31, 2006 were as follows:
Long-Term Return
Ordinary Capital of
Income Gains Capital Total
- --------------------------------------------------------------------------------
2007 $6,169,021 $-- $305,059 $6,474,080
2006 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 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, 2007 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated Paid in
Income Net Realized Gain Capital
- --------------------------------------------------------------------------------
$335,829 $(30,770) $(305,059)
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Expenses of the Company which are directly identifiable to the Fund are
allocated to the portfolio. Expenses which are not directly identifiable to the
Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expenses and relative size of the Fund. All
expenses of the Fund are paid by GEAM and reimbursed by the Fund.
22
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
3. LINE OF CREDIT
The Company 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. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established November 7, 2007. Generally, borrowings under the
credit facilities would accrue interest at the Federal Funds Rate plus 50 basis
points and would be borne by the borrowing Fund. The maximum amount allowed to
be borrowed by any one Fund is the lesser of (i) its prospectus limitation or
(ii) 20% of its net assets. The credit facilities were not utilized by the Fund
during the period ended December 31, 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 December 31, 2007, $2,030 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.)
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 December 31, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$627,609,811 $658,857,752
SECURITY LENDING At December 31, 2007, the Fund participated in securities
lending:
Loaned
securities at Cash
market value collateral
- --------------------------------------------------------------------------------
$21,462,938 $21,902,109
23
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
GE Investments Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Income Fund, a series of GE Investments Funds, Inc., including the schedule of
investments, as of December 31, 2007, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2007 by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Income Fund as of December 31, 2007, the results of its operations, changes in
its net assets and financial highlights for the years described above, in
conformity with U.S. generally accepted accounting principles.
KPMG LLP
Boston, Massachusetts
February 25, 2008
24
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
The Fund Board, including the independent Board members, considered and
unanimously approved the continuance of the Fund's investment advisory agreement
with GE Asset Management Incorporated ("GEAM") at meetings held on December 5
and December 12, 2007.
In considering whether to approve the Fund's investment advisory agreement, the
Board members, including the independent members, considered and discussed a
substantial amount of information and analysis provided, at the Board's request,
by GEAM. The Board members also considered detailed information regarding
performance and expenses of other investment companies, including those with
similar investment objectives and sizes, which was prepared by an independent
third party provider, Lipper Inc. ("Lipper"). The Board members reviewed the
fees charged by GEAM for other mutual funds and investment products other than
mutual funds that employ the same investment strategy as the Fund.
Before approving the Fund's advisory agreement, the Board members reviewed the
proposed continuance of the agreement with management of GEAM and with
independent legal counsel. The Board members also reviewed a memorandum prepared
by independent legal counsel discussing the legal standards for the
consideration of the proposed continuance. The independent Board members
discussed the proposed continuance in detail during a private session with their
independent legal counsel at which no representatives of GEAM were present. The
independent Board members and their independent legal counsel requested, and
received and considered, additional information from GEAM following this
session.
In advance of the meetings, and in response to their request, the Board members
received from GEAM written responses to their inquiries, which included
substantial exhibits and other materials related to GEAM's business and the
services it provides to the Fund. The Board members took into account their
multi-year experience as Board members and particularly their consideration of
these agreements in recent years, noting that the information was presented in a
similar manner and format. To focus their review, the Board members asked GEAM
management, in its oral presentation, to highlight material differences from the
information presented in recent years. During the meetings, the Board members
had an opportunity to discuss this information with GEAM managers, including
senior executives, representatives from the legal, compliance and finance
departments, and investment personnel. The Board members posed questions to
these representatives and engaged in substantive discussions with them
concerning GEAM's investment process.
In reaching their determination relating to continuance of the agreement, the
Board members considered all factors they believed relevant, including the
factors discussed below. In their deliberations, the Board members did not
identify any particular information that was all-important or controlling, and
each Board member attributed different weights to the various factors. In
particular, the Board members focused on the following:
THE NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED.
The Board members reviewed the services provided
by GEAM, and the Board members, including the independent members, concurred
that GEAM provides high quality advisory and administrative services to the
Fund.
In connection with their consideration of GEAM's services, the Board members
focused on the favorable attributes of GEAM, including (i) an investment
philosophy oriented toward long-term performance; (ii) effective processes used
for selecting investments, selecting brokers and with respect to Fund
administration, controllership and compliance activities; (iii) highly skilled
professionals, including analysts, research professionals and portfolio managers
with a depth of experience; (iv) access to significant technological resources
from which the Fund may benefit; and (v) a favorable history and reputation. The
Board members discussed with senior officers of GEAM the personnel changes made,
and proposed to be made, by GEAM. The Board members noted that the Fund
represents only a small portion of the assets managed by GEAM, but benefits from
a full array of services and resources provided by GEAM. In light of these
discussions, the Board members, including the independent members, concluded
that GEAM's services were of a high quality and had benefited the Fund.
25
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE FUND.
The Board members considered the investment performance of the Fund for various
periods. The Board members reviewed detailed comparisons of the performance of
the Fund with the relevant securities indexes and peer groupings of mutual funds
prepared by Lipper with respect to various periods. The Board members also
engaged in detailed discussions with GEAM management about the investment
process, focusing on the Fund's investment objective, the number and experience
of portfolio management and support research personnel, the investment style and
approach employed, the likely market cycles for the investment style, and the
relative underperformance of the Fund in certain periods in light of GEAM's
commitment to long-term satisfactory performance with respect to the Fund's
investment objective and investment approach. The Board members, including the
independent members, concluded that the Fund's performance was acceptable
overall taking into consideration the factors discussed above.
COST OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED FROM THE
RELATIONSHIP WITH THE FUND.
The Board members considered the cost of the services provided by GEAM. The
Board members reviewed the information they had requested from GEAM concerning
its profitability from the fees and services it provides to the Fund and the
financial condition of GEAM for various past periods. The Board members
considered the profit margin information for GEAM's investment company business
as a whole, as well as GEAM's profitability data for the Fund. The Board members
reviewed GEAM's assumptions and the methods of cost allocation used by GEAM in
preparing Fund-specific profitability data. The Board members also discussed
with GEAM the basis for its belief that the methods of allocation used were
reasonable and consistent across its business.
The Board members noted and discussed the additional services provided by GEAM
to the Fund compared to other investment products managed by GEAM. The Board
members determined that GEAM should be entitled to earn a reasonable level of
profits for the services it provides to the Fund. The Board members also
recognized that GEAM had made significant investments in its business and had
not fully recovered the sums invested.
Based on their review, the Board members, including
the independent members, concluded that they were satisfied that the level of
profitability achieved by GEAM from its relationship with the Fund was not
unreasonable or excessive.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS AND
WHETHER FEE LEVELS WOULD REFLECT SUCH ECONOMIES OF SCALE.
The Board members considered the extent to which economies of scale would be
realized as the Fund grows, and whether fee levels reflect these economies of
scale for the benefit of Fund investors. The Board members considered the
substantial infrastructure investments that GEAM has made with respect to its
operations and its commitment to continue investing resources to enhance
services to Fund shareholders. The Board members recognized the benefits to the
Fund of GEAM's past investment in its operations through the expenditure of sums
to support its substantial infrastructure, and that, with respect to all GEAM
managed mutual funds, GEAM has not yet fully recouped that investment. The Board
members also recognized the benefits to the Fund of being able to leverage a
favorable cost structure achieved with respect to the Fund's other operating
expenses as a result of GEAM's large overall base of assets under management and
its vendor management practices.
COMPARISON OF SERVICES TO BE RENDERED AND FEES TO BE PAID.
The Board members discussed the services provided to the Fund by GEAM, and the
fees charged for those services. The Board members reviewed information
concerning the fee and expense ratios for the Fund, and comparative information
with respect to similar products. They discussed that the Fund's figures were
within the applicable peer group range. In addition, the Board members
considered their discussion with representatives of GEAM about the fees being
charged to the Fund and, to the extent applicable, the effect, if any, of the
Securities and Exchange Commission staff's interpretive guidance concerning soft
dollars. In light of the foregoing, the Board members, including the independent
members, determined that the advisory fees were reasonable in relation to the
services provided to the Fund.
26
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
FALL-OUT BENEFITS.
The Board members considered other actual and potential financial benefits that
GEAM may derive from its relationship with the Fund, including, to the extent
applicable, soft dollar commission benefits generated through Fund portfolio
transactions. The Board members noted, however, that the Fund benefits from the
vast array of resources available through GEAM, and that the Fund represents
only a small portion of the assets managed by GEAM.
CONCLUSION.
No single factor was determinative to the Board members' decision. Based on
their discussion and such other matters as were deemed relevant, the Board
members, including the independent members, concluded that the proposed advisory
fee and projected total expense ratio are reasonable in relation to the services
provided to the Fund. In view of these facts, the Board members, including the
independent members, concluded that the renewal of the advisory agreement was in
the best interests of the Fund and its shareholders.
27
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.
28
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 Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
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
29
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.
30
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL 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 OPERATING OFFICER
(AS OF JANUARY 31, 2008)
31
[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 FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
U.S. Equity Fund
Annual Report
DECEMBER 31, 2007
[GE LOGO OMITTED]
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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ............................................................. 20
TAX INFORMATION ..................................................................................................... 21
ADVISORY AND ADMINISTRATIVE AGREEMENT RENEWAL ....................................................................... 22
ADDITIONAL INFORMATION .............................................................................................. 25
INVESTMENT TEAM ..................................................................................................... 28
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance December 31, 2007
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
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(R) Composite Price Index of stocks (S&P 500
Index) is an unmanaged index and does not reflect the actual cost of investing
in the instruments that comprise the index.
The S&P 500 Index is a market capitalization-weighted index of stocks of 500
large U.S. companies, which is widely used as a measure of large-cap stock
market performance. The results shown for the foregoing index assume the
reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer 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.
- -------------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUNDS.
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 MANAGES
(OR CO-MANAGES) ONE OF THREE SUB-PORTFOLIOS, WHICH COMPRISE THE FUND. THE THREE
SUB-PORTFOLIOS ARE MANAGED INDEPENDENTLY OF EACH OTHER AND THE PORTFOLIO
MANAGERS HAVE FULL DISCRETION OVER THEIR SUB-PORTFOLIO. THE WEIGHTINGS TO EACH
SUB-PORTFOLIO IN THE U.S. EQUITY FUND, WHICH CAN BE CHANGED AT ANY TIME BUT
GENERALLY REMAIN STABLE FOR 18 TO 24 MONTHS, ARE DRIVEN BY THE OBJECTIVE OF
KEEPING THE FUND "STYLE NEUTRAL" SUCH THAT IT COMBINES GROWTH AND VALUE
INVESTMENT MANAGEMENT STYLES AND DOES NOT TEND TO FAVOR EITHER STYLE.
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
U.S. EQUITIES. MR. LINCOLN BECAME PART OF THE INVESTMENT MANAGEMENT TEAM FOR
U.S. EQUITIES AT GE ASSET MANAGEMENT IN 1997 AND A PORTFOLIO MANAGER FOR U.S.
EQUITIES IN 2003.
PAUL C. REINHARDT IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN
A PORTFOLIO MANAGER FOR THE 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. EQUITIES GROUP FROM 1995 THROUGH 2001.
Q. HOW DID THE U.S. EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND
LIPPER PEER GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the U.S. Equity Fund
returned 8.01%. The S&P 500 Index, the Fund's benchmark, returned 5.50% and
the Fund's Lipper peer group of 203 Large-Cap Core funds returned an average
of 5.78% for the same period.
[PHOTO OMITTED]
2
Q&A
- --------------------------------------------------------------------------------
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. In the first half of the year, stocks rallied due to strong corporate
earnings, record M&A activity, cooling inflation worries and in the absence
of Fed tightening. The market's climb was interrupted by global liquidity
concerns in February, and again in late June and July of 2007, amid a credit
crunch brought about by rising sub-prime mortgage defaults. However,
accommodative actions by the Fed in late summer/early fall propelled the
markets higher, and the S&P 500 reached a record high of 1,565 in early
October as Fed remarks allayed investor concerns that the economy was headed
for recession. However, stocks pulled back sharply during the balance of the
fourth quarter, reflecting investor concerns over the economic impact of the
housing- and credit-market turmoil and record-high oil prices. In this
environment, the growth style of investing outperformed the value style for
the first time in seven years. Large caps also outperformed small, as these
higher-quality companies are better able to sustain earnings growth during a
significant economic slowdown.
Eight out of ten S&P 500 sectors had positive returns, and each of these was
in the double-digits, led by sectors tilted toward global infrastructure
investment and booming commodity prices, including energy (+35%) and
materials (+23%). Utilities (+20%) were a good place to be, and technology
(+16%) showed strength as the sector's high proportion of non-US revenues
promised some insulation from a slowing domestic economy. The two sectors
that lagged brought the index return down into the mid-single digits, as the
S&P 500 returned +5.5% for the year. Financials (-19%) lagged the most,
facing credit cycle headwinds and broken balance sheets. Consumer
discretionary (-13%) also lagged the broad market as the recession debate
increased.
Q. WHAT WERE THE PRIMARY DRIVERS OF
FUND PERFORMANCE?
A. The Fund's preference for large, high quality companies paid off in a year
where stock market volatility increased. Underweighting financials--the S&P
500's worst performing sector--was the Fund's primary driver of
outperformance. Underweighting commercial banks and consumer finance
companies, as well as focusing on State Street (+22%) within the capital
markets industry, provided key downside protection. Strong stock selection
in the materials, industrials and energy sectors also drove gains. While
these sectors have been buoyed by robust investment in developing economies,
the Fund has owned some the top performers, including Hess (+105%), global
oil services giants Transocean (+67%) and Schlumberger (+57%), aerospace
leader Textron (+54%) and agricultural bioengineering company Monsanto
(+115%). Defensive consumer staples stocks also benefited the Fund against
the backdrop of a slowing U.S. economy, with large cap multinationals like
Pepsi (+24%) and Procter & Gamble (+17%) boosting returns.
Partially offsetting the Fund's broad-based strength were negative
contributions from healthcare and telecommunications. Most notable was a
pullback in Amgen (-32%), which suffered amid safety concerns regarding its
anemia drugs and increased FDA scrutiny. However, we continued to like the
strength in Amgen's pipeline of biotech products, and its long-term
prospects. Our continued underweight in telecommunications was another key
detractor. While we have been adding to our position in AT&T (+21%), our
underweight versus the benchmark hampered returns, as did the lag in Latin
wireless provider, NII Holdings (-38%). We continued to believe that the
cable companies would be more successful taking share from phone companies
rather than vice versa, hence our larger relative weighting in media, taking
a long-term view. Unfortunately, disappointing results at cable giant,
Comcast (-35%) detracted from relative performance this year.
3
<page>
U.S. Equity Fund
- --------------------------------------------------------------------------------
Q&A
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. There were no significant changes to the Fund during the year, as we have
remained 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 year-end, our largest
overweight was in technology--an area that we believe could benefit from
multiple expansion in the months to come due to the large international
component of tech earnings, and its above average growth prospects. Overall,
our tech holdings tend not to be the most economically sensitive, with high
recurring revenues and ample free cash flow. We added to our overweight in
consumer staples and materials during the period. We also capitalized on
strength in the energy and utilities sectors to take some profits, and we
reduced our overweight in healthcare due to some increased uncertainty in
the risk landscape.
The U.S. has experienced economic growth that we believe was below potential
in 2007, and earnings growth has slowed. We are constructive on our
positioning in this environment and the high quality of our holdings. We had
expected the companies in the Fund's portfolio 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
year. 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
<page>
U.S. Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended December
31, 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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,010.68 3.41
- ---------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,021.60 3.41
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.67% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2007 WAS: 1.07%.
5
U.S. Equity Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
GEI U.S. EQUITY S&P 500 INDEX
12/97 $10000 $10000
12/98 12341 12870
12/99 14761 15581
12/00 14674 14150
12/01 13430 12465
12/02 10843 9710
12/03 13367 12499
12/04 14459 13859
12/05 14822 14541
12/06 17211 16837
12/07 18590 17763
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
U.S. Equity Fund 8.01% 11.38% 6.40%
- --------------------------------------------------------------------------------
S&P 500 Index 5.50% 12.84% 5.91%
- --------------------------------------------------------------------------------
Lipper peer group average* 5.78% 12.19% 5.06%
- --------------------------------------------------------------------------------
Inception date 1/3/95
- --------------------------------------------------------------------------------
U.S. Equity Fund (ending value $18,590)
S&P 500 Index (ending value $17,763)
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 DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 3.37%
- --------------------------------------------------------------------------------
Microsoft Corp. 3.18%
- --------------------------------------------------------------------------------
American International Group, Inc. 3.03%
- --------------------------------------------------------------------------------
Procter & Gamble Co. 2.99%
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 2.57%
- --------------------------------------------------------------------------------
PepsiCo, Inc. 2.44%
- --------------------------------------------------------------------------------
Industrial Select Sector SPDR Fund 2.24%
- --------------------------------------------------------------------------------
UnitedHealth Group, Inc. 2.07%
- --------------------------------------------------------------------------------
Amgen, Inc. 2.03%
- --------------------------------------------------------------------------------
State Street Corp. 2.00%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
AS OF DECEMBER, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $77,966 (in thousands)
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
Information Technology 22.4%
Healtcare 13.1%
Financials 12.9%
Consumer Staples 11.6%
Energy 10.5%
Industrials 10.2%
Consumer Discretionary 8.4%
Materials 3.7%
Utilities 2.7%
Telecommunication Services 2.4%
Short-Term 2.1%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE YEAR, FIVE-YEAR AND TEN-YEAR PERIODS INDICATED IN THE LARGE-CAP CORE
FUNDS PEER GROUP CONSISTING OF 203, 163 AND 69 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 December 31, 2007
- --------------------------------------------------------------------------------
U.S. EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 95.3%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 8.4%
Bed Bath & Beyond, Inc. 22,984 $ 675,500(a)
Cablevision Systems Corp. 3,759 92,096(a)
Carnival Corp. 12,444 553,634
Comcast Corp. (Class A) 60,284 1,092,346(a)
General Motors Corp. 3,472 86,418
Kohl's Corp. 3,204 146,743(a)
Koninklijke Philips
Electronics N.V. ADR 6,749 288,520
Liberty Global, Inc. (Series C) 6,380 233,444(a)
Liberty Media Holding Corp -
Capital (Series A) 3,370 392,571(a)
Lowe's Companies, Inc. 21,175 478,979
News Corp. (Class A) 15,548 318,578
Omnicom Group, Inc. 26,861 1,276,703
Staples, Inc. 6,990 161,259
Target Corp. 2,257 112,850
The Cheesecake Factory 3,968 94,081(a)
Time Warner, Inc. 31,977 527,940
6,531,662
CONSUMER STAPLES -- 11.6%
Alberto-Culver Co. 8,278 203,142
Clorox Co. 7,893 514,387
Colgate-Palmolive Co. 10,426 812,811
Diageo PLC ADR 1,658 142,306
General Mills, Inc. 13,120 747,840
Kimberly-Clark Corp. 14,006 971,176
McCormick & Company, Inc. 10,264 389,108
Nestle S.A. ADR 2,229 255,221
PepsiCo, Inc. 25,088 1,904,179
Procter & Gamble Co. 31,736 2,330,057
Sara Lee Corp. 7,893 126,762
The Coca-Cola Co. 1,866 114,516
The Estee Lauder Companies Inc.
(Class A) 3,891 169,686
Wal-Mart Stores, Inc. 7,774 369,498
9,050,689
ENERGY -- 10.6%
Apache Corp. 2,384 256,375
Devon Energy Corp. 4,987 443,394
EOG Resources, Inc. 3,363 300,148
Exxon Mobil Corp. 28,022 2,625,381
Halliburton Co. 19,847 752,400
Hess Corp. 8,657 873,145
Marathon Oil Corp. 1,711 104,131
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Nabors Industries Ltd. 4,385 $ 120,105(a)
Schlumberger Ltd. 12,664 1,245,758
Suncor Energy, Inc. 1,180 128,301
Transocean, Inc. 9,491 1,358,637
8,207,775
FINANCIALS -- 12.4%
ACE Ltd. 5,452 336,825
Allstate Corp. 6,012 314,007
American International
Group, Inc. 40,498 2,361,033
AON Corp. 6,219 296,584
Bank of New York Mellon Corp. 8,499 414,411
Berkshire Hathaway, Inc.
(Class B) 15 71,040(a)
BlackRock Inc. (Class A) 829 179,727
CB Richard Ellis
Group, Inc. (Class A) 15,247 328,573(a)
Chubb Corp. 6,219 339,433
Citigroup, Inc. 27,858 820,139
Federal Home Loan
Mortgage Corp. 12,581 428,635
Federal National Mortgage Assoc. 6,519 260,630
Goldman Sachs Group, Inc. 958 206,018
Hartford Financial
Services Group, Inc. 1,901 165,748
HCC Insurance Holdings, Inc. 4,282 122,808
JP Morgan Chase & Co. 3,137 136,930
Metlife, Inc. 13,564 835,814
State Street Corp. 19,179 1,557,335(d)
SunTrust Banks, Inc. 5,950 371,816
US Bancorp 2,505 79,509
9,627,015
HEALTHCARE -- 13.1%
Abbott Laboratories 13,803 775,038
Aetna, Inc. 11,227 648,135
Amgen, Inc. 34,124 1,584,719(a)
Baxter International, Inc. 8,745 507,647
Boston Scientific Corp. 9,775 113,683(a)
Bristol-Myers Squibb Co. 9,710 257,509
Covidien Ltd. 6,885 304,937
DaVita, Inc. 4,509 254,082(a)
Genentech Inc. 2,819 189,070(a)
Gilead Sciences, Inc. 8,071 371,347(a)
GlaxoSmithKline PLC ADR 3,572 179,993
Johnson & Johnson 3,576 238,519
Lincare Holdings Inc. 1,268 44,583(a)
McKesson Corp. 4,820 315,758
Medco Health Solutions, Inc. 877 88,928(a)
Medtronic Inc. 11,533 579,764
Merck & Company, Inc. 5,046 293,223
Novartis AG ADR 1,192 64,737
Resmed, Inc. 7,877 413,779(a)
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements.
7
<page>
U.S. EQUITY FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Thermo Electron Corp. 1,918 $ 110,630(a)
UnitedHealth Group, Inc. 27,782 1,616,912
Wyeth 28,355 1,253,007
10,206,000
INDUSTRIALS -- 8.0%
ABB Ltd. ADR 8,292 238,810
CAE, Inc. 32,512 438,457
Cooper Industries Ltd. 6,264 331,240
Deere & Co. 3,835 357,115
Dover Corp. 14,431 665,125
Eaton Corp. 1,566 151,824
Emerson Electric Co. 6,970 394,920
General Dynamics Corp. 6,538 581,817
Hexcel Corp. 7,567 183,727(a)
ITT Corp. 2,756 182,006
Monster Worldwide, Inc. 1,515 49,086(a)
Northrop Grumman Corp. 626 49,229
Rockwell Collins, Inc. 829 59,663
Textron Inc. 14,883 1,061,158
3M Co. 4,820 406,422
United Technologies Corp. 13,513 1,034,285
6,184,884
INFORMATION TECHNOLOGY -- 22.4%
Affiliated Computer
Services, Inc. (Class A) 4,385 197,764(a)
Alibaba.com Ltd. 5,530 19,964(a,b)
Analog Devices, Inc. 8,551 271,067
Automatic Data Processing, Inc. 7,848 349,471
Cisco Systems, Inc. 73,896 2,000,365(a)
Corning Incorporated 16,743 401,665
Dell, Inc. 2,332 57,157(a)
EMC Corp. 3,007 55,720(a)
Fidelity National Information
Services, Inc. 8,415 349,980
Hewlett-Packard Co. 16,862 851,194
Intel Corp. 56,921 1,517,514
International Business
Machines Corp. 6,352 686,651
Intuit Inc. 15,695 496,119(a)
Lam Research Corp. 2,631 113,738(a)
Maxim Integrated Products, Inc. 12,598 333,595
Microchip Technology Inc. 11,488 360,953
Microsoft Corp. 69,737 2,482,637
Molex, Inc. (Class A) 13,677 359,295
National Semiconductor Corp. 9,536 215,895
Oracle Corp. 67,724 1,529,208(a)
Paychex, Inc. 20,019 725,088
QUALCOMM, Inc. 31,622 1,244,326
Research In Motion Ltd. 2,862 324,551(a)
Salesforce.com, Inc. 1,303 81,685(a)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Taiwan Semiconductor
Manufacturing
Company Ltd. ADR 18,140 $ 180,672
Texas Instruments Incorporated 9,381 313,325
Western Union Co. 55,633 1,350,769
Yahoo! Inc. 23,989 557,984(a)
17,428,352
MATERIALS -- 3.7%
Alcoa, Inc. 4,146 151,536
Allegheny Technologies
Incorporated 4,390 379,296
Barrick Gold Corp. 17,152 721,242
Freeport-McMoRan Copper &
Gold Inc. (Class B) 3,363 344,506
Monsanto Co. 6,893 769,879
PAN American Silver Corp. 3,758 131,267(a)
Praxair, Inc. 4,281 379,767
2,877,493
TELECOMMUNICATION SERVICES -- 2.4%
AT&T, Inc. 3,110 129,252
NII Holdings Inc. (Class B) 18,030 871,210(a)
Sprint Nextel Corp. (Series 1) 1,280 16,806
Verizon Communications Inc. 16,928 739,584
Vodafone Group, PLC ADR 3,524 131,516
1,888,368
UTILITIES -- 2.7%
American Electric Power
Company, Inc. 2,280 106,157
Constellation Energy Group, Inc. 3,132 321,124
Dominion Resources, Inc. 16,883 801,098
Edison International 4,146 221,272
Entergy Corp. 2,591 309,676
FPL Group, Inc. 3,393 229,978
PG&E Corp. 3,295 141,982
2,131,287
TOTAL COMMON STOCK
(COST $67,181,869) 74,133,525
EXCHANGE TRADED FUNDS -- 2.8%
Financial Select Sector SPDR Fund 14,831 429,061(e,g)
Industrial Select Sector SPDR Fund 44,636 1,747,946(e,g)
TOTAL EXCHANGE TRADED FUNDS
(COST $1,698,431) 2,177,007
TOTAL INVESTMENTS IN SECURITIES
(COST $68,880,300) 76,310,532
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements.
8
<page>
U.S. EQUITY FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.1%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
4.96% 1,655,481 $ 1,655,481(c,f)
(COST $1,655,481)
TOTAL INVESTMENTS
(COST $70,535,781) 77,966,013
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (0.2)% (189,191)
-----------
NET ASSETS-- 100.0% $77,776,822
===========
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI U.S. Equity had the following long futures contracts open at
December 31, 2007.
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE APPRECIATION
- --------------------------------------------------------------------------------
S&P 500 Index
Futures March 2008 2 $738,600 $5,105
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements.
9
<page>
Notes to Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
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 December 31, 2007, these securities amounted to
$19,964 or 0.03% of net assets. These securities have been determined to be
liquid using procedures established by the Board of Trustees.
(c) Coupon amount represents effective yield.
(d) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(e) At December 31, 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) GE Asset Management (GEAM), the investment advisor of the Fund, also 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 December 31, 2007.
Abbreviations:
ADR American Depository Receipt
SPDR Standard & Poors Depository Receipts
10
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY FUND
12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
- -----------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- 1/3/95
Net asset value, beginning of period ........................... $39.02 $34.06 $33.61 $31.48 $25.75
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ....................................... 0.45 0.53 0.39 0.44 0.26
Net realized and unrealized
gains/(losses) on investments ............................ 2.70 4.96 0.46 2.13 5.73
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS 3.15 5.49 0.85 2.57 5.99
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ....................................... 0.44 0.53 0.40 0.44 0.26
Net realized gains .......................................... 5.32 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................................ 5.76 0.53 0.40 0.44 0.26
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ................................. $36.41 $39.02 $34.06 $33.61 $31.48
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (A) ............................................... 8.01% 16.12% 2.51% 8.17% 23.28%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .................... $77,777 $101,885 $98,883 $112,545 $114,123
Ratios to average net assets:
Net investment income .................................... 0.94% 1.43% 1.06% 1.30% 0.95%
Expenses ................................................. 0.66% 0.63% 0.63% 0.63% 0.61%
Portfolio turnover rate ..................................... 55% 45% 40% 30% 39%
- -----------------------------------------------------------------------------------------------------------------------------------
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.
See Notes to Financial Statements.
11
<Page>
Statement of Assets
and Liabilities DECEMBER 31, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
U.S.
EQUITY
FUND
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $68,880,300) ..................................... $76,310,532
Short-term affiliated investments (at amortized cost) ....................................... 1,655,481
Foreign cash (cost $289) .................................................................... 286
Receivable for investments sold ............................................................. 33,143
Income receivables .......................................................................... 88,043
Receivable for fund shares sold ............................................................. 1,355
Other assets ................................................................................ 45
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................................................................ 78,088,885
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed ............................................................ 197,349
Payable to GEAM ............................................................................. 110,564
Variation margin payable .................................................................... 4,150
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ....................................................................... 312,063
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ..................................................................................... $77,776,822
===================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ............................................................................. 70,422,094
Undistributed (distribution in excess of) net investment income ............................. 7,946
Accumulated net realized gain (loss) ........................................................ (88,552)
Net unrealized appreciation/(depreciation) on:
Investments ............................................................................. 7,430,232
Futures ................................................................................. 5,105
Foreign currency related transactions ................................................... (3)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ..................................................................................... $77,776,822
===================================================================================================================================
NET ASSETS ..................................................................................... 77,776,822
Shares outstanding ($0.01 par value; unlimited shares authorized) .............................. 2,135,865
Net asset value per share ...................................................................... $36.41
See Notes to Financial Statements.
12
<page>
Statement of Operations
FOR THE YEAR ENDED DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
U.S.
EQUITY
FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ........................................................................... $ 1,312,927
Interest* .......................................................................... 47,885
Interest from affiliated investments ............................................... 51,574
Less: Foreign taxes withheld ....................................................... (4,426)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ......................................................................... 1,407,960
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ................................................... 485,039
Transfer agent ..................................................................... 63
Director's fees .................................................................... 2,197
Custody and accounting expenses .................................................... 57,517
Professional fees .................................................................. 19,574
Registration expenses .............................................................. 3,997
Other expenses ..................................................................... 12,892
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ....................................................................... 581,279
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ................................................................ 826,681
===========================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ..................................................................... 12,359,972
Futures ......................................................................... 85,323
Foreign currency transactions ................................................... (84)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ..................................................................... (6,238,563)
Futures ......................................................................... 3,635
Foreign currency transactions ................................................... (3)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments .................................... 6,210,280
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................. $ 7,036,961
===========================================================================================================================
* Income attributable to security lending activity, net of rebate expenses, for
the U.S. Equity Fund was $3,734.
See Notes to Financial Statements.
13
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
U.S.
EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income ........................................................... $ 826,681 $ 1,379,790
Net realized gain on investments, futures, written options,
foreign currency transactions and swaps ........................................ 12,445,211 8,114,057
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation ......... (6,234,931) 5,009,082
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase from operations ..................................................... 7,036,961 14,502,929
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................................ (821,468) (1,376,973)
Net realized gains ............................................................... (9,856,050) --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................ (10,677,518) (1,376,973)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations .............................. (3,640,557) 13,125,956
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ..................................................... 831,344 10,918,601
Value of distributions reinvested ................................................ 10,677,532 1,376,973
Cost of shares redeemed .......................................................... (31,976,001) (22,419,927)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease from share transactions ............................................. (20,467,125) (10,124,353)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................ (24,107,682) 3,001,603
NET ASSETS
Beginning of period ................................................................ 101,884,504 98,882,901
- ------------------------------------------------------------------------------------------------------------------------------------
End of period ...................................................................... $ 77,776,822 $101,884,504
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ........ $ 7,946 $ 2,817
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ...................................................................... 20,172 296,918
Issued for distributions reinvested .............................................. 291,815 35,118
Shares redeemed .................................................................. (787,114) (624,307)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in fund shares ........................................................... (475,127) (292,271)
====================================================================================================================================
See Notes to Financial Statements.
14
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized costs, which approximates market
value.
All assets and liabilities of the Fund's initially expressed in foreign currency
values will be converted into U.S. dollars at the WM exchange rate computed at
11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security,
or if it is believed that a price for a portfolio security does not represent
its fair value, the security may be valued using procedures approved by the
Fund's Board of Directors that are designed to establish its "fair" value. Those
procedures require that the fair value of a security be established by the fair
valuation committee. The fair valuation committee follows different protocols
for different types of investments and circumstances. The fair value procedures
may be used to value any investment by the Fund in the appropriate
circumstances. Examples of the types of securities that may be fair valued
include: thinly traded or illiquid investments, high-yield securities or foreign
securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
15
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
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 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 custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the
16
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
underlying instrument while selling futures tends to decrease the Fund's
exposure to the underlying instrument, or hedge other Fund investments. The Fund
will not enter into a transaction involving futures for speculative purposes.
The Fund's risks in using these contracts include changes in the value of the
underlying instruments, non-performance of the counterparties under the
contracts' terms and changes in the liquidity of the secondary market for the
contracts. Futures contracts are valued at the settlement price established each
day by the board of trade or exchange on which they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. The Fund will not enter
into a transaction involving options for speculative purposes. The Fund's risks
in using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Options
are valued at the last sale price, or if no sales occurred on that day, at the
last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
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 December 31, 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
- ------------------------------------------------------------------------------------------------------------------------------------
$71,376,681 $11,393,998 $(4,804,666) $6,589,332
17
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
Net Tax Appreciation/ Undistributed Undistributed
(Depreciation) on Income/ Long-Term Gains/ Post
Derivatives, Currency (Accumulated (Accumulated October
and Other Net Assets Ordinary Loss) Capital Loss) Losses
- ---------------------------------------------------------------------------------------------------------------------------
$(3) $357,223 $408,176 $--
As of December 31, 2007, 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, 2007, the Fund utilized approximately
$788,340 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, 2007.
The tax composition of distributions paid during the years ended December 31,
2007 and December 31, 2006 were as follows:
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
2007 $ 821,468 $9,856,050 $10,677,518
2006 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.
The reclassifications for the year ended December 31, 2007 were as follows:
Undistributed
(Distribution in
Excess of)
Net Investment Accumulated
Income Net Realized Gain
- --------------------------------------------------------------------------------
$(84) $84
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Expenses of the Company which are directly identifiable to the Fund are
allocated to the portfolio. Expenses which are not directly identifiable to the
Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expenses and relative size of the Fund. All
expenses of the Fund are paid by GEAM and reimbursed by the Fund.
18
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
3. LINE OF CREDIT
The Company 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. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established November 7, 2007. Generally, borrowings under the
credit facilities would accrue interest at the Federal Funds Rate plus 50 basis
points and would be borne by the borrowing Fund. The maximum amount allowed to
be borrowed by any one Fund is the lesser of (i) its prospectus limitation or
(ii) 20% of its net assets. The credit facilities were not utilized by the Fund
during the period ended December 31, 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 December 31, 2007, $1,372 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 December 31, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$47,307,823 $76,111,347
SECURITY LENDING At December 31, 2007, the Fund did not participate in
securities lending.
19
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
GE Investments Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the U.S.
Equity Fund, a series of GE Investments Funds, Inc., including the schedule of
investments, as of December 31, 2007, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2007 by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
U.S. Equity Fund as of December 31, 2007, the results of its operations, changes
in its net assets and financial highlights for the years described above, in
conformity with U.S. generally accepted accounting principles.
KPMG LLP
Boston, Massachusetts
February 25, 2008
20
<page>
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For the year ended December 31, 2007
SUMMARY
During the year ended December 31, 2007, the Fund paid to shareholders of record
on December 26, 2007, the following long-term capital gain dividends 2007:
FUND NAME PER SHARE AMOUNT
- --------------------------------------------------------------------------------
GE Investments Funds, Inc.-- U.S. Equity Fund $5.32040
21
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
The Fund Board, including the independent Board members, considered and
unanimously approved the continuance of the Fund's investment advisory agreement
with GE Asset Management Incorporated ("GEAM") at meetings held on December 5
and December 12, 2007.
In considering whether to approve the Fund's investment advisory agreement, the
Board members, including the independent members, considered and discussed a
substantial amount of information and analysis provided, at the Board's request,
by GEAM. The Board members also considered detailed information regarding
performance and expenses of other investment companies, including those with
similar investment objectives and sizes, which was prepared by an independent
third party provider, Lipper Inc. ("Lipper"). The Board members reviewed the
fees charged by GEAM for other mutual funds and investment products other than
mutual funds that employ the same investment strategy as the Fund.
Before approving the Fund's advisory agreement, the Board members reviewed the
proposed continuance of the agreement with management of GEAM and with
independent legal counsel. The Board members also reviewed a memorandum prepared
by independent legal counsel discussing the legal standards for the
consideration of the proposed continuance. The independent Board members
discussed the proposed continuance in detail during a private session with their
independent legal counsel at which no representatives of GEAM were present. The
independent Board members and their independent legal counsel requested, and
received and considered, additional information from GEAM following this
session.
In advance of the meetings, and in response to their request, the Board members
received from GEAM written responses to their inquiries, which included
substantial exhibits and other materials related to GEAM's business and the
services it provides to the Fund. The Board members took into account their
multi-year experience as Board members and particularly their consideration of
these agreements in recent years, noting that the information was presented in a
similar manner and format. To focus their review, the Board members asked GEAM
management, in its oral presentation, to highlight material differences from the
information presented in recent years. During the meetings, the Board members
had an opportunity to discuss this information with GEAM managers, including
senior executives, representatives from the legal, compliance and finance
departments, and investment personnel. The Board members posed questions to
these representatives and engaged in substantive discussions with them
concerning GEAM's investment process.
In reaching their determination relating to continuance of the agreement, the
Board members considered all factors they believed relevant, including the
factors discussed below. In their deliberations, the Board members did not
identify any particular information that was all-important or controlling, and
each Board member attributed different weights to the various factors. In
particular, the Board members focused on the following:
THE NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED.
The Board members reviewed the services provided by GEAM, and the Board members,
including the independent members, concurred that GEAM provides high quality
advisory and administrative services to the Fund.
In connection with their consideration of GEAM's services, the Board members
focused on the favorable attributes of GEAM, including (i) an investment
philosophy oriented toward long-term performance; (ii) effective processes used
for selecting investments, selecting brokers and with respect to Fund
administration, controllership and compliance activities; (iii) highly skilled
professionals, including analysts, research professionals and portfolio managers
with a depth of experience; (iv) access to significant technological resources
from which the Fund may benefit; and (v) a favorable history and reputation. The
Board members discussed with senior officers of GEAM the personnel changes made,
and proposed to be made, by GEAM. The Board members noted that the Fund
represents only a small portion of the assets managed by GEAM, but benefits from
a full array of services and resources provided by GEAM. In light of these
discussions, the Board members, including the independent members, concluded
that GEAM's services were of a high quality and had benefited the Fund.
22
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE FUND.
The Board members considered the investment performance of the Fund for various
periods. The Board members reviewed detailed comparisons of the performance of
the Fund with the relevant securities indexes and peer groupings of mutual funds
prepared by Lipper with respect to various periods. The Board members also
engaged in detailed discussions with GEAM management about the investment
process, focusing on the Fund's investment objective, the number and experience
of portfolio management and supporting research personnel, the investment style
and approach employed, the likely market cycles for the investment style, and
the relative underperformance of the Fund in certain periods in light of GEAM's
commitment to long-term satisfactory performance with respect to the Fund's
investment objective and investment approach. The Board members, including the
independent members, concluded that the Fund's performance was acceptable
overall taking into consideration the factors discussed above.
COST OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED FROM THE
RELATIONSHIP WITH THE FUND.
The Board members considered the cost of the services provided by GEAM. The
Board members reviewed the information they had requested from GEAM concerning
its profitability from the fees and services it provides to the Fund and the
financial condition of GEAM for various past periods. The Board members
considered the profit margin information for GEAM's investment company business
as a whole, as well as GEAM's profitability data for the Fund. The Board members
reviewed GEAM's assumptions and the methods of cost allocation used by GEAM in
preparing Fund-specific profitability data. The Board members also discussed
with GEAM the basis for its belief that the methods of allocation used were
reasonable and consistent across its business.
The Board members noted and discussed the additional services provided by GEAM
to the Fund compared to other investment products managed by GEAM. The Board
members determined that GEAM should be entitled to earn a reasonable level of
profits for the services it provides to the Fund. The Board members also
recognized that GEAM had made significant investments in its business and had
not fully recovered the sums invested. Based on their review, the Board members,
including the independent members, concluded that they were satisfied that the
level of profitability achieved by GEAM from its relationship with the Fund was
not unreasonable or excessive.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS AND
WHETHER FEE LEVELS WOULD REFLECT SUCH ECONOMIES OF SCALE.
The Board members considered the extent to which economies of scale would be
realized as the Fund grows, and whether fee levels reflect these economies of
scale for the benefit of Fund investors. The Board members considered the
substantial infrastructure investments that GEAM has made with respect to its
operations and its commitment to continue investing resources to enhance
services to Fund shareholders. The Board members recognized the benefits to the
Fund of GEAM's past investment in its operations through the expenditure of sums
to support its substantial infrastructure, and that, with respect to all GEAM
managed mutual funds, GEAM has not yet fully recouped that investment. The Board
members also recognized the benefits to the Fund of being able to leverage a
favorable cost structure achieved with respect to the Fund's other operating
expenses as a result of GEAM's large overall base of assets under management and
its vendor management practices.
COMPARISON OF SERVICES TO BE RENDERED AND FEES TO BE PAID.
The Board members discussed the services provided to the Fund by GEAM, and the
fees charged for those services. The Board members reviewed information
concerning the fee and expense ratios for the Fund, and comparative information
with respect to similar products. They discussed that the Fund's figures were
within the applicable peer group range. In addition, the Board members
considered their discussion with representatives of GEAM about the fees being
charged to the Fund and, to the extent applicable, the effect, if any, of the
Securities and Exchange Commission staff's interpretive guidance concerning soft
dollars. In light of the foregoing, the Board members, including the independent
members, determined that the advisory fees were reasonable in relation to the
services provided to the Fund.
23
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
FALL-OUT BENEFITS.
The Board members considered other actual and potential financial benefits that
GEAM may derive from its relationship with the Fund, including, to the extent
applicable, soft dollar commission benefits generated through Fund portfolio
transactions. The Board members noted, however, that the Fund benefits from the
vast array of resources available through GEAM, and that the Fund represents
only a small portion of the assets managed by GEAM.
CONCLUSION.
No single factor was determinative to the Board members' decision. Based on
their discussion and such other matters as were deemed relevant, the Board
members, including the independent members, concluded that the proposed advisory
fee and projected total expense ratio are reasonable in relation to the services
provided to the Fund. In view of these facts, the Board members, including the
independent members, concluded that the renewal of the advisory agreement was in
the best interests of the Fund and its shareholders.
24
<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.
25
<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 Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
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
26
<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.
27
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL 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 OPERATING OFFICER (AS OF JANUARY 31, 2008)
28
<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 FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
Value Equity Fund
Annual Report
DECEMBER 31, 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ............................................................. 18
TAX INFORMATION ..................................................................................................... 19
ADVISORY AND ADMINISTRATIVE AGREEMENT RENEWAL ....................................................................... 20
ADDITIONAL INFORMATION .............................................................................................. 23
INVESTMENT TEAM ..................................................................................................... 26
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance December 31, 2007
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
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(R) Composite Price Index of stocks (S&P 500
Index) is an unmanaged index and does not reflect the actual cost of investing
in the instruments that comprise the index.
The S&P 500 Index is an unmanaged, market capitalization-weighted index of
stocks of 500 large U.S. companies, which is widely used as a measure of
large-cap stock market performance. The results shown for the foregoing index
assume the reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer 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.
- ---------------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUNDS.
1
<page>
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 U.S. EQUITIES GROUP 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 TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the Value Equity Fund
returned 10.10%. The S&P 500 Index, the Fund's benchmark, returned 5.50% and
the Fund's Lipper peer group of 203 Large-Cap Core funds returned an average
of 5.78% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED
FUND PERFORMANCE?
A. In the first half of the year, stocks rallied amid strong corporate
earnings, record M&A activity, cooling inflation worries and in the absence
of Fed tightening. The market's climb was interrupted by global liquidity
concerns in February, and again in late June and July of 2007, amid a credit
crunch brought about by rising sub-prime mortgage defaults. However Fed
monetary easing propelled the markets higher, and by early October the S&P
500 reached a record high of 1,565. However, stocks pulled back sharply
during the balance of the fourth quarter, reflecting investor concerns over
the economic impact of the housing- and credit-market turmoil and
record-high oil prices. In this environment, the growth style of investing
outperformed the value style for the first time in seven years. Large-caps
also outperformed small-cap companies, as these higher-quality companies are
perceived to have the financial strength and scale to sustain earnings
growth during a significant economic slowdown.
Eight out of ten S&P 500 sectors had positive returns, and each of these was
in the double-digits, led by sectors tilted toward global infrastructure
investment and booming commodity prices, including energy (+35%) and
materials (+23%). Utilities (+20%) were a good place to be, and technology
(+16%) showed strength as the sector's high proportion of non-US revenues
promised some insulation from a slowing domestic economy. The two sectors
that lagged brought the index return down into the mid-single
[PHOTO OMITTED]
2
<page>
Q&A
- --------------------------------------------------------------------------------
digits, as the S&P 500 returned +5.5% for the year. Financials (-19%) lagged
the most, facing credit cycle headwinds. Consumer discretionary (-13%) also
underperformed the broad market as the recession debate increased.
Q. WHAT WERE THE PRIMARY DRIVERS OF
FUND PERFORMANCE?
A. The Fund appeared to have fired on all cylinders this year with positive
contributions from nine out of the ten S&P 500 sectors. The Fund was well
positioned to withstand the financial market turmoil due to an underweight
in the companies most exposed to seizing credit markets, including those in
the banks, capital markets, consumer finance and mortgage industries.
Sidestepping the worst of the fallout from the sub-prime debacle enabled our
financial holdings to fall approximately 6% less than the benchmark sector.
Stock selection in industrials, materials and energy also benefited the
Fund, driven by strength in Hess (+105%), Deere (+99%), Transocean (+67%),
ABB (+62%), Barrick Gold (+38%) and Freeport-McMoRan Copper & Gold (+87%).
Each of these multi-national players has been well positioned to benefit
from industrialization in developing countries, and their global business
mixes worked to insulate earnings from a slowing US economy. In addition,
overweighting utilities and consumer staples stocks also helped against the
backdrop of a US slowdown, with particular strength in Constellation Energy
Group (+52%), Pepsi (+24%) and Procter & Gamble (+17%). Similarly, it proved
helpful to underweight the consumer discretionary sector as the outlook for
consumer spending dimmed.
Selected holdings partially offset the broad-based strength in the Fund this
year. While Freddie Mac (-48%) and AIG (-18%) pulled back in the credit
turmoil, their negative contributions were more than offset by the balance
of the Fund's high-quality financials. Amgen's weakness (-32%) was
significant enough to make the whole healthcare sector a detractor from
performance--the only such sector this year. The biotech company languished
amid safety concerns regarding its anemia drugs, and increased FDA scrutiny.
However, we continued to like both Amgen's pipeline of new products and its
low stock valuation. In consumer discretionary, disappointing results in
media detracted from relative returns (e.g., Comcast -35% and Time Warner
-23%), but such headwinds were counteracted by underweights in economically
sensitive retailers, as well as strength in Philips Electronics (+16%).
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 discipline to seek out underappreciated stocks with catalysts for
growth or improving fundamentals. The Fund remained 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 tightened credit conditions have dampened the outlook for home-price
appreciation and consumer spending.
We have increased technology and consumer staples as a percentage of
portfolio holdings. We believe companies in these sectors will show strong
earnings growth despite a slowing economy. The Fund also continues to
emphasize larger companies that can compete globally. Over the last year,
many of these holdings were selling at discounts or on par with smaller,
more U.S.-centric companies. Thus, the holdings include dominant competitors
in the household products, semiconductor and software industries. Over time,
we expect the relative valuations to increase.
We believe that the Value Equity Fund is well positioned to outperform its
benchmarks in the coming years.
3
<page>
Value Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended December
31, 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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,020.84 4.18
- ---------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,020.86 4.18
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.82% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2007 WAS: 2.08%.
4
Value Equity Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
GEI VALUE
EQUITY FUND S&P 500 INDEX
4/28/00 $ 10000 $ 10000
6/00 9970 10035
12/00 9978.58 9154.99
6/01 9486.19 8542.89
12/01 9105.15 8064.45
6/02 8357.33 7003.61
12/02 7505.72 6282.05
6/03 8219.58 7021.98
12/03 9310.98 8086.77
6/04 9517.43 8364.94
12/04 10202.11 8966.72
6/05 10181.23 8894.16
12/05 10616.27 9407.74
6/06 11019.29 9662.05
12/06 12511.37 10893.45
6/07 13493.57 11651.80
12/07 13774.83 11492.11
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE SINCE
YEAR YEAR INCEPTION
- --------------------------------------------------------------------------------
Value Equity Fund 10.10% 12.91% 4.26%
- --------------------------------------------------------------------------------
S&P 500 Index 5.50% 12.84% 1.83%
- --------------------------------------------------------------------------------
Lipper peer group average* 5.78% 12.19% N/A
- --------------------------------------------------------------------------------
Inception date 4/28/00
- --------------------------------------------------------------------------------
Value Equity Fund (ending value $13,775)
S&P 500 Index (ending value $11,492)
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 DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 4.58%
- --------------------------------------------------------------------------------
Microsoft Corp. 3.52%
- --------------------------------------------------------------------------------
American International Group, Inc. 3.08%
- --------------------------------------------------------------------------------
Procter & Gamble Co. 2.80%
- --------------------------------------------------------------------------------
Oracle Corp. 2.63%
- --------------------------------------------------------------------------------
PepsiCo, Inc. 2.29%
- --------------------------------------------------------------------------------
Industrial Select Sector SPDR Fund 2.28%
- --------------------------------------------------------------------------------
International Business Machines Corp. 2.20%
- --------------------------------------------------------------------------------
Omnicom Group, Inc. 2.20%
- --------------------------------------------------------------------------------
Dominion Resources, Inc. 1.96%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
AS OF DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $37,819 (in thousands)
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
Information Technology 21.3%
Consumer Staples 15.0%
Financials 13.7%
Healthcare 11.6%
Energy 10.3%
Industrials 9.8%
Consumer Discretionary 6.9%
Utilities 5.0%
Materials 3.9%
Telecommunication Services 2.0%
Short-Term 0.5%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE YEAR AND FIVE-YEAR PERIODS INDICATED IN THE LARGE-CAP CORE FUNDS PEER
GROUP CONSISTING OF 203 AND 163 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 December 31, 2007
- --------------------------------------------------------------------------------
VALUE EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 96.8%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 6.9%
Cablevision Systems Corp. 4,565 $ 111,843(a)
Comcast Corp. (Class A) 10,273 186,147(a)
General Motors Corp. 4,214 104,886
Koninklijke Philips
Electronics N.V. ADR 8,131 347,600
News Corp. (Class A) 18,869 386,626
Omnicom Group, Inc. 17,486 831,110
Time Warner, Inc. 38,807 640,703
2,608,915
CONSUMER STAPLES -- 15.0%
Clorox Co. 9,575 624,003
Diageo PLC ADR 2,013 172,776
General Mills, Inc. 11,950 681,150
Kimberly-Clark Corp. 10,189 706,505
McCormick & Company, Inc. 7,605 288,305
Nestle S.A. ADR 2,705 309,723
PepsiCo, Inc. 11,401 865,336
Procter & Gamble Co. 14,443 1,060,405
Sara Lee Corp. 9,580 153,855
The Coca-Cola Co. 2,264 138,942
The Estee Lauder Companies Inc.
(Class A) 4,723 205,970
Wal-Mart Stores, Inc. 9,434 448,398
5,655,368
ENERGY -- 10.4%
Apache Corp. 2,893 311,113
Devon Energy Corp. 2,327 206,893
Exxon Mobil Corp. 18,492 1,732,515
Halliburton Co. 11,026 417,996
Hess Corp. 5,926 597,696
Marathon Oil Corp. 1,143 69,563
Nabors Industries Ltd. 5,323 145,797
Transocean, Inc. 2,948 422,006
3,903,579
FINANCIALS -- 13.2%
ACE Ltd. 3,774 233,158
Allstate Corp. 7,296 381,070
American International Group, Inc. 19,995 1,165,709
AON Corp. 7,548 359,964
Bank of New York Mellon Corp. 10,315 502,959
BlackRock Inc. (Class A) 1,006 218,101
Chubb Corp. 7,548 411,970
Citigroup, Inc. 11,950 351,808
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Federal Home Loan
Mortgage Corp. 11,950 $ 407,137
Goldman Sachs Group, Inc. 381 81,934
Metlife, Inc. 7,604 468,558
State Street Corp. 3,585 291,102(c)
US Bancorp 3,045 96,648
4,970,118
HEALTH CARE -- 11.6%
Abbott Laboratories 3,962 222,466
Aetna, Inc. 4,906 283,223
Amgen, Inc. 14,152 657,219(a)
Baxter International, Inc. 6,290 365,135
Bristol-Myers Squibb Co. 11,786 312,565
Covidien Ltd. 762 33,749
DaVita, Inc. 5,472 308,347(a)
GlaxoSmithKline PLC ADR 4,385 220,960
Johnson & Johnson 4,340 289,478
McKesson Corp. 5,849 383,168
Medco Health Solutions, Inc. 1,062 107,687(a)
Novartis AG ADR 1,447 78,586
Thermo Electron Corp. 2,327 134,221(a)
UnitedHealth Group, Inc. 5,928 345,010
Wyeth 14,844 655,956
4,397,770
INDUSTRIALS -- 7.5%
ABB Ltd. ADR 10,063 289,814
Cooper Industries Ltd. 7,603 402,047
Deere & Co. 4,792 446,231
Eaton Corp. 1,899 184,108
General Dynamics Corp. 6,290 559,747
ITT Corp. 3,348 221,102
Northrop Grumman Corp. 759 59,688
Rockwell Collins, Inc. 1,006 72,402
3M Co. 5,849 493,188
United Technologies Corp. 1,604 122,770
2,851,097
INFORMATION TECHNOLOGY -- 21.3%
Affiliated Computer
Services, Inc. (Class A) 5,324 240,112(a)
Analog Devices, Inc. 10,378 328,983(d)
Cisco Systems, Inc. 21,291 576,347(a,d)
Corning Incorporated 9,434 226,322
Dell, Inc. 2,830 69,363(a)
EMC Corp. 3,650 67,635(a)
Fidelity National Information
Services, Inc. 4,108 170,852
Hewlett-Packard Co. 11,321 571,484
Intel Corp. 23,272 620,431
International Business
Machines Corp. 7,710 833,451
Lam Research Corp. 3,195 138,120(a)
Maxim Integrated Products, Inc. 11,699 309,789
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
<page>
VALUE EQUITY FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Microchip Technology Inc. 5,849 $ 183,776
Microsoft Corp. 37,423 1,332,259(d)
National Semiconductor Corp. 11,573 262,013
Oracle Corp. 44,097 995,710(a,d)
Taiwan Semiconductor
Manufacturing
Company Ltd. ADR 22,015 219,269
Texas Instruments Incorporated 11,384 380,226
Western Union Co. 21,699 526,852
8,052,994
MATERIALS -- 3.9%
Alcoa, Inc. 5,032 183,920
Allegheny Technologies
Incorporated 1,526 131,846
Barrick Gold Corp. 13,305 559,475
Freeport-McMoRan Copper &
Gold Inc. (Class B) 2,705 277,100
PAN American Silver Corp. 4,561 159,316(a)
Praxair, Inc. 1,635 145,041
1,456,698
TELECOMMUNICATION SERVICES -- 2.0%
AT&T, Inc. 3,774 156,847
Sprint Nextel Corp. (Series 1) 1,506 19,774
Verizon Communications Inc. 9,623 420,429
Vodafone Group, PLC ADR 4,277 159,618
756,668
UTILITIES -- 5.0%
American Electric Power
Company, Inc. 2,767 128,831
Constellation Energy Group, Inc. 3,800 389,614
Dominion Resources, Inc. 15,583 739,413
Edison International 5,032 268,558
Entergy Corp. 3,145 375,890
1,902,306
TOTAL COMMON STOCK
(COST $31,423,764) 36,555,513
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 2.8%
- --------------------------------------------------------------------------------
Financial Select Sector SPDR Fund 7,189 207,978(f)
Industrial Select Sector SPDR Fund 22,005 861,716(d,f)
TOTAL EXCHANGE TRADED FUNDS
(COST $844,314) 1,069,694
TOTAL INVESTMENTS IN SECURITIES
(COST $32,268,078) 37,625,207
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.5%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
4.96% 193,798 $ 193,798(b,e)
(COST $193,798)
TOTAL INVESTMENTS
(COST $32,461,876) 37,819,005
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (0.1)% (53,574)
-----------
NET ASSETS-- 100.0% $37,765,431
===========
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
<page>
Notes to Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
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 December 31, 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) GE Asset Management (GEAM), the investment advisor of the Fund, also serves
as investment advisor of the GEI Short-Term Investment Fund.
(f) 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 December 31, 2007.
Abbreviations:
ADR American Depository Receipt
SPDR Standard & Poors Depository Receipts
8
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ---------------------------------------------------------------------------------------------------------------------------
VALUE EQUITY FUND
12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
- ---------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- 4/28/00
Net asset value, beginning of period .............. $10.70 $10.01 $9.77 $9.02 $7.36
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.12 0.17 0.11 0.11 0.11
Net realized and unrealized
gains/(losses) on investments ............... 0.97 1.62 0.29 0.75 1.66
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS .... 1.09 1.79 0.40 0.86 1.77
LESS DISTRIBUTIONS FROM:
Net investment income .......................... 0.12 0.17 0.12 0.11 0.11
Net realized gains ............................. 1.51 0.93 0.04 -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... 1.63 1.10 0.16 0.11 0.11
NET ASSET VALUE, END OF PERIOD .................... $10.16 $10.70 $10.01 $9.77 $9.02
===========================================================================================================================
TOTAL RETURN (A) .................................. 10.10% 17.85% 4.06% 9.57% 24.05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ....... $37,765 $39,683 $37,115 $37,128 $29,989
Ratios to average net assets:
Net investment income ....................... 0.96% 1.55% 1.13% 1.26% 1.16%
Expenses .................................... 0.81% 0.81% 0.80% 0.80% 0.73%
Portfolio turnover rate ........................ 45% 42% 36% 53% 78%
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.
See Notes to Financial Statements.
9
<page>
Statement of Assets
and Liabilities DECEMBER 31, 2007
- ----------------------------------------------------------------------------------------------------------------------------
VALUE
EQUITY
FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $32,268,078) ........................................ $37,625,207
Short-term affiliated investments (at amortized cost) .......................................... 193,798
Income receivables ............................................................................. 48,941
Receivable for fund shares sold ................................................................ 408
Variation margin receivable .................................................................... 5
Other assets ................................................................................... 25
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................................................................... 37,868,384
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed ............................................................... 28,073
Payable to GEAM ................................................................................ 74,880
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES .......................................................................... 102,953
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................................................................ $37,765,431
===========================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ................................................................................ 32,178,440
Undistributed (distribution in excess of) net investment income ................................ 5,197
Accumulated net realized gain (loss) ........................................................... 224,660
Net unrealized appreciation/(depreciation) on:
Investments ................................................................................ 5,357,129
Futures .................................................................................... 5
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................................................................ $37,765,431
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................................................................ 37,765,431
===========================================================================================================================
Shares outstanding ($0.01 par value; unlimited shares authorized) ................................. 3,717,837
Net asset value per share ......................................................................... $10.16
See Notes to Financial Statements.
10
<page>
Statement of Operations
FOR THE YEAR ENDED DECEMBER 31, 2007
VALUE
EQUITY
FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ......................................................................... $ 665,628
Interest* ........................................................................ 14,702
Interest from affiliated investments ............................................. 27,080
Less: Foreign taxes withheld ..................................................... (3,226)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ....................................................................... 704,184
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ................................................. 258,747
Transfer agent ................................................................... 43
Director's fees .................................................................. 1,015
Custody and accounting expenses .................................................. 38,979
Professional fees ................................................................ 17,565
Registration expenses ............................................................ 3,092
Other expenses ................................................................... 3,869
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ..................................................................... 323,310
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME .............................................................. 380,874
===========================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN ON:
Investments ................................................................... 4,801,847
Futures ....................................................................... 1,135
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ................................................................... (1,345,816)
Futures ....................................................................... 2,450
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments .................................. 3,459,616
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................... $3,840,490
===========================================================================================================================
* Income attributable to security lending activity, net of rebate expenses, for
the $3,142.
See Notes to Financial Statements.
11
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
VALUE
EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income ............................................................ $ 380,874 $ 582,026
Net realized gain on investments, futures, written options,
foreign currency transactions and swaps ......................................... 4,802,982 3,361,481
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation .......... (1,343,366) 2,256,614
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase from operations ...................................................... 3,840,490 6,200,121
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................................. (375,677) (583,024)
Net realized gains ................................................................ (4,867,273) (3,132,510)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................. (5,242,950) (3,715,534)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ................. (1,402,460) 2,484,587
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ...................................................... 1,494,210 1,598,076
Value of distributions reinvested ................................................. 5,242,950 3,715,534
Cost of shares redeemed ........................................................... (7,251,969) (5,230,437)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ................................... (514,809) 83,173
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................. (1,917,269) 2,567,760
NET ASSETS
Beginning of period ................................................................. 39,682,700 37,114,940
- ------------------------------------------------------------------------------------------------------------------------------------
End of period ....................................................................... $37,765,431 $39,682,700
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ......... $ 5,197 $ --
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ....................................................................... 133,227 145,506
Issued for distributions reinvested ............................................... 513,512 345,632
Shares redeemed ................................................................... (638,176) (488,227)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in fund shares ............................................................ 8,563 2,911
====================================================================================================================================
See Notes to Financial Statements.
12
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized costs, which approximates market
value.
All assets and liabilities of the Fund's initially expressed in foreign currency
values will be converted into U.S. dollars at the WM exchange rate computed at
11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would
13
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
be applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
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 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 custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
14
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund 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 December 31, 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
- ---------------------------------------------------------------------------------------------------------------------------
$32,575,531 $6,850,523 $(1,607,049) $5,243,474
15
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
Net Tax Appreciation/ Undistributed Undistributed Post
(Depreciation) on Income/ Long-Term Gains/ October
Derivatives, Currency (Accumulated (Accumulated Losses
and Other Net Assets Ordinary Loss) Capital Loss) (see Detail Below)
- ---------------------------------------------------------------------------------------------------------------------------
$-- $6,548 $336,969 $--
As of December 31, 2007, 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, 2007.
The tax composition of distributions paid during the years ended December 31,
2007 and December 31, 2006 were as follows:
Long-Term
Ordinary Capital
Income Gains Total
- --------------------------------------------------------------------------------
2007 $741,446 $4,501,504 $5,242,950
2006 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.
There were no reclassifications for the year ended December 31, 2007.
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Expenses of the Company which are directly identifiable to the Fund are
allocated to the portfolio. Expenses which are not directly identifiable to the
Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expenses and relative size of the Fund. All
expenses of the Fund are paid by GEAM and reimbursed by the Fund.
3. LINE OF CREDIT
The Company 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
16
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
borne proportionally based upon net assets. In addition, the Company has a $100
million uncommitted, unsecured line of credit with State Street, which was
established November 7, 2007. Generally, borrowings under the credit facilities
would accrue interest at the Federal Funds Rate plus 50 basis points and would
be borne by the borrowing Fund. The maximum amount allowed to be borrowed by any
one Fund is the lesser of (i) its prospectus limitation or (ii) 20% of its net
assets. The credit facilities were not utilized by the Fund during the period
ended December 31, 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 December 31, 2007, $612 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 December 31, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$17,495,671 $22,443,301
SECURITY LENDING At December 31, 2007, the Fund did not participate in
securities lending.
17
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
GE Investments Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Value Equity Fund, a series of GE Investments Funds, Inc., including the
schedule of investments, as of December 31, 2007, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2007 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Value Equity Fund as of December 31, 2007, the results of its operations,
changes in its net assets and financial highlights for the years described
above, in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Boston, Massachusetts
February 25, 2008
18
<page>
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For the year ended December 31, 2007
SUMMARY
During the year ended December 31, 2007, the Fund paid to shareholders of record
on December 26, 2007, the following long-term capital gain dividends 2007:
FUND NAME PER SHARE AMOUNT
- --------------------------------------------------------------------------------
GE Investments Funds, Inc.-- Value Equity Fund $1.39822
19
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
The Fund Board, including the independent Board members, considered and
unanimously approved the continuance of the Fund's investment advisory agreement
with GE Asset Management Incorporated ("GEAM") at meetings held on December 5
and December 12, 2007.
In considering whether to approve the Fund's investment advisory agreement, the
Board members, including the independent members, considered and discussed a
substantial amount of information and analysis provided, at the Board's request,
by GEAM. The Board members also considered detailed information regarding
performance and expenses of other investment companies, including those with
similar investment objectives and sizes, which was prepared by an independent
third party provider, Lipper Inc. ("Lipper"). The Board members reviewed the
fees charged by GEAM for other mutual funds and investment products other than
mutual funds that employ the same investment strategy as the Fund.
Before approving the Fund's advisory agreement, the Board members reviewed the
proposed continuance of the agreement with management of GEAM and with
independent legal counsel. The Board members also reviewed a memorandum prepared
by independent legal counsel discussing the legal standards for the
consideration of the proposed continuance. The independent Board members
discussed the proposed continuance in detail during a private session with their
independent legal counsel at which no representatives of GEAM were present. The
independent Board members and their independent legal counsel requested, and
received and considered, additional information from GEAM following this
session.
In advance of the meetings, and in response to their request, the Board members
received from GEAM written responses to their inquiries, which included
substantial exhibits and other materials related to GEAM's business and the
services it provides to the Fund. The Board members took into account their
multi-year experience as Board members and particularly their consideration of
these agreements in recent years, noting that the information was presented in a
similar manner and format. To focus their review, the Board members asked GEAM
management, in its oral presentation, to highlight material differences from the
information presented in recent years. During the meetings, the Board members
had an opportunity to discuss this information with GEAM managers, including
senior executives, representatives from the legal, compliance and finance
departments, and investment personnel. The Board members posed questions to
these representatives and engaged in substantive discussions with them
concerning GEAM's investment process.
In reaching their determination relating to continuance of the agreement, the
Board members considered all factors they believed relevant, including the
factors discussed below. In their deliberations, the Board members did not
identify any particular information that was all-important or controlling, and
each Board member attributed different weights to the various factors. In
particular, the Board members focused on the following:
THE NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED.
The Board members reviewed the services provided
by GEAM, and the Board members, including the independent members, concurred
that GEAM provides high quality advisory and administrative services to the
Fund.
In connection with their consideration of GEAM's services, the Board members
focused on the favorable attributes of GEAM, including (i) an investment
philosophy oriented toward long-term performance; (ii) effective processes used
for selecting investments, selecting brokers and with respect to Fund
administration, controllership and compliance activities; (iii) highly skilled
professionals, including analysts, research professionals and portfolio managers
with a depth of experience; (iv) access to significant technological resources
from which the Fund may benefit; and (v) a favorable history and reputation. The
Board members discussed with senior officers of GEAM the personnel changes made,
and proposed to be made, by GEAM. The Board members noted that the Fund
represents only a small portion of the assets managed by GEAM, but benefits from
a full array of services and resources provided by GEAM. In light of these
discussions, the Board members, including the independent members, concluded
that GEAM's services were of a high quality and had benefited the Fund.
20
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE FUND.
The Board members considered the investment performance of the Fund for various
periods. The Board members reviewed detailed comparisons of the performance of
the Fund with the relevant securities indexes and peer groupings of mutual funds
prepared by Lipper with respect to various periods. The Board members also
engaged in detailed discussions with GEAM management about the investment
process, focusing on the Fund's investment objective, the number and experience
of portfolio management and supporting research personnel, the investment style
and approach employed and the likely market cycles for the investment style. The
Board members, including the independent members, concluded that the Fund's
performance was acceptable overall taking into consideration the factors
discussed above.
COST OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED FROM THE
RELATIONSHIP WITH THE FUND.
The Board members considered the cost of the services provided by GEAM. The
Board members reviewed the information they had requested from GEAM concerning
its profitability from the fees and services it provides to the Fund and the
financial condition of GEAM for various past periods. The Board members
considered the profit margin information for GEAM's investment company business
as a whole, as well as GEAM's profitability data for the Fund. The Board members
reviewed GEAM's assumptions and the methods of cost allocation used by GEAM in
preparing Fund-specific profitability data. The Board members also discussed
with GEAM the basis for its belief that the methods of allocation used were
reasonable and consistent across its business.
The Board members noted and discussed the additional services provided by GEAM
to the Fund compared to other investment products managed by GEAM. The Board
members determined that GEAM should be entitled to earn a reasonable level of
profits for the services it provides to the Fund. The Board members also
recognized that GEAM had made significant investments in its business and had
not fully recovered the sums invested. Based on their review, the Board members,
including the independent members, concluded that they were satisfied that the
level of profitability achieved by GEAM from its relationship with the Fund was
not unreasonable or excessive.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS AND
WHETHER FEE LEVELS WOULD REFLECT SUCH ECONOMIES OF SCALE.
The Board members considered the extent to which economies of scale would be
realized as the Fund grows, and whether fee levels reflect these economies of
scale for the benefit of Fund investors. The Board members considered the
substantial infrastructure investments that GEAM has made with respect to its
operations and its commitment to continue investing resources to enhance
services to Fund shareholders. The Board members recognized the benefits to the
Fund of GEAM's past investment in its operations through the expenditure of sums
to support its substantial infrastructure, and that, with respect to all GEAM
managed mutual funds, GEAM has not yet fully recouped that investment. The Board
members also recognized the benefits to the Fund of being able to leverage a
favorable cost structure achieved with respect to the Fund's other operating
expenses as a result of GEAM's large overall base of assets under management and
its vendor management practices.
COMPARISON OF SERVICES TO BE RENDERED AND FEES TO BE PAID.
The Board members discussed the services provided to the Fund by GEAM, and the
fees charged for those services. The Board members reviewed information
concerning the fee and expense ratios for the Fund, and comparative information
with respect to similar products. They discussed that the Fund's figures were
within the applicable peer group range. In addition, the Board members
considered their discussion with representatives of GEAM about the fees being
charged to the Fund and, to the extent applicable, the effect, if any, of the
Securities and Exchange Commission staff's interpretive guidance concerning soft
dollars. In light of the foregoing, the Board members, including the independent
members, determined that the advisory fees were reasonable in relation to the
services provided to the Fund.
21
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- -------------------------------------------------------------------------------
FALL-OUT BENEFITS.
The Board members considered other actual and potential financial benefits that
GEAM may derive from its relationship with the Fund, including, to the extent
applicable, soft dollar commission benefits generated through Fund portfolio
transactions. The Board members noted, however, that the Fund benefits from the
vast array of resources available through GEAM, and that the Fund represents
only a small portion of the assets managed by GEAM.
CONCLUSION.
No single factor was determinative to the Board members' decision. Based on
their discussion and such other matters as were deemed relevant, the Board
members, including the independent members, concluded that the proposed advisory
fee and projected total expense ratio are reasonable in relation to the services
provided to the Fund. In view of these facts, the Board members, including the
independent members, concluded that the renewal of the advisory agreement was in
the best interests of the Fund and its shareholders.
22
<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.
23
<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 Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
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
24
<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.
25
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL 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 OPERATING OFFICER (AS OF JANUARY 31, 2008)
26
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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 FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
Total Return Fund
Annual Report
DECEMBER 31, 2007
[GE LOGO OMITTED]
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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ............................................................. 30
TAX INFORMATION ..................................................................................................... 31
ADVISORY AND ADMINISTRATIVE AGREEMENT RENEWAL ....................................................................... 32
ADDITIONAL INFORMATION .............................................................................................. 35
INVESTMENT TEAM ..................................................................................................... 38
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 December 31, 2007
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
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(R) Composite Price Index of stocks (S&P 500
Index) and Lehman Brothers Aggregate Bond Index (LB Aggregate Bond Index) are
unmanaged indices and do not reflect the actual cost of investing in the
instruments that comprise each index.
The S&P 500 Index is an unmanaged, market capitalization-weighted index of
stocks of 500 large U.S. companies, which is widely used as a measure of
large-cap stock market performance. The LB Aggregate Bond Index is a market
value-weighted index of taxable investment-grade debt issues, including
government, corporate, asset-backed and mortgage-backed securities, with
maturities of one year or more. This index is designed to represent the
performance of the U.S. investment-grade first rate bond market. The results
shown for the foregoing indices assume the reinvestment of net dividends or
interest.
The peer universe of the underlying annuity funds used in our peer 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.
- ---------------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUNDS.
1
Total Return Fund
- --------------------------------------------------------------------------------
THE TOTAL RETURN FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES
PAUL M. COLONNA, RALPH R. LAYMAN, THOMAS R. LINCOLN, JUDITH A. STUDER AND DIANE
M. WEHNER. MS. STUDER 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 THE FUND ARE MANAGED INDEPENDENTLY OF EACH OTHER AND
THE PORTFOLIO MANAGERS HAVE FULL DISCRETION OVER THEIR PARTICULAR SUB-PORTFOLIO;
HOWEVER, THE PORTFOLIO MANAGEMENT TEAM IS COLLABORATIVE TO ENSURE STRICT
ADHERENCE TO THE FUND'S OBJECTIVES.
JUDITH A. STUDER IS A DIRECTOR AND EXECUTIVE 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 -
U.S. EQUITIES IN 1991, SENIOR VICE PRESIDENT - INTERNATIONAL EQUITIES IN 1995,
PRESIDENT - INVESTMENT STRATEGIES IN JULY 2006 AND PRESIDENT - U.S. EQUITIES IN
JUNE 2007.
PAUL M. COLONNA IS A DIRECTOR AND 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. MR. COLONNA BECAME PRESIDENT - FIXED
INCOME IN MARCH 2007.
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 AN EXECUTIVE VICE
PRESIDENT IN 1992 AND PRESIDENT - INTERNATIONAL EQUITIES IN MARCH 2007.
THOMAS R. LINCOLN IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN
A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE TOTAL RETURN FUND SINCE MAY
2007. MR. LINCOLN JOINED GE ASSET MANAGEMENT IN 1994 AS A FINANCIAL ANALYST IN
U.S. EQUITIES. MR. LINCOLN BECAME PART OF THE INVESTMENT MANAGEMENT TEAM FOR
U.S. EQUITIES IN 1997 AND PORTFOLIO MANAGER FOR U.S. EQUITIES IN 2003.
PICTURED FROM LEFT TO RIGHT:
DIANE M. WEHNER, RALPH R. LAYMAN, JUDITH A. STUDER, THOMAS R. LINCOLN
AND PAUL M. COLONNA.
[PHOTO OMITTED]
2
Q&A
- --------------------------------------------------------------------------------
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.
Q. HOW DID THE TOTAL RETURN FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the Total Return Fund
returned 11.68% for the Class 1 shares, 11.63% for Class 2 shares, 11.56%
for Class 3 shares and 11.68% for Class 4 shares. The Fund's broad based
benchmarks, the S&P 500 Index and the Lehman Brothers Aggregate Bond Index
returned 5.50% and 6.97% respectively. The Fund's Lipper peer group of 174
Mixed-Asset Target Allocation Growth funds returned an average of 6.76% for
the same period.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE AND WHAT MARKET CONDITIONS
IMPACTED THE PERFORMANCE OF THE FUND?
A. The solid performance of the Total Return Fund for the twelve-month period
was primarily driven by the Fund's overweight in international equities and
its underweight position in fixed income. The Fund benefited from the
Tactical Asset Allocation Committee's decision through most of the period to
overweight equities and underweight fixed income. Towards the later part of
the year, we reduced our equity exposure and raised cash, which also
benefited the Fund during the equity market weakness.
In the first half of the year, U.S. stocks rallied due to strong corporate
earnings, record M&A activity, cooling inflation worries and the absence of
Federal Reserve rate hikes. The market's climb was interrupted by global
liquidity concerns in February, and again beginning in late June and July of
2007, amid a credit crunch brought about by rising sub-prime mortgage
defaults. However, accommodative actions by the Fed in late summer/early
fall propelled markets higher, and the S&P 500 reached a record high close
of 1,565 in early October as Fed remarks allayed investors concerns that the
economy was headed for a recession. However, stocks pulled back sharply
during the balance of the fourth quarter, reflecting investors' concerns
over the economic impact of the housing- and credit-market turmoil and
record-high oil prices. In this environment, the growth style of investing
outperformed the value style by over 10%, its first period of outperformance
in seven years.
The Fund's U.S. equity performance broadly tracked the benchmark in the
large-cap space but handily exceeded in the mid-cap segment. The large cap
portfolio benefited from a focus on large cap companies with sustainable
earnings growth. In the U.S., larger cap stocks outperformed small, as these
higher-quality companies are perceived to have the financial strength and
scale to better weather a significant economic slowdown. Our focus on
disciplined growth avoided the worst of the year's sub-prime mortgage
debacle and resulting credit market turmoil, as the Fund's financial sector
holdings were concentrated in companies that derive the majority of their
revenues from fee-based (versus credit-based) activities. Underweighting
financials in this environment also aided Fund performance, as did stock
selection in the strong energy, materials and industrials segments.
Offsetting these positives were an overweighting in the weak consumer
discretionary sector, an underweight in telecommunications stocks, and
adverse stock selection in the healthcare area. The mid-cap equity portfolio
handily outperformed its relevant benchmark, as well as the large cap
portfolio, as the portfolio's growth bias and overweight in the faster
growing healthcare and information technology sectors drove returns. Also
helping the mid-cap portfolio was technology stock selection and
underweights in consumer cyclical and financial stocks.
3
<page>
Total Return Fund
- --------------------------------------------------------------------------------
Q&A
The international equity markets were up strongly during the last year, as
shown by the MSCI EAFE's 11.2% return and an even-stronger 39.4% advance in
MSCI Emerging Markets Index. The weak US dollar helped international equity
returns for US investors.
In international stock markets, strong corporate performance in revenue and
cash generation and continued productivity enhancements more than
compensated for a rising input cost environment, currency headwinds for
exporters and the turmoil created by the collapse of the sub-prime mortgage
market. Market volatility at certain times of the year was extreme, similar
to what was observed in the U.S. The developing sub-prime crisis spread
through the financial sector as the year progressed. Initially confined to
over-zealous mortgage lenders in the U.S., it was soon apparent that many
financial institutions around the globe would be affected. The reduction in
market liquidity, plus concerns over the quality of borrowers at all levels
of the economy, has served to tighten credit conditions through the global
system. The international portfolio substantially exceeded its benchmark.
Two investment themes that led to the strong performance of our
International equity portfolios were the high growth coming from emerging
markets (influencing materials, energy and telecom stocks) and
infrastructure development in both developed and developing countries.
In the fixed income market, the fallout from the sub-prime mortgage crisis
became apparent in the fourth quarter as confidence in valuing securities
backed by these loans disappeared and ratings agencies moved quickly to
downgrade hundreds of securities. Broker/dealers across Wall Street began
reporting writedowns in the billions. In the latter half of the year,
investors shied away from risky assets and fled to the safety of U.S.
treasuries, pushing interest rates downward and credit spreads wider. As the
year matured, economic fundamentals slowed and the housing market failed to
stabilize, leading the Fed to cut its target rate in September, October and
December. The Fed also injected reserves into the financial system to
mitigate year-end liquidity issues. The drop in interest rates helped the
Lehman Brothers Aggregate Bond index to rise in the fourth quarter as equity
markets fell. Our fixed income portfolio slightly underperformed the index
for the year, negatively impacted by some credit exposures, including a
small amount of sub-prime.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. Towards the end of the year, we maintained a more cautious equity allocation
on concerns over employment growth, the achievability of anticipated
earnings growth, and continued housing weakness and credit issues. We
remained slightly underweighted in fixed income as segments of the market
continue to be strained and spreads may continue to widen. We held a higher
cash balance to help dampen volatility and preserve capital. Also late in
the year, we rotated a small amount of the portfolio allocated to equities
into a core-relative value strategy to increase diversification.
4
<page>
Total Return Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, distribution and service fees (for shareholders of classes 2, 3
and 4), professional fees, administrative fees and other Fund expenses. The
following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended December
31, 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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ---------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,040.32 2.69
Class 2 1,000.00 1,039.88 2.90
Class 3 1,000.00 1,039.78 3.21
Class 4 1,000.00 1,040.79 3.31
- ---------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ---------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,022.34 2.65
Class 2 1,000.00 1,022.14 2.85
Class 3 1,000.00 1,021.85 3.16
Class 4 1,000.00 1,021.75 3.26
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.52% FOR CLASS
1, 0.56% FOR CLASS 2, 0.62% FOR CLASS 3, AND 0.64% FOR CLASS 4, (FROM PERIOD
JULY 1, 2007 - DECEMBER 31, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE
OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX MONTH PERIOD).
** ACTUAL FUND RETURNS FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2007 WERE AS
FOLLOWS: 4.03% FOR CLASS 1 SHARES, 3.99% FOR CLASS 2 SHARES, 3.98% FOR CLASS
3 SHARES, AND 4.08% FOR CLASS 4 SHARES.
5
Total Return Fund
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek the highest total return, composed of
current income and capital appreciation, as is consistent with prudent
investment risk by investing primarily in a combination of equity securities
and investment grade debt securities.
TOP TEN LARGEST HOLDINGS (EXCLUDING SHORT-TERM HOLDINGS) AS OF DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
U.S. Treasury Notes 4.63%,
11/15/09 - 02/15/17 1.89%
- --------------------------------------------------------------------------------
Federal National Mortgage
Assoc. 5.50%, TBA 1.77%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 4.88%,
06/30/12 1.55%
- --------------------------------------------------------------------------------
Federal National Mortgage
Assoc. 6.00%, TBA 1.40%
- --------------------------------------------------------------------------------
American International
Group, Inc. 1.10%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 4.25%,
09/30/12 1.09%
- --------------------------------------------------------------------------------
UnitedHealth Group, Inc. 1.08%
- --------------------------------------------------------------------------------
State Street Corp. 1.07%
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 1.06%
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 0.99%
- --------------------------------------------------------------------------------
LIPPER PERFORMANCE COMPARISON
Mixed-Asset Target Allocation
Growth Funds
Based on average annual
total returns for the periods ended 12/31/07
ONE FIVE TEN
YEAR YEAR YEAR
---- ---- ----
Number of
Funds in
peer group: 174 81 47
- --------------------------------------------------------------------------------
Peer group
average
annual total
return: 6.76% 10.68% 6.02%
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
LB AGGREGATE
GEI TOTAL RETURN S&P 500 INDEX BOND INDEX
12/97 $10000 $10000 $10000
12/98 11710 12870 10869
12/99 13262 15581 10779
12/00 13917 14150 12033
12/01 13515 12465 13049
12/02 12257 9710 14387
12/03 14746 12499 14977
12/04 15954 13859 15627
12/05 16539 14541 16007
12/06 18813 16837 16700
12/07 21010 17763 17864
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED DECEMBER 31, 2007
ENDING
VALUE OF A
ONE FIVE TEN $10,000
YEAR YEAR YEAR INVESTMENT
-----------------------------------------
Total Return Fund 11.68% 11.38% 7.71% $21,010
S&P 500 Index 5.50% 12.84% 5.91% $17,763
LB Aggregate
Bond Index 6.97% 4.42% 5.97% $17,864
Inception date 7/1/85
CLASS 2 SHARES
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
LB AGGREGATE
GEI TOTAL RETURN S&P 500 INDEX BOND INDEX
5/01/06 $10000 $10000 $10000
6/06 9701 9725 10010
9/06 10100 10276 10392
12/06 10705 10965 10520
3/07 10874 11035 10679
6/07 11492 11728 10623
9/07 11988 11966 10925
12/07 11950 11567 11253
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED DECEMBER 31, 2007
ENDING
VALUE OF A
ONE SINCE $10,000
YEAR INCEPTION INVESTMENT
-----------------------------------------
Total Return Fund 11.63% 11.23% $11,950
S&P 500 Index 5.50% 9.11% $11,567
LB Aggregate
Bond Index 6.97% 7.33% $11,253
Inception date 5/1/06
CLASS 3 SHARES
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
LB AGGREGATE
GEI TOTAL RETURN S&P 500 INDEX BOND INDEX
5/01/06 $10000 $10000 $10000
6/06 9701 9725 10010
9/06 10106 10276 10392
12/06 10717 10965 10520
3/07 10875 11035 10679
6/07 11499 11728 10623
9/07 11996 11966 10925
12/07 11956 11567 11253
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED DECEMBER 31, 2007
ENDING
VALUE OF A
ONE SINCE $10,000
YEAR INCEPTION INVESTMENT
-----------------------------------------
Total Return Fund 11.56% 11.26% $11,956
S&P 500 Index 5.50% 9.11% $11,567
LB Aggregate
Bond Index 6.97% 7.33% $11,253
Inception date 5/1/06
CLASS 4 SHARES
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
LB AGGREGATE
GEI TOTAL RETURN S&P 500 INDEX BOND INDEX
5/01/06 $10000 $10000 $10000
6/06 9689 9725 10010
9/06 10088 10276 10392
12/06 10689 10965 10520
3/07 10846 11035 10679
6/07 11469 11728 10623
9/07 11971 11966 10925
12/07 11937 11567 11253
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED DECEMBER 31, 2007
ENDING
VALUE OF A
ONE SINCE $10,000
YEAR INCEPTION INVESTMENT
-----------------------------------------
Total Return Fund 11.68% 11.15% $11,937
S&P 500 Index 5.50% 9.11% $11,567
LB Aggregate
Bond Index 6.97% 7.33% $11,253
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 December 31, 2007
- --------------------------------------------------------------------------------
TOTAL RETURN FUND
- --------------------------------------------------------------------------------
Portfolio Composition as a % of the Market Value of $2,967,649
(in thousands) as of December 31, 2007
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
Domestic Equity 38.9%
Foreign Equity 26.6%
Bonds & Notes 21.6%
Short Term & Others 12.9%
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
DOMESTIC EQUITY -- 41.4%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 4.7%
Bed Bath & Beyond, Inc. 672,824 $ 19,774,297(a)
Cablevision Systems Corp. 11,047 270,652(a)
Carnival Corp. 362,028 16,106,626
Coach, Inc. 54,134 1,655,418(a)
Comcast Corp. (Class A) 1,170,942 21,217,469(a)
EchoStar Communications
Corp. (Class A) 11,086 418,164(a)
General Motors Corp. 10,296 256,267
Kohl's Corp. 94,013 4,305,795(a)
Liberty Global, Inc. (Series C) 280,723 10,271,655(a)
Liberty Media Holding Corp -
Capital (Series A) 98,046 11,421,379(a)
Life Time Fitness, Inc. 54,513 2,708,206(a)
Lowe's Companies, Inc. 478,228 10,817,517
News Corp. (Class A) 46,100 944,589
Omnicom Group, Inc. 222,108 10,556,793
O'Reilly Automotive, Inc. 104,349 3,384,038(a)
Penn National Gaming Inc. 18,091 1,077,319(a)
Regal Entertainment Group,
(Class A) 97,603 1,763,686
Starwood Hotels & Resorts
Worldwide, Inc. 27,432 1,207,831
Target Corp. 66,492 3,324,600
The Cheesecake Factory 192,723 4,569,462(a)
Time Warner, Inc. 94,812 1,565,346
Weight Watchers International Inc. 25,108 1,134,379
128,751,488
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 3.9%
Alberto-Culver Co. 341,695 $ 8,385,195
Clorox Co. 23,384 1,523,935
Colgate-Palmolive Co. 303,321 23,646,905(h)
General Mills, Inc. 83,702 4,771,014
Kimberly-Clark Corp. 62,403 4,327,024
McCormick & Company, Inc. 129,446 4,907,298
PepsiCo, Inc. 353,996 26,868,297
Procter & Gamble Co. 392,417 28,811,256
Sara Lee Corp. 23,412 375,997
The Coca-Cola Co. 5,532 339,499
The Estee Lauder Companies
Inc. (Class A) 11,572 504,655
Wal-Mart Stores, Inc. 23,050 1,095,567
105,556,642
ENERGY -- 4.4%
Apache Corp. 7,069 760,200
Devon Energy Corp. 5,686 505,542
Dresser-Rand Group, Inc. 73,036 2,852,056(a)
EOG Resources, Inc. 124,096 11,075,568
Exxon Mobil Corp. 300,314 28,136,419(h)
Halliburton Co. 173,717 6,585,612
Hess Corp. 52,366 5,281,635
Marathon Oil Corp. 2,803 170,591
Nabors Industries Ltd. 13,006 356,234(a)
Peabody Energy Corp. 37,962 2,339,978
SandRidge Energy, Inc. 2,618 93,881(a)
Schlumberger Ltd. 296,798 29,196,019
Southwestern Energy Co. 56,352 3,139,933(a)
Sunoco, Inc. 15,705 1,137,670
Transocean, Inc. 159,378 22,814,960
Weatherford International Ltd. 61,206 4,198,732(a)
118,645,030
FINANCIALS -- 5.1%
ACE Ltd. 9,220 569,612
Affiliated Managers Group, Inc. 18,816 2,210,127(a)
Allstate Corp. 17,825 931,000
American International
Group, Inc. 557,651 32,511,054(h)
AON Corp. 18,440 879,404
Bank of New York Mellon Corp. 25,201 1,228,801
BlackRock Inc. (Class A) 2,459 533,111
CB Richard Ellis Group, Inc.
(Class A) 571,759 12,321,406(a)
Chubb Corp. 18,440 1,006,455
Citigroup, Inc. 357,070 10,512,141
CVB Financial Corp. 138,022 1,427,147
Douglas Emmett, Inc. (REIT) 57,722 1,305,094
DuPont Fabros Technology,
Inc. (REIT) 95,327 1,868,409
Federal Home Loan
Mortgage Corp. 29,197 994,742
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
7
TOTAL RETURN FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Federal National Mortgage Assoc. 189,656 $ 7,582,447
Fortress Investment Group LLC
(Class A) 123,776 1,928,430
Goldman Sachs Group, Inc. 934 200,857
Greenhill & Company, Inc. 30,728 2,042,797
HCC Insurance Holdings, Inc. 272,262 7,808,474
Legg Mason, Inc. 30,145 2,205,107
Metlife, Inc. 96,864 5,968,760
Prologis (REIT) 23,095 1,463,761
SL Green Realty Corp. (REIT) 10,162 949,741
State Street Corp. 390,354 31,696,745(e)
SunTrust Banks, Inc. 94,584 5,910,554
US Bancorp 7,453 236,558
Zions Bancorporation 24,204 1,130,085
137,422,819
HEALTHCARE -- 7.0%
Abbott Laboratories 316,264 17,758,223(h)
Accuray Inc. 90,532 1,377,897(a)
Aetna, Inc. 221,007 12,758,734
Alcon, Inc. 15,150 2,167,056
Amgen, Inc. 551,995 25,634,648(a)
Amylin Pharmaceuticals, Inc. 71,983 2,663,371(a)
Arthrocare Corp. 25,847 1,241,948(a)
Barr Pharmaceuticals, Inc. 51,212 2,719,357(a)
Baxter International, Inc. 15,367 892,054
Bristol-Myers Squibb Co. 28,801 763,803
Covidien Ltd. 1,868 82,734
DaVita, Inc. 13,369 753,343(a)
DENTSPLY International, Inc. 69,330 3,121,237
Gen-Probe Inc. 34,181 2,151,010(a)
Gilead Sciences, Inc. 280,607 12,910,728(a)
Hologic, Inc. 66,514 4,565,521(a)
Johnson & Johnson 10,603 707,220
Lifecell Corp. 62,819 2,708,127(a)
Lincare Holdings Inc. 36,105 1,269,452(a)
Masimo Corp. 123,214 4,860,792(a)
McKesson Corp. 14,291 936,203
Medco Health Solutions, Inc. 2,593 262,930(a)
Medtronic Inc. 335,515 16,866,339
Psychiatric Solutions Inc. 111,253 3,615,723(a)
Resmed, Inc. 229,145 12,036,987(a)
Thermo Electron Corp. 90,662 5,229,384(a)
UnitedHealth Group, Inc. 549,523 31,982,239
Vertex Pharmaceuticals, Inc. 86,993 2,020,847(a)
Wyeth 359,155 15,871,059
189,928,966
INDUSTRIALS -- 3.2%
Cooper Industries Ltd. 47,216 2,496,782
Corporate Executive Board Co. 29,303 1,761,110
Deere & Co. 11,372 1,058,961
Dover Corp. 344,641 15,884,504(h)
Eaton Corp. 4,635 449,363
General Dynamics Corp. 15,367 1,367,509
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Harsco Corp. 81,277 $ 5,207,417
Hexcel Corp. 339,988 8,254,909(a)
ITT Corp. 22,041 1,455,587
Joy Global, Inc. 45,049 2,965,125
Northrop Grumman Corp. 1,852 145,641
Rockwell Collins, Inc. 2,459 176,974
SAIC, Inc. 108,270 2,178,392(a)
Textron Inc. 371,080 26,458,004
3M Co. 14,291 1,205,017
United Technologies Corp. 199,610 15,278,149
86,343,444
INFORMATION TECHNOLOGY -- 10.1%
Activision, Inc. 119,614 3,552,536(a)
Affiliated Computer
Services, Inc. (Class A) 47,200 2,128,720(a)
Analog Devices, Inc. 25,355 803,754
Automatic Data Processing, Inc. 228,306 10,166,466
Blackboard, Inc. 18,506 744,867(a)
Cisco Systems, Inc. 1,163,740 31,502,442(a,h)
Citrix Systems, Inc. 60,047 2,282,386(a)
Cogent, Inc. 128,238 1,429,854(a)
Corning Incorporated 283,970 6,812,441
Dell, Inc. 6,915 169,487(a)
DST Systems, Inc. 31,449 2,596,115(a)
EMC Corp. 8,923 165,343(a)
Fidelity National Information
Services, Inc. 73,786 3,068,760
Harris Corp. 21,811 1,367,113
Hewlett-Packard Co. 27,660 1,396,277
Hittite Microwave Corp. 68,362 3,264,969(a)
Intel Corp. 784,175 20,906,106(h)
International Business
Machines Corp. 18,840 2,036,604
Intuit Inc. 456,612 14,433,505(a)
Juniper Networks, Inc. 116,369 3,863,451(a)
Lam Research Corp. 7,747 334,903(a)
Macrovision Corp. 173,556 3,181,281(a)
Marvell Technology Group Ltd. 76,121 1,064,172(a)
Maxim Integrated Products, Inc. 74,772 1,979,962
Mettler Toledo International Inc. 21,721 2,471,850(a)
Microchip Technology Inc. 207,345 6,514,779
Microsoft Corp. 711,119 25,315,837(h)
Molex, Inc. (Class A) 397,905 10,452,964
National Semiconductor Corp. 28,275 640,146
Neustar, Inc. (Class A) 136,459 3,913,644(a)
Oracle Corp. 1,020,972 23,053,548(a,h)
Paychex, Inc. 465,823 16,872,109
QUALCOMM, Inc. 745,177 29,322,715
Salesforce.com, Inc. 39,724 2,490,298(a)
Texas Instruments Incorporated 27,814 928,988
THQ, Inc. 62,818 1,770,839(a)
Western Union Co. 847,194 20,569,870
Yahoo! Inc. 507,182 11,797,054(a)
275,366,155
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
8
TOTAL RETURN FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
MATERIALS -- 1.2%
Alcoa, Inc. 12,293 $ 449,309
Allegheny Technologies
Incorporated 78,464 6,779,290
Cabot Corp. 44,397 1,480,196
Freeport-McMoRan Copper &
Gold Inc. (Class B) 6,608 676,924
Martin Marietta Materials, Inc. 19,214 2,547,776
Monsanto Co. 164,464 18,368,984
Praxair, Inc. 40,818 3,620,964
33,923,443
TELECOMMUNICATION SERVICES -- 1.3%
American Tower Corp. (Class A) 52,857 2,251,708(a)
AT&T, Inc. 9,220 383,183
Clearwire Corp. (Class A) 38,800 531,948(a)
NII Holdings Inc. (Class B) 581,856 28,115,282(a)
Sprint Nextel Corp. (Series 1) 3,618 47,504
Syniverse Holdings, Inc. 102,278 1,593,491(a)
Verizon Communications Inc. 23,511 1,027,196
33,950,312
UTILITIES -- 0.5%
American Electric Power
Company, Inc. 6,761 314,792
Constellation Energy Group, Inc. 9,278 951,273
Dominion Resources, Inc. 38,064 1,806,137
DTE Energy Co. 36,519 1,605,375
Edison International 12,293 656,077
Entergy Corp. 7,683 918,272
ITC Holdings Corp. 84,072 4,743,342
PPL Corp. 38,422 2,001,402
SCANA Corp. 44,551 1,877,825
14,874,495
TOTAL DOMESTIC EQUITY
(COST $1,055,897,489) 1,124,762,794
- --------------------------------------------------------------------------------
FOREIGN EQUITY -- 29.1%
- --------------------------------------------------------------------------------
COMMON STOCK -- 28.2%
CONSUMER DISCRETIONARY -- 1.9%
Accor S.A. 30,760 2,460,005
China Travel International Inv 1,863,319 1,228,289
DaimlerChrysler AG (Regd.) 46,888 4,558,749
Esprit Holdings Ltd. 144,000 2,158,873
Gafisa S.A. 37,950 707,618
Koninklijke Philips Electronics N.V. 332,150 14,335,503
Koninklijke Philips
Electronics N.V. ADR 19,800 846,450
LVMH Moet Hennessy
Louis Vuitton S.A. 29,994 3,625,744
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Megainfo Holdings Ltd. 2,421,779 $ 307,482(a)
ON*Media Corp. 96,880 723,456(a)
Prajay Engineers Syndicate Ltd. 75,862 771,804
Reed Elsevier PLC 229,859 3,109,103
Renault S.A. 19,446 2,758,094
Swatch Group AG 15,423 4,648,765
Toyota Motor Corp. 172,988 9,352,795
Urbi Desarrollos Urbanos
S.A. de C.V. 187,037 646,060(a)
52,238,790
CONSUMER STAPLES -- 2.4%
British American Tobacco PLC 25,422 994,389
China Mengniu Dairy
Company Ltd. 194,000 710,327
Diageo PLC 389,532 8,374,340
Diageo PLC ADR 4,917 422,026
Groupe Danone 138,883 12,467,511
IOI Corp. 453,550 1,062,901
ITC Ltd. 197,723 1,056,462
Metro AG 54,146 4,547,190
Nestle S.A. (Regd.) 39,957 18,352,374
Nestle S.A. ADR 6,608 756,616
Shinsegae Company Ltd. 630 488,628(a)
Shiseido Company Ltd. 294,000 6,960,838
Tesco PLC 776,265 7,374,626
Tiger Brands Ltd. 30,649 753,405
64,321,633
ENERGY -- 2.9%
Acergy S.A. 295,410 6,596,584
BG Group, PLC 463,941 10,620,493
CAT Oil AG 32,562 716,490(a)
China Petroleum &
Chemical Corp. 414,000 624,393
China Shenhua Energy
Company Ltd. 140,500 838,776
LUKOIL ADR 13,085 1,131,853
OAO Gazprom ADR 196,412 11,136,561
Paladin Resources Ltd. 631,231 3,763,375(a)
Pan Asia Environmental
Protection Group Ltd. 1,294,000 497,858(a)
PetroChina Company Ltd. 64,000 114,089
Petroleo Brasileiro S.A. ADR 149,525 14,387,295
Saipem S.p.A. 357,927 14,354,319
Tesco Corp. 57,461 1,647,407(a)
Thai Oil PCL 290,300 745,464
Total S.A. 145,594 12,097,161
79,272,118
FINANCIALS -- 5.2%
Allianz AG (Regd.) 10,714 2,317,549
AXA S.A. 115,844 4,639,038
Banca Intesa S.p.A. 1,044,947 8,265,209
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
9
<page>
TOTAL RETURN FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Banco do Brasil S.A. 46,192 $ 788,897
Banco Santander Central
Hispano S.A. (Regd.) 476,283 10,299,012
Bank of Yokohama Ltd. 565,012 3,965,174
BNP Paribas 69,683 7,561,537
CapitaLand Ltd. 834,000 3,632,763
China Vanke Company Ltd. 150,450 390,722
Chinatrust Financial Holding
Company Ltd. 657,000 466,906(a)
Credit Agricole S.A. 115,181 3,884,998
Dubai Islamic Bank 432,718 1,296,057
Egyptian Financial Group-
Hermes Holding 126,426 1,512,643
Emaar Properties 209,944 851,758
Hung Poo Real Estate
Development Corp. 599,860 442,943
Kookmin Bank 77,691 5,726,915(a)
Lloyds TSB Group, PLC 382,972 3,598,265
Megaworld Corp. 5,034,677 457,421
Metropolitan Bank & Trust 334,700 441,942
Mitsubishi Estate Company Ltd. 435,982 10,517,580
Mitsubishi UFJ Financial Group,
Inc. 1,075,803 10,082,493
Nomura Holdings, Inc. 719,698 12,208,098
Ping An Insurance Group 82,500 884,526
Plaza Centers N.V. 104,902 480,281(a)
Prudential PLC 475,265 6,735,966
PT Bank Niaga 7,931,553 760,010
Royal Bank of Scotland
Group, PLC 747,497 6,606,577
Samsung Fire & Marine
Insurance Company Ltd. 4,300 1,162,224
Siam Commercial Bank PCL 383,400 973,154
Sony Financial Holdings Inc. 1,334 5,098,850(a)
Standard Bank Group, Ltd. 46,348 678,705
State Bank of India Ltd. 3,520 211,209
State Bank of India Ltd. GDR 5,284 644,648
Sumitomo Realty & Development
Company Ltd. 100,000 2,475,048
Sun Hung Kai Properties Ltd. 202,476 4,294,961
Swiss Reinsurance 24,863 1,766,752
Tisco Bank PCL 24,344 21,681
Tisco Bank PCL 534,579 468,163
Unibail-Rodamco (REIT) 15,524 3,402,715
UniCredito Italiano S.p.A. 1,332,007 11,061,580
Woori Investment &
Securities Co Ltd 34,040 958,233
142,033,203
HEALTHCARE -- 0.8%
GlaxoSmithKline PLC ADR 10,800 544,212
Novartis AG ADR 3,534 191,932
Roche Holding AG 101,726 17,575,061
Smith & Nephew PLC ADR 34,753 1,995,517
Teva Pharmaceutical
Industries Ltd. ADR 19,895 924,720
Yuhan Corp. 3,549 769,667(a)
22,001,109
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
INDUSTRIALS -- 4.6%
ABB Ltd. (Regd.) 364,922 $ 10,514,292
ABB Ltd. ADR 24,587 708,106
ACS Actividades de Construccion
y Servicios S.A. 8,583 510,108
Alstom 30,741 6,606,899
Asahi Glass Company Ltd. 346,005 4,642,720
Brambles Ltd. 273,656 2,770,471
CAE, Inc. 945,824 12,755,375
Canadian National Railway Co. 126,749 5,991,024
China Communications
Construction Company Ltd. 567,080 1,498,172
China High Speed Transmission
Equipment Group Company Ltd. 419,000 1,117,706(a)
China Infrastructure Machinery
Holdings Ltd. 219,013 347,167
Daewoo Shipbuilding & Marine
Engineering Company Ltd. 8,237 454,067(a)
Doosan Heavy Industries and
Construction Company Ltd. 12,310 1,657,027(a)
East Japan Railway Co. 911 7,518,614
Empresas ICA Sociedad
Controladora S.A. de C.V. 150,029 989,581(a)
Enka Insaat ve Sanayi AS 71,412 1,248,834
Fraser and Neave Ltd. 100,000 409,879
Gamuda BHD 368,302 536,805
Group 4 Securicor PLC 587,489 2,862,243
Group 4 Securicor PLC 700,852 3,380,547
Hyundai Development Co. 12,160 1,188,654(a)
Hyunjin Materials Company Ltd. 20,425 877,181(a)
Italian-Thai Development PCL 1,125,594 277,347
Italian-Thai Development
PCL NVDR 1,470,847 360,234
IVRCL Infrastructures &
Projects Ltd. 52,279 741,310
Jaiprakash Associates Ltd. 127,905 1,380,297
Komatsu Ltd. 151,075 4,111,068
Larsen & Toubro Ltd. 40,782 4,309,451
Mitsubishi Heavy Industries Ltd. 1,195,000 5,145,191
Murray & Roberts Holdings Ltd. 44,260 660,563
Orascom Construction Industries 62,912 6,546,270
Orkla ASA 184,682 3,579,801
Sandvik AB 329,449 5,670,752
Schneider Electric S.A. 21,484 2,911,143
Siemens AG (Regd.) 92,676 14,750,200
United Tractors Tbk PT 623,500 723,572
Vinci S.A. 68,888 5,101,353
124,854,024
INFORMATION TECHNOLOGY -- 2.3%
AAC Acoustic Technologies
Holdings Inc. 529,019 712,378(a)
Delta Electronics Inc. 286,207 979,481
HON HAI Precision Industry
Company Ltd. 204,240 1,271,994
Hoya Corp. 41,500 1,322,472
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
10
TOTAL RETURN FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Ibiden Company Ltd. 135,394 $ 9,392,682
Kingdee International Software
Group Company Ltd. 333 259
MediaTek Inc. 79,245 1,028,601
Nidec Corp. 47,313 3,506,706
Nintendo Company Ltd. 1,400 838,383
Nokia OYJ 454,177 17,610,065
Research In Motion Ltd. 83,259 9,441,571(a)
Samsung Electronics
Company Ltd. 12,970 7,703,991
Sohu.com Inc. 12,272 669,069(a)
Taiwan Semiconductor
Manufacturing Company Ltd. 3,210,914 6,137,806
Taiwan Semiconductor
Manufacturing Company
Ltd. ADR 53,783 535,679
61,151,137
MATERIALS -- 3.7%
Anglo Platinum Ltd. 28,670 4,237,145
Barrick Gold Corp. 32,511 1,367,088
Bayer AG 135,499 12,387,590
BHP Billiton PLC 541,895 16,676,646
China Grand Forest 4,809,153 1,017,660(a)
Israel Chemicals Ltd. 97,774 1,244,974
Linde AG 69,855 9,237,796
Maanshan Iron & Steel 566,000 376,733
Makhteshim-Agan Industries Ltd. 107,775 989,268(a)
MMC Norilsk Nickel ADR 3,987 1,079,480
Novozymes (Series B) 54,674 6,239,207
PAN American Silver Corp. 11,137 389,015(a)
POSCO 1,090 669,569
Potash Corp of Saskatchewan 96,178 13,983,058
Rio Tinto PLC (Regd.) 85,574 9,057,171
Samling Global Ltd. 1,130,000 227,525
Sinofert Holdings Ltd. 1,614,000 1,508,972
Syngenta AG (Regd) 19,382 4,939,016
Toray Industries Inc. 1,760,998 13,792,895
Vedanta Resources PLC 21,936 893,402
100,314,210
TELECOMMUNICATION SERVICES -- 2.9%
America Movil S.A. de C.V.
ADR (Series L) 146,835 9,014,201
Bharti Airtel Ltd. 58,879 1,478,884(a)
China Mobile Ltd. 125,474 2,219,056
Hellenic Telecommunications
Organization S.A. 214,115 7,888,782
Mobile Telesystems OJSC ADR 36,122 3,676,858
MTN Group, Ltd. 505,588 9,473,557
Orascom Telecom Holding SAE 79,821 1,329,663
Philippine Long Distance
Telephone Co. 3,120 240,000
Singapore Telecommunications Ltd. 2,007,003 5,577,138
Telekom Malaysia Bhd 243,000 822,982
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Telekomunikasi Indonesia
Tbk PT (Series B) 684,500 $ 739,705
Telenor ASA 798,790 19,087,636
Turkcell Iletisim Hizmet AS ADR 20,082 553,661
Vodafone Group, PLC 4,223,874 15,790,310
Vodafone Group, PLC ADR 10,449 389,957
78,282,390
UTILITIES -- 1.5%
CEZ 16,084 1,206,338
E.ON AG 59,489 12,662,823
First Philippine Holdings Corp. 46,724 82,071
National Grid PLC 319,321 5,301,242
PNOC Energy Development Corp. 6,180,385 973,289
RWE AG 20,287 2,847,419
Suez S.A. 96,672 6,582,172
Veolia Environnement 123,865 11,309,499
40,964,853
TOTAL COMMON STOCK
(COST $602,050,911) 765,433,467
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.9%
- --------------------------------------------------------------------------------
All America Latina Logistica S.A. 308,300 3,990,579
Cia Vale do Rio Doce 97,303 2,774,229
Cia Vale do Rio Doce ADR 548,064 15,334,830
NET Servicos de Comunicacao S.A. 42,466 517,703(a)
Petroleo Brasileiro S.A. 14,400 715,146
TOTAL PREFERRED STOCK
(COST $12,256,848) 23,332,487
TOTAL FOREIGN EQUITY
(COST $614,307,759) 788,765,954
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BONDS AND NOTES -- 22.0%
- --------------------------------------------------------------------------------
U.S. TREASURIES -- 7.8%
U.S. Treasury Bonds
4.50% 02/15/36 $ 265,000 266,434(j)
4.75% 02/15/37 20,703,000 21,667,759(j)
U.S. Treasury Notes
3.63% 10/31/09 24,722,000 24,967,737(j)
4.25% 09/30/12 31,215,000 32,305,339(j)
4.50% 05/15/17 6,175,000 6,398,350(j)
4.63% 11/15/09 - 02/15/17 53,819,000 55,979,254(j)
4.75% 08/15/17 22,510,000 23,772,586(h,j)
4.88% 06/30/12 43,318,000 45,939,173(h,j)
211,296,632
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
11
TOTAL RETURN FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FEDERAL AGENCIES -- 0.0%*
Federal Home Loan Mortgage Corp.
4.88% 02/09/10 $ 610,000 $ 625,758
AGENCY MORTGAGE BACKED -- 6.8%
Federal Home Loan Mortgage Corp.
4.50% 06/01/33 - 02/01/35 271,502 256,784(h)
5.00% 07/01/35 - 10/01/35 7,999,437 7,810,674(h)
5.50% 05/01/20 88,461 89,597(h)
6.00% 04/01/17 - 11/01/36 462,926 470,793(h)
6.50% 01/01/27 - 08/01/36 964,703 993,478(h)
7.00% 10/01/25 - 08/01/36 279,017 290,583(h)
7.50% 11/01/09 - 09/01/33 43,496 46,250(h)
8.00% 01/01/30 - 11/01/30 16,318 17,413(h)
9.00% 10/01/25 687 746(h)
6.00% TBA 4,815,000 4,885,723(c)
Federal National Mortgage Assoc.
4.00% 05/01/19 - 06/01/19 243,454 234,877(h)
4.50% 05/01/18 - 02/01/35 1,789,410 1,736,118(h)
5.00% 07/01/20 - 08/01/35 4,572,108 4,467,853(h)
5.00% 07/01/35 1,086,742 1,098,654(h,i)
5.10% 08/01/35 713,375 717,471(h,i)
5.26% 04/01/37 581,289 585,660(i)
5.44% 04/01/37 52,991 53,486(i)
5.50% 04/01/14 - 08/01/35 1,788,813 1,801,303(h)
5.53% 04/01/37 732,890 743,251(i)
5.59% 04/01/37 1,304,589 1,326,123(i)
5.62% 03/01/37 45,285 45,854(i)
5.63% 06/01/37 956,006 971,132(i)
5.66% 05/01/37 380,525 386,344(i)
5.68% 04/01/37 472,805 480,683(i)
5.70% 04/01/37 904,610 919,110(i)
5.71% 04/01/37 752,871 765,015(i)
5.72% 04/01/37 234,619 238,862(i)
5.85% 06/01/37 1,190,314 1,213,193(i)
6.00% 09/01/19 - 08/01/35 4,426,561 4,500,179(h)
6.04% 10/01/37 1,001,799 1,021,110(i)
6.50% 09/01/17 - 08/01/36 2,265,254 2,333,763(h)
7.00% 04/01/17 - 06/01/36 385,004 402,637(h)
7.50% 12/01/09 - 03/01/34 96,059 101,307(h)
8.00% 12/01/11 - 11/01/33 34,854 36,801(h)
8.50% 06/01/30 219 236(h)
9.00% 06/01/09 - 12/01/22 14,380 15,155(h)
5.00% TBA 22,815,000 22,407,426(c)
5.50% TBA 52,514,000 52,562,358(c)
6.00% TBA 40,902,000 41,534,572(c)
6.50% TBA 14,390,000 14,790,215(c)
Government National
Mortgage Assoc.
4.50% 08/15/33 - 09/15/34 437,585 421,036(h)
6.00% 04/15/27 - 09/15/36 624,858 640,265(h)
6.50% 04/15/24 - 09/15/36 619,518 640,027(h)
7.00% 03/15/12 - 10/15/36 601,127 627,945(h)
8.00% 03/15/30 3,351 3,628(h)
9.00% 11/15/16 - 12/15/21 18,613 20,023(h)
5.50% TBA 9,395,000 9,433,163(c)
184,138,876
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.4%
Federal Home Loan Mortgage Corp.
1.42% 04/15/37 $ 1,893,880 $ 143,199(g,i)
1.72% 05/15/37 2,668,222 193,901(g,i)
1.79% 04/25/37 1,511,832 114,568(g,i)
2.12% 12/15/30 383,267 23,954(g,h,i)
2.75% 09/15/36 1,490,128 165,311(g,h,i)
4.30% 12/15/33 45,000 37,705(h,i)
4.50% 04/15/13 - 03/15/19 396,107 26,320(g,h)
5.00% 04/15/14 - 12/01/34 5,468,704 1,068,182(g,h)
5.50% 04/15/17 - 06/15/33 195,297 29,898(g,h)
5.50% 04/15/26 1,988,155 2,014,273
7.50% 01/15/16 7,855 8,138 (h)
7.50% 07/15/27 5,765 1,012(g,h)
8.00% 02/01/23 - 07/01/24 4,095 929(g,h)
8.61% 11/15/37 1,422,852 1,058,146(d,f)
21.57% 09/25/43 389,513 4,390(d,g,h,i)
Federal Home Loan Mortgage STRIPS
6.04% 08/01/27 936 759(d,f,h)
Federal National Mortgage Assoc.
1.59% 05/25/37 - 06/25/37 23,217,387 1,537,203(g,i)
1.91% 03/25/37 1,507,977 142,080(g,i)
2.34% 07/25/37 3,985,404 370,523(g,i)
2.74% 09/25/42 211,489 16,589(g,h,i)
2.79% 04/25/17 - 10/25/17 167,311 12,207(g,h,i)
2.84% 08/25/16 61,827 3,227(g,h,i)
4.50% 05/25/18 107,947 9,091(g,h)
4.75% 11/25/14 19,541 786(g,h)
5.00% 02/25/32 30,259 1,850(g,h)
5.00% 10/25/35 415,000 373,328
5.50% 03/25/29 - 01/25/33 2,339,382 2,321,641
8.00% 07/25/14 16,235 16,378 (h)
39.31% 12/25/42 216,220 6,351(d,g,h,i)
Federal National Mortgage
Assoc. (Class 2)
5.50% 12/01/33 - 05/25/37 386,913 92,230 (g)
Federal National Mortgage
Assoc. (Class S)
2.24% 02/25/31 69,374 3,596(g,h,i)
Federal National Mortgage
Assoc. REMIC
4.50% 11/25/13 49,476 1,410(g,h)
5.00% 10/25/22 101,712 15,114(g,h)
5.91% 03/25/31 71,677 73,454(h,i)
Federal National Mortgage Assoc.
REMIC (Class J)
1080.91% 03/25/22 4 15(g,h)
Federal National Mortgage Assoc.
REMIC (Class K)
1008.00% 05/25/22 5 103(g,h)
Federal National Mortgage Assoc.
STRIPS (Class 2)
5.00% 08/01/34 5,416,465 1,384,584 (g)
7.50% 11/01/23 18,716 5,258(g,h)
8.00% 08/01/23 - 07/01/24 8,798 2,069(g,h)
11,279,772
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
12
TOTAL RETURN FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ASSET BACKED -- 2.0%
American Express Credit Account
Master Trust (Class A)
5.02% 12/17/12 $5,000,000 $ 4,970,211(h,i)
BA Credit Card Trust
5.03% 08/15/12 9,500,000 9,420,215(h,i)
Bear Stearns Asset Backed
Securities Inc. (Class A)
5.24% 01/25/34 14,031 13,449(h,i)
Capital Auto Receivables Asset Trust
5.09% 05/15/11 8,000,000 7,958,752(h,i)
Capital One Auto Finance Trust
5.03% 04/15/12 3,000,000 2,899,824(h,i)
Capital One Multi-Asset Execution
Trust (Class A)
5.06% 03/16/15 490,000 484,043(h,i)
Carmax Auto Owner Trust
4.35% 03/15/10 154,000 153,469(h)
Citibank Credit Card Issuance Trust
4.45% 04/07/10 35,000 34,948(h)
Ford Credit Auto Owner Trust (Class A)
5.07% 02/15/12 7,125,000 7,013,963(h,i)
Honda Auto Receivables Owner
Trust (Class A)
4.15% 10/15/10 138,000 137,568(h)
Indymac Residential
Asset Backed Trust
5.04% 10/25/35 3,059,513 3,043,042(h,i)
6.87% 04/25/37 189,000 23,457(h,i)
JP Morgan Mortgage
Acquisition Corp.
5.02% 03/01/37 1,500,000 1,345,035(i)
Long Beach Mortgage Loan Trust
5.15% 09/25/35 718,574 711,700(h,i)
Mid-State Trust
7.54% 07/01/35 4,929 5,251(h)
Option One Mortgage Loan Trust
5.00% 06/25/37 4,000,000 3,652,330(i)
Peco Energy Transition Trust
6.52% 12/31/10 50,000 53,011(h)
Residential Asset Mortgage
Products, Inc.
5.11% 03/25/34 9,063 9,033(h,i)
Residential Asset Securities Corp.
5.12% 01/25/36 2,427,533 2,259,503(h,i)
5.37% 07/25/32 8,057 7,519(h,i)
Residential Asset Securities
Corp. (Class A)
4.16% 07/25/30 90,164 88,992(h,i)
SLM Student Loan Trust (Class A)
5.04% 06/15/18 222,624 221,378(h,i)
Superior Wholesale Inventory
Financing Trust (Class A)
5.21% 06/15/10 4,000,000 3,982,911(h,i)
Swift Master Auto Receivables
Trust (Class A)
5.13% 06/15/12 4,250,000 4,065,557(i)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Triad Auto Receivables Owner
Trust (Class A)
5.29% 02/12/14 $2,000,000 $ 1,952,395(i)
Wells Fargo Home Equity Trust
3.97% 05/25/34 35,424 33,269(h,i)
54,540,825
CORPORATE NOTES -- 2.5%
Abbey National PLC
7.95% 10/26/29 219,000 251,167(h)
American Electric Power
Company, Inc. (Series C)
5.38% 03/15/10 2,125,000 2,153,393(h)
American Electric Power
Company, Inc. (Series D)
5.25% 06/01/15 1,040,000 1,000,845(h)
American International Group, Inc.
5.85% 01/16/18 717,000 722,166
Appalachian Power Co. (Series G)
3.60% 05/15/08 20,000 19,858(h)
Archer-Daniels-Midland Co.
6.45% 01/15/38 477,000 487,675
Arizona Public Service Co.
6.25% 08/01/16 370,000 376,538(h)
AT&T, Inc.
4.13% 09/15/09 1,800,000 1,782,937(h)
BAC CAP TRUST V
5.63% 03/08/35 925,000 784,760(h)
Bear Stearns Companies Inc.
5.85% 07/19/10 425,000 424,524(h)
6.95% 08/10/12 1,555,000 1,598,851(h)
BellSouth Corp.
4.20% 09/15/09 735,000 730,469(h)
6.55% 06/15/34 510,000 525,477(h)
BJ Services Co.
5.75% 06/01/11 430,000 441,418(h)
Bristol-Myers Squibb Co.
5.88% 11/15/36 420,000 414,946(h)
British Telecommunications PLC
8.63% 12/15/10 170,000 186,114(h)
Burlington Northern Santa Fe Corp.
6.75% 07/15/11 1,000,000 1,054,601(h)
Capital One Bank
6.50% 06/13/13 25,000 24,645(h)
Carolina Power & Light Co.
5.15% 04/01/15 810,000 803,471(h)
5.70% 04/01/35 155,000 149,547(h)
6.13% 09/15/33 190,000 194,026(h)
Chubb Corp.
6.00% 05/11/37 400,000 383,366(h)
Citigroup Capital
8.30% 12/21/57 244,000 257,692(i)
Citigroup, Inc.
5.13% 02/14/11 - 05/05/14 3,805,000 3,747,984(h)
Consumers Energy Co.
5.15% 02/15/17 555,000 530,334(h)
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
13
TOTAL RETURN FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
COX Communications, Inc.
7.13% 10/01/12 $ 505,000 $ 540,032(h)
7.75% 11/01/10 375,000 401,112(h)
CSX Transportation, Inc.
9.75% 06/15/20 1,021,000 1,318,182(h)
DaimlerChrysler NA Holding Corp.
4.05% 06/04/08 280,000 278,922(h)
Diageo Capital PLC
5.20% 01/30/13 454,000 456,971
Dominion Resources, Inc.
5.69% 05/15/08 370,000 370,818(h,k)
Dominion Resources, Inc. (Series B)
6.30% 09/30/66 1,505,000 1,458,837(h,i)
Dover Corp.
6.50% 02/15/11 375,000 390,553(h)
Duke Energy Corp.
5.38% 01/01/09 160,000 161,088(h)
EI Du Pont de Nemours & Co.
4.88% 04/30/14 325,000 317,071(h)
El Paso Electric Co.
6.00% 05/15/35 270,000 252,413(h)
FirstEnergy Corp. (Series B)
6.45% 11/15/11 2,040,000 2,106,537(h)
Goldman Sachs Group, Inc.
6.60% 01/15/12 3,195,000 3,398,374(h)
6.88% 01/15/11 900,000 952,330(h)
GTE Corp.
6.94% 04/15/28 850,000 910,463(h)
7.51% 04/01/09 165,000 170,028(h)
HSBC Bank USA NA
3.88% 09/15/09 1,175,000 1,159,673(h)
4.63% 04/01/14 1,085,000 1,027,970(h)
HSBC Finance Corp.
6.75% 05/15/11 405,000 428,064(h)
HSBC Holdings PLC
6.50% 05/02/36 100,000 97,313(h)
Hydro Quebec
8.05% 07/07/24 820,000 1,070,183(h)
8.50% 12/01/29 1,585,000 2,250,343(h)
ING Capital Funding TR III
8.44% 12/29/49 960,000 1,022,653(h,i)
ING Groep N.V.
5.78% 12/29/49 1,265,000 1,176,673(h,i)
International Business
Machines Corp.
4.75% 11/29/12 1,300,000 1,308,718(h)
International Steel Group Inc.
6.50% 04/15/14 415,000 426,064
iStar Financial, Inc. (REIT)
7.00% 03/15/08 400,000 399,311(h)
JP Morgan Chase & Co.
7.00% 11/15/09 1,130,000 1,176,464(h)
JP Morgan Chase Bank
5.88% 06/13/16 825,000 838,257
Kansas Gas & Electric
5.65% 03/29/21 417,836 403,744(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc.
5.00% 01/14/11 $1,150,000 $ 1,135,829(h)
6.20% 09/26/14 375,000 384,892
Markel Corp.
7.35% 08/15/34 340,000 357,976(h)
Martin Marietta Materials, Inc.
6.25% 05/01/37 105,000 98,165
McDonald's Corp.
5.80% 10/15/17 450,000 464,101
Merck & Company, Inc.
5.75% 11/15/36 445,000 442,482(h)
Mizuho Financial Group
Cayman Ltd.
8.38% 12/29/49 595,000 601,212
Morgan Stanley
5.95% 12/28/17 700,000 698,285
Munich Re America Corp. (Series B)
7.45% 12/15/26 315,000 350,554(h)
Nevada Power Co. (Series A)
8.25% 06/01/11 250,000 271,544(h)
Nevada Power Company (Series I)
6.50% 04/15/12 515,000 533,379(h)
Nisource Finance Corp.
7.88% 11/15/10 160,000 169,839(h)
Norfolk Southern Corp.
6.00% 04/30/08 20,000 20,070(h)
8.63% 05/15/10 485,000 527,488(h)
Norfolk Southern Railway Co.
9.75% 06/15/20 64,000 87,337(h)
Northeast Utilities (Series B)
3.30% 06/01/08 30,000 29,697(h)
NorthWestern Corp.
5.88% 11/01/14 200,000 197,126(h)
Pacific Bell
7.13% 03/15/26 55,000 58,253(h)
Pacific Gas & Electric Co.
5.80% 03/01/37 500,000 478,820
Pacificorp
6.25% 10/15/37 375,000 387,234
Pemex Finance Ltd.
9.03% 02/15/11 172,250 184,044(h)
Pemex Project Funding Master Trust
7.88% 02/01/09 158,000 162,784
Petrobras International Finance Co.
5.88% 03/01/18 685,000 685,260
Prudential Financial, Inc.
5.70% 12/14/36 485,000 425,434(h)
6.10% 06/15/17 415,000 417,426
Public Service Company of Colorado
7.88% 10/01/12 520,000 580,248(h)
Puget Sound Energy, Inc.
3.36% 06/01/08 30,000 29,759(h)
5.48% 06/01/35 130,000 112,253(h)
Puget Sound Energy, Inc. (Series A)
6.97% 06/01/67 830,000 743,977(i)
Royal Bank of Scotland Group PLC
5.00% 10/01/14 375,000 359,763(h)
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
14
<page>
TOTAL RETURN FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Sovereign Capital Trust VI
7.91% 06/13/36 $ 945,000 $ 913,486(h)
Sprint Capital Corp.
7.63% 01/30/11 2,200,000 2,286,837
Standard Chartered Bank
Hong Kong Ltd.
4.38% 12/03/14 380,000 376,276(i)
Telecom Italia Capital S.A.
6.20% 07/18/11 1,175,000 1,208,941
Telefonica Emisiones SAU
5.86% 02/04/13 600,000 617,354
Time Warner, Inc.
6.88% 05/01/12 25,000 26,312(h)
TXU Electric Delivery Co.
6.38% 05/01/12 580,000 603,920(h)
UBS Preferred Funding Trust I
8.62% 10/29/49 495,000 528,976(i)
Valspar Corp.
5.63% 05/01/12 320,000 323,577
Verizon Global Funding Corp.
7.25% 12/01/10 900,000 963,690
Verizon Pennsylvania, Inc.
8.35% 12/15/30 210,000 251,369(h)
Verizon Pennsylvania, Inc.
8.75% 08/15/31 165,000 205,690(h)
Wal-Mart Stores, Inc.
6.88% 08/10/09 1,000,000 1,043,086(h)
Wells Fargo & Co.
5.63% 12/11/17 240,000 241,665
Wells Fargo Bank NA
5.95% 08/26/36 1,450,000 1,408,691(h)
Westar Energy, Inc.
7.13% 08/01/09 420,000 431,406(h)
Wisconsin Electric Power
5.70% 12/01/36 115,000 110,102(h)
67,852,574
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.5%
Banc of America Commercial
Mortgage Inc.
4.13% 07/10/42 1,800,000 1,773,187(h)
5.32% 10/10/11 1,300,000 1,302,975(h)
Banc of America Commercial
Mortgage Inc. (Class A)
5.79% 05/11/35 1,872,843 1,913,483(h)
Banc of America Commercial
Mortgage Inc. (Class C)
5.70% 04/10/17 400,000 362,263(h)
Banc of America Funding Corp.
5.74% 03/20/36 193,839 200,349(h,i)
5.82% 02/20/36 345,563 341,302(h,i)
Banc of America Mortgage
Securities (Class B)
5.38% 01/25/36 198,603 196,827(h,i)
5.55% 02/25/36 158,718 162,968(h,i)
Bank of America Alternative Loan Trust
6.50% 07/25/35 209,216 207,915(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Bear Stearns Asset Backed
Securities Trust (Class A)
5.04% 07/25/36 $ 7,414,897 $ 7,302,751(h,i)
Bear Stearns Commercial
Mortgage Securities
5.41% 03/11/39 1,000,000 1,010,044(h,i)
5.48% 10/12/41 1,500,000 1,510,997(h,i)
5.53% 10/12/41 1,500,000 1,500,732(h,i)
6.02% 02/14/31 72,628 73,129(h)
Bear Stearns Commercial Mortgage
Securities (Class A)
5.47% 04/12/38 700,000 707,981(h,i)
5.66% 06/11/40 2,100,000 2,133,238(h,i)
Countrywide Alternative Loan Trust
5.98% 05/25/36 73,636 49,198(h,i)
6.00% 03/25/36 - 08/25/36 423,157 93,812(h)
Countrywide Alternative Loan
Trust (Class B)
6.00% 05/25/36 - 08/25/36 227,016 121,491(h)
Credit Suisse Mortgage
Capital Certificates
5.47% 09/15/39 682,000 687,329(h)
Credit Suisse Mortgage
Capital Certificates (Class C)
5.65% 02/25/36 112,605 95,423(h,i)
Crusade Global Trust (Class A)
5.41% 01/17/34 2,180,042 2,168,127(h,i)
CS First Boston Mortgage
Securities Corp.
5.25% 08/25/34 226,842 224,071(h)
5.33% 10/25/35 167,215 134,470(h,i)
6.13% 04/15/37 50,000 51,856(h)
CS First Boston Mortgage
Securities Corp. (Class A)
5.44% 09/15/34 595,366 602,289(h)
6.53% 06/15/34 600,000 625,088(h)
DLJ Commercial Mortgage Corp.
6.24% 11/12/31 204,172 205,184(h)
DLJ Commercial Mortgage
Corp. (Class A)
7.18% 11/10/33 1,617,453 1,692,526(h)
7.62% 06/10/33 2,919,663 3,065,379(h)
GMAC Commercial Mortgage
Securities, Inc.
6.42% 05/15/35 384,423 385,459(h)
6.47% 04/15/34 399,237 414,039(h)
GMAC Commercial Mortgage
Securities, Inc. (Class X)
5.29% 12/10/41 3,246,780 58,899(d,g,h,i)
Greenwich Capital Commercial
Funding Corp.
5.12% 04/10/37 500,000 500,849(h)
Impac CMB Trust
5.13% 04/25/35 334,663 325,605(h,i)
Indymac INDA Mortgage Loan Trust
5.14% 01/25/36 99,765 89,714(h,i)
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
15
TOTAL RETURN FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Indymac INDA Mortgage Loan
Trust (Class B)
5.14% 01/25/36 $ 107,746 $ 101,648(h,i)
JP Morgan Chase Commercial
Mortgage Securities Corp.
6.47% 11/15/35 40,000 41,778(h)
LB-UBS Commercial Mortgage Trust
4.06% 09/15/27 108,000 106,626(g,h,i)
5.20% 01/18/12 4,585,120 96,976(d,g,h,i)
5.26% 09/15/39 1,000,000 1,003,746 (h)
5.42% 02/15/40 359,000 360,557
5.53% 03/15/39 1,000,000 1,012,778 (h)
5.66% 03/15/39 1,000,000 1,024,162(h,i)
6.23% 03/15/26 53,000 53,525 (h)
LB-UBS Commercial Mortgage
Trust (Class F)
6.24% 07/15/40 475,000 408,379 (i)
LB-UBS Commercial Mortgage
Trust (Class X)
5.56% 09/15/39 20,981,588 606,802(d,h,i)
Master Alternative Loans Trust
5.00% 08/25/18 49,084 7,531(g,h)
6.50% 08/25/34 - 05/25/35 436,797 431,240 (h)
Master Alternative Loans
Trust (Class 3)
6.50% 01/25/35 102,184 101,976 (h)
Medallion Trust (Class A)
5.04% 08/22/36 1,358,716 1,343,056(h,i)
Merrill Lynch Mortgage
Trust (Class A)
5.61% 05/12/39 1,000,000 1,015,927(h,i)
Merrill Lynch/Countrywide
Commercial Mortgage
Trust (Class A)
5.49% 03/12/51 2,700,000 2,714,180 (i)
5.75% 06/12/50 1,900,000 1,940,517 (i)
MLCC Mortgage Investors, Inc.
5.37% 02/25/36 164,986 158,237(h,i)
Morgan Stanley Capital I
5.28% 12/15/43 1,500,000 1,508,295(h,i)
5.33% 12/15/43 1,500,000 1,497,764(h,i)
5.39% 11/12/41 2,000,000 1,878,421(h,i)
5.44% 02/12/44 1,000,000 997,701(b,i)
5.45% 02/12/44 1,000,000 1,002,371 (i)
5.69% 04/15/49 2,500,000 2,548,199 (i)
5.71% 07/12/44 300,000 304,787 (h)
6.53% 03/15/31 258,990 261,269 (h)
7.11% 04/15/33 65,582 67,099 (h)
Morgan Stanley Capital I (Class A)
5.36% 02/12/44 1,000,000 1,003,715 (i)
Morgan Stanley Dean
Witter Capital I
7.20% 10/15/33 45,011 46,885 (h)
MortgageIT Trust (Class A)
5.17% 08/25/35 2,373,051 2,340,726(h,i)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Nomura Asset Securities
Corp. (Class A)
6.59% 03/15/30 $ 230,759 $ 231,294(h)
Opteum Mortgage Acceptance Corp.
5.17% 02/25/35 223,955 204,154(h,i)
PNC Mortgage Acceptance Corp.
(Class A)
6.36% 03/12/34 2,000,000 2,073,982
Residential Accredit Loans, Inc.
6.00% 01/25/36 242,887 201,958(h)
6.04% 01/25/36 108,434 112,996(h,i)
Residential Asset Securitization
Trust (Class A)
5.27% 05/25/35 883,004 797,866(h,i)
Residential Funding Mortgage
Security I
5.75% 01/25/36 228,312 189,877(h)
Wachovia Bank Commercial
Mortgage Trust
5.42% 04/15/47 2,000,000 2,000,160
Wachovia Bank Commercial
Mortgage Trust (Class E)
5.90% 02/15/51 1,485,000 1,284,759(i)
Washington Mutual Inc.
5.21% 01/25/45 122,635 116,368(h,i)
Wells Fargo Mortgage Backed
Securities Trust
5.39% 08/25/35 472,020 458,935(h,i)
5.50% 01/25/36 - 03/25/36 571,042 453,817(h)
Wells Fargo Mortgage Backed
Securities Trust (Class B)
5.50% 03/25/36 976,852 819,365(h)
67,223,353
SOVEREIGN BONDS -- 0.0%*
Government of Canada
7.50% 09/15/29 495,000 641,094
Government of Manitoba Canada
4.90% 12/06/16 330,000 338,320(h)
979,414
TOTAL BONDS AND NOTES
(COST $595,875,116) 597,937,204
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 1.1%
- --------------------------------------------------------------------------------
Financial Select Sector SPDR Fund 177,242 5,127,611(m)
Industrial Select Sector SPDR Fund 606,648 23,756,336(m)
TOTAL EXCHANGE TRADED FUNDS
(COST $25,529,349) 28,883,947
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
16
TOTAL RETURN FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SECURITIES PURCHASED WITH COLLATERAL
FROM SECURITIES ON LOAN -- 1.6%
- --------------------------------------------------------------------------------
ASSET BACKED -- 1.3%
Bear Stearns Asset Backed
Securities Inc.
5.09% 11/25/35 $5,000,000 $ 4,825,168(h,i)
Countrywide Asset-Backed
Certificates
4.98% 06/25/35 1,480,451 1,456,190(h,i)
Countrywide Asset-Backed
Certificates (Class M)
5.57% 06/26/33 681,250 626,006(h,i)
Discover Card Master Trust I
5.04% 04/15/10 3,000,000 2,982,113(h,i)
GSAA Trust
4.93% 10/25/36 6,259,395 6,175,165(h,i)
GSAMP Trust
4.98% 05/25/36 1,409,337 1,155,656(b,h,i)
GSR Mortgage Loan Trust
5.07% 11/25/30 1,879,398 1,728,527(h,i)
Indymac Residential Asset
Backed Trust
4.99% 06/25/36 5,819,871 5,713,892(h,i)
Nissan Auto Lease Trust
5.10% 02/15/13 6,310,000 6,216,334(i)
Waverly Community School (Class A)
5.03% 02/25/37 4,333,558 4,003,782(h,i)
34,882,833
CORPORATE NOTES -- 0.2%
Countrywide Financial Corp.
5.20% 09/02/08 4,000,000 3,424,448(h,i)
Morgan Stanley
4.93% 05/07/09 1,100,000 1,086,371(i)
4,510,819
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1%
JP Morgan Alternative Loan Trust
4.93% 08/25/36 1,107,882 1,105,883(h,i)
Residential Accredit Loans, Inc.
5.05% 07/25/36 3,360,445 2,832,205(h,i)
3,938,088
TOTAL SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN
(COST $45,743,956) 43,331,740
TOTAL INVESTMENTS IN SECURITIES
(COST $2,337,324,831) 2,583,681,639
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 14.1%*
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 11.4%
GEI Short Term Investment Fund
4.96% 310,629,498 $ 310,629,498(d,l)
SHORT-TERM SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN -- 2.7%
GEI Short Term Investment Fund
4.96% 73,338,013 73,338,013(d,l)
TOTAL SHORT-TERM INVESTMENTS
(COST $383,967,511) 383,967,511
TOTAL INVESTMENTS
(COST $2,721,292,342) 2,967,649,150
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (9.3)% (253,657,566)
--------------
NET ASSETS-- 100.0% $2,713,991,584
==============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Total Return Fund had the following long futures contracts open at
December 31, 2007:
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
S&P 500 Index
Futures March 2008 123 $45,423,900 $188,100)
U.S. Treasury
Notes 2 Yr.
Futures March 2008 98 20,604,500 5,027
U.S. Treasury
Notes 10 Yr.
Futures March 2008 305 34,584,141 124,085
--------
$(58,988)
========
* The financial statement figure presented above for Short-Term Investments
includes collateral received from transactions such as loans of portfolio
securities and amounts held pending settlement of securities transactions. In
evaluating the Fund's net cash level, portfolio management takes into account
certain of the Fund's liabilities in excess of other assets, such as
liabilities associated with loans of portfolio securities and securities
pending settlement, and equitized cash. The Fund's net cash level is not
expected to exceed 10%.
See Notes to Schedule of Investments on page 18 and Notes to Financial
Statements.
17
<page>
Notes to Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
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 December 31, 2007 , these securities amounted to
$2,153,357 or 0.08% of net assets for the 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 December 31, 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
December 31, 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) GE Asset Management (GEAM), the investment advisor of the Fund, also 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 December 31, 2007.
Abbreviations:
ADR American Depository Receipt
GDR Global Depository Receipt
NVDR Non-Voting Depository Receipt
REGD. Registered
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
SPDR Standard & Poors Depository Receipts
STRIPS Separate Trading of Registered Interest and Principal of Security
TBA To be Announced
18
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN FUND
-------------------------------------------------------------------------
CLASS 1
-------------------------------------------------------------------------
12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
-------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- 7/1/85
Net asset value, beginning of period .................... $17.69 $16.04 $15.97 $15.09 $12.68
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.35 0.36 0.23 0.20 0.16
Net realized and unrealized gains/(losses)
on investments ....................................... 1.71 1.84 0.36 1.04 2.41
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS .......... 2.06 2.20 0.59 1.24 2.57
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ................................. 0.35 0.31 0.23 0.20 0.16
Net realized gains .................................... 0.79 0.24 0.29 0.16 --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ..................................... 1.14 0.55 0.52 0.36 0.16
NET ASSET VALUE, END OF PERIOD .......................... $18.61 $17.69 $16.04 $15.97 $15.09
====================================================================================================================================
TOTAL RETURN (A) ........................................ 11.68%(B) 13.75% 3.67% 8.19% 20.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .............. $1,525,002 $1,390,230 $959,531 $515,506 $225,867
Ratios to average net assets:
Net investment income ............................... 2.20% 2.33% 1.89% 1.81% 1.58%
Net Expenses ........................................ 0.52% 0.48% 0.45% 0.49% 0.53%
Gross Expenses ...................................... 0.56% 0.53% 0.45% 0.49% 0.53%
Portfolio turnover rate ............................... 176% 138% 146% 141% 115%
------------------------- ------------------------ ----------------------
CLASS 2 CLASS 3 CLASS 4
------------------------- ------------------------ ----------------------
12/31/07 12/31/06 12/31/07 12/31/06 12/31/07 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 .......................... 0.38 0.26 0.35 0.12 0.33 0.26
Net realized and unrealized gains/(losses)
on investments ................................ 1.67 0.94 1.69 1.10 1.73 0.92
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ... 2.05 1.20 2.04 1.22 2.06 1.18
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .......................... 0.38 0.31 0.35 0.32 0.33 0.29
Net realized gains ............................. 0.79 0.24 0.79 0.24 0.79 0.24
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............................. 1.17 0.55 1.14 0.56 1.12 0.53
NET ASSET VALUE, END OF PERIOD ................... $18.56 $17.68 $18.59 $17.69 $18.62 $17.68
====================================================================================================================================
TOTAL RETURN (A) ................................. 11.63%(B) 7.05% 11.56%(B) 7.17% 11.68%(B) 6.89%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ....... $15,281 $1 $1,173,708 $396,349 $1 $1
Ratios to average net assets:
Net investment income* ....................... 1.75% 2.33% 2.04% 2.09% 2.06% 2.17%
Net Expenses* ................................ 0.56% 0.57% 0.61% 0.62% 0.67% 0.77%
Gross Expenses* .............................. 0.59% 0.64% 0.65% 0.69% 0.73% 0.84%
Portfolio turnover rate ........................ 176% 138% 176% 138% 176% 138%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
(b) The total return includes .07% related to the purchases and sales of initial
public offerings.
* Annualized for periods less than one year.
See Notes to Financial Statements.
19
<page>
Statement of Assets
and Liabilities DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL
RETURN
FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $2,337,324,831) .................................. $2,583,681,639
Short-term affiliated investments (at amortized cost) ........................................ 383,967,511
Cash ......................................................................................... 19,198
Foreign cash (cost $1,206,480) ............................................................... 1,242,906
Receivable for investments sold .............................................................. 1,856,812
Income receivables ........................................................................... 7,586,333
Receivable for fund shares sold .............................................................. 1,313,506
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................................................................. 2,979,667,905
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned ..................................................... 116,669,467
Payable for investments purchased ............................................................ 147,525,219
Payable for fund shares redeemed ............................................................. 111,073
Payable to GEAM .............................................................................. 1,247,917
Variation margin payable ..................................................................... 122,247
Other liabilities ............................................................................ 398
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................................................ 265,676,321
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................................................... $2,713,991,584
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in .............................................................................. 2,458,152,933
Undistributed (distribution in excess of) net investment income .............................. 79,063
Accumulated net realized gain (loss) ......................................................... 9,429,412
Net unrealized appreciation/(depreciation) on:
Investments .............................................................................. 246,356,808
Futures .................................................................................. (58,988)
Foreign currency related transactions .................................................... 32,356
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................................................... $2,713,991,584
- ---------------------------------------------------------------------------------------------------------------------------
CLASS 1:
NET ASSETS ...................................................................................... 1,525,001,711
Shares outstanding ($0.01 par value; unlimited shares authorized) ............................... 81,926,948
Net asset value per share ....................................................................... $18.61
CLASS 2:
NET ASSETS ...................................................................................... 15,280,837
Shares outstanding ($0.01 par value; unlimited shares authorized) ............................... 823,189
Net asset value per share ....................................................................... $18.56
CLASS 3:
NET ASSETS ...................................................................................... 1,173,707,841
Shares outstanding ($0.01 par value; unlimited shares authorized) ............................... 63,135,115
Net asset value per share ....................................................................... $18.59
CLASS 4:
NET ASSETS ...................................................................................... 1,195
Shares outstanding ($0.01 par value; unlimited shares authorized) ............................... 64
Net asset value per share ....................................................................... $18.62
* Includes $114,309,812 of securities on loan.
See Notes to Financial Statements.
20
<page>
Statement of Operations
FOR THE YEAR ENDED DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL
RETURN
FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ......................................................................... $ 27,643,120
Interest ......................................................................... 19,374,063
Interest from affliated investments* ............................................. 15,145,880
Less: Foreign taxes withheld ..................................................... (1,404,247)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ....................................................................... 60,758,816
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ................................................. 7,277,652
Distributors Fees (Notes 4)
Class 1 ....................................................................... 2,952,542
Class 2 ....................................................................... 5,916
Class 3 ....................................................................... 2,309,866
Class 4 ....................................................................... 4
Transfer agent ................................................................... 35,912
Director's fees .................................................................. 55,125
Custody and accounting expenses 464,960
Professional fees ................................................................ 97,195
Registration expenses ............................................................ 28,202
Other expenses ................................................................... 87,090
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ..................................... 13,314,464
- ---------------------------------------------------------------------------------------------------------------------------
Less: Expenses waived or borne by the adviser .................................... (850,608)
Net expenses ..................................................................... 12,463,856
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ....................................................... 48,294,960
===========================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ................................................................... 100,622,662
Futures ....................................................................... 2,450,583
Written options ............................................................... (10,988)
Foreign currency transactions ................................................. (125,167)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ................................................................... 88,757,240
Futures ....................................................................... 49,533
Foreign currency transactions ................................................. 32,419
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ........................... 191,776,282
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................... $240,071,242
===========================================================================================================================
* Income attributable to security lending, net of rebate expenses, for the Total
Return Fund $1,132,697.
See Notes to Financial Statements.
21
<page>
Statements of
Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL
RETURN
FUND
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income .......................................................... $ 48,294,960 $ 30,879,471
Net realized gain on investments, futures, written options,
foreign currency transactions and swaps ....................................... 102,937,090 34,835,590
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation ........ 88,839,192 115,639,111
- ---------------------------------------------------------------------------------------------------------------------------
Net increase from operations .................................................... 240,071,242 181,354,172
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 ....................................................................... (27,215,414) (23,735,343)
Class 2 ....................................................................... (294,066) (18)
Class 3 ....................................................................... (20,800,343) (6,765,709)
Class 4 ....................................................................... (20) (17)
Net realized gains
Class 1 ....................................................................... (60,978,922) (18,619,381)
Class 2 ....................................................................... (605,496) (15)
Class 3 ....................................................................... (46,682,897) (5,194,867)
Class 4 ....................................................................... (48) (15)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................................................... (156,577,206) (54,315,365)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations ........................................ 83,494,036 127,038,807
- ---------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 ....................................................................... 46,393,598 289,978,256
Class 2 ....................................................................... 15,917,245 1,000
Class 3 ....................................................................... 702,792,548 372,387,466
Class 4 ....................................................................... -- 1,000
Value of distributions reinvested
Class 1 ....................................................................... 88,194,336 42,354,257
Class 2 ....................................................................... 899,559 32
Class 3 ....................................................................... 67,483,240 11,960,436
Class 4 ....................................................................... 68 31
Cost of shares redeemed
Class 1 ....................................................................... (73,733,321) (16,516,114)
Class 2 ....................................................................... (941,263) --
Class 3 ....................................................................... (3,089,360) (155,188)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase from share transactions ............................................ 843,916,650 700,011,176
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................................... 927,410,686 827,049,983
NET ASSETS
Beginning of period ............................................................... 1,786,580,898 959,530,915
- ---------------------------------------------------------------------------------------------------------------------------
End of period ..................................................................... $2,713,991,584 $1,786,580,898
===========================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ....... $ 79,063 $ 277,312
- ---------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
22
<page>
Statements of Changes in Net Assets (continued)
Changes in Fund Shares
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL
RETURN
FUND
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006
- ---------------------------------------------------------------------------------------------------------------------------
CLASS 1:
Shares sold .............................................................................. 2,467,981 17,330,893
Issued for distributions reinvested ...................................................... 4,749,306 2,390,195
Shares redeemed .......................................................................... (3,869,587) (952,918)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in fund shares .............................................................. 3,347,700 18,768,170
===========================================================================================================================
CLASS 2:
Shares sold .............................................................................. 822,308 59
Issued for distributions reinvested ...................................................... 48,572 2
Shares redeemed .......................................................................... (47,752) --
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in fund shares .............................................................. 823,128 61
===========================================================================================================================
CLASS 3:
Shares sold .............................................................................. 37,246,423 21,743,379
Issued for distributions reinvested ...................................................... 3,637,911 674,968
Shares redeemed .......................................................................... (158,444) (9,122)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in fund shares .............................................................. 40,725,890 22,409,225
===========================================================================================================================
CLASS 4:
Shares sold .............................................................................. -- 59
Issued for distributions reinvested ...................................................... 4 2
Shares redeemed .......................................................................... -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in fund shares .............................................................. 4 61
===========================================================================================================================
See Notes to Financial Statements.
23
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized costs, which approximates market
value.
All assets and liabilities of the Fund's initially expressed in foreign currency
values will be converted into U.S. dollars at the WM exchange rate computed at
11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security,
or if it is believed that a price for a portfolio security does not represent
its fair value, the security may be valued using procedures approved by the
Fund's Board of Directors that are designed to establish its "fair" value. Those
procedures require that the fair value of a security be established by the fair
valuation committee. The fair valuation committee follows different protocols
for different types of investments and circumstances. The fair value procedures
may be used to value any investment by the Fund in the appropriate
circumstances. Examples of the types of securities that may be fair valued
include: thinly traded or illiquid investments, high-yield securities or foreign
securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
24
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
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 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 custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying
25
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
futures tends to increase the Fund's exposure to the underlying instrument while
selling futures tends to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments. The Fund will not enter into a
transaction involving futures for speculative purposes. The Fund's risks in
using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Futures
contracts are valued at the settlement price established each day by the board
of trade or exchange on which they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. The Fund will not enter
into a transaction involving options for speculative purposes. The Fund's risks
in using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Options
are valued at the last sale price, or if no sales occurred on that day, at the
last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
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
26
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
settlement date and for sales commitments, the Fund maintains equivalent
deliverable securities as "cover" for the transaction. Unsettled commitments are
valued at the current market value of the underlying security. Daily
fluctuations in the value of such contracts are recorded as unrealized gains or
losses. The Fund will not enter into such commitments for the purpose of
investment leverage.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts to facilitate transactions in foreign
denominated securities and to manage the Fund's currency exposure. Forward
foreign currency exchange contracts are valued at the mean between the bid and
the offered forward rates as last quoted by a recognized dealer. The aggregate
principal amounts of the contracts are not recorded in the Fund's financial
statements. Such amounts appear under the caption forward foreign currency
contracts in the Schedule of Investments. Fluctuations in the value of the
contracts are recorded in the Statement of Assets and Liabilities as an asset
(or liability) and in the Statement of Operations as unrealized appreciation
(depreciation) until the contracts are closed, when they are recorded as
realized gains or losses on foreign currency related transactions. The Fund's
risks in using these contracts include changes in the value of foreign currency
or the possibility that the counterparties do not perform under the contracts'
terms. When the Fund enters into a forward foreign currency exchange contract,
it is required to segregate cash or liquid securities with its custodian in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract. If the value of the segregated securities
declines, additional cash or securities is segregated so that the value of the
account will equal the amount of the Fund's commitment with respect to the
contract.
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 December 31, 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
- ---------------------------------------------------------------------------------------------------------------------------
$2,723,284,034 $341,455,106 $(97,089,990) $244,365,116
Net Tax Appreciation/ Undistributed Undistributed Post
(Depreciation) on Income/ Long-Term Gains/ October
Derivatives, Currency (Accumulated (Accumulated Losses
and Other Net Assets Ordinary Loss) Capital Loss) (see Detail Below)
- ---------------------------------------------------------------------------------------------------------------------------
$31,880 $135,296 $11,362,592 $(56,233)
27
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
As of December 31, 2007, 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, 2007 as follows:
Capital Currency
- --------------------------------------------------------------------------------
$-- $56,233
The tax composition of distributions paid during the years ended December 31,
2007 and December 31, 2006 were as follows:
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
2007 $63,569,771 $93,007,435 $156,577,206
2006 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.
The reclassifications for the year ended December 31, 2007 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated
Income Net Realized Gain
- --------------------------------------------------------------------------------
$(183,366) $183,366
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized
respectively to call or maturity date, whichever is shorter, using the effective
yield method.
EXPENSES Expenses of the Company which are directly identifiable to the Fund are
allocated to the portfolio. Expenses which are not directly identifiable to the
Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expenses and relative size of the Fund. All
expenses of the Fund are paid by GEAM and reimbursed by the Fund.
3. LINE OF CREDIT
The Company 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. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established November 7, 2007. Generally, borrowings under the
credit facilities would accrue interest at the Federal Funds Rate plus 50 basis
points and would be borne by the borrowing Fund. The maximum amount allowed to
be borrowed by any one Fund is the lesser of (i) its prospectus limitation or
(ii) 20% of its net assets. The credit facilities were not utilized by the Fund
during the period ended December 31, 2007.
28
<page>
Notes to Financial Statements December 31, 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 0.20% 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's Board of Directors and GEAM.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending December 31, 2007, $31,837 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 December 31, 2007, were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$4,510,924,439 $3,873,108,465
SECURITY LENDING At December 31, 2007, the Fund participated in securities
lending:
Loaned
securities at Cash
market value collateral
- --------------------------------------------------------------------------------
$114,309,812 $116,669,753
29
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
GE Investments Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Total Return Fund, a series of GE Investments Funds, Inc., including the
schedule of investments, as of December 31, 2007, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years or periods in the five-year period then ended.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2007 by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Total Return Fund as of December 31, 2007, the results of its operations,
changes in its net assets and financial highlights for the years or periods
described above, in conformity with U.S. generally accepted accounting
principles.
KPMG LLP
Boston, Massachusetts
February 25, 2008
30
<page>
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For the year ended December 31, 2007
SUMMARY
During the year ended December 31, 2007, the Fund paid to shareholders of record
on December 26, 2007, the following long-term capital gain dividends 2007:
FUND NAME PER SHARE AMOUNT
- -------------------------------------------------------------------------------
GE Investments Funds, Inc.-- Total Return Fund $0.67902
31
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
The Fund Board, including the independent Board members, considered and
unanimously approved the continuance of the Fund's investment advisory agreement
with GE Asset Management Incorporated ("GEAM") at meetings held on December 5
and December 12, 2007.
In considering whether to approve the Fund's investment advisory agreement, the
Board members, including the independent members, considered and discussed a
substantial amount of information and analysis provided, at the Board's request,
by GEAM. The Board members also considered detailed information regarding
performance and expenses of other investment companies, including those with
similar investment objectives and sizes, which was prepared by an independent
third party provider, Lipper Inc. ("Lipper"). The Board members reviewed the
fees charged by GEAM for other mutual funds and investment products other than
mutual funds that employ the same investment strategy as the Fund.
Before approving the Fund's advisory agreement, the Board members reviewed the
proposed continuance of the agreement with management of GEAM and with
independent legal counsel. The Board members also reviewed a memorandum prepared
by independent legal counsel discussing the legal standards for the
consideration of the proposed continuance. The independent Board members
discussed the proposed continuance in detail during a private session with their
independent legal counsel at which no representatives of GEAM were present. The
independent Board members and their independent legal counsel requested, and
received and considered, additional information from GEAM following this
session.
In advance of the meetings, and in response to their request, the Board members
received from GEAM written responses to their inquiries, which included
substantial exhibits and other materials related to GEAM's business and the
services it provides to the Fund. The Board members took into account their
multi-year experience as Board members and particularly their consideration of
these agreements in recent years, noting that the information was presented in a
similar manner and format. To focus their review, the Board members asked GEAM
management, in its oral presentation, to highlight material differences from the
information presented in recent years. During the meetings, the Board members
had an opportunity to discuss this information with GEAM managers, including
senior executives, representatives from the legal, compliance and finance
departments, and investment personnel. The Board members posed questions to
these representatives and engaged in substantive discussions with them
concerning GEAM's investment process.
In reaching their determination relating to continuance of the agreement, the
Board members considered all factors they believed relevant, including the
factors discussed below. In their deliberations, the Board members did not
identify any particular information that was all-important or controlling, and
each Board member attributed different weights to the various factors. In
particular, the Board members focused on the following:
THE NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED.
The Board members reviewed the services provided by GEAM, and the Board members,
including the independent members, concurred that GEAM provides high quality
advisory and administrative services to the Fund.
In connection with their consideration of GEAM's services, the Board members
focused on the favorable attributes of GEAM, including (i) an investment
philosophy oriented toward long-term performance; (ii) effective processes used
for selecting investments, selecting brokers and with respect to Fund
administration, controllership and compliance activities; (iii) highly skilled
professionals, including analysts, research professionals and portfolio managers
with a depth of experience; (iv) access to significant technological resources
from which the Fund may benefit; and (v) a favorable history and reputation. The
Board members discussed with senior officers of GEAM the personnel changes made,
and proposed to be made, by GEAM. The Board members noted that the Fund
represents only a small portion of the assets managed by GEAM, but benefits from
a full array of services and resources provided by GEAM. In light of these
discussions, the Board members, including the independent members, concluded
that GEAM's services were of a high quality and had benefited the Fund.
INVESTMENT PERFORMANCE OF THE FUND.
The Board members considered the investment performance of the Fund for various
periods. The Board members reviewed detailed comparisons of the performance of
the Fund with the relevant securities
32
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
indexes and peer groupings of mutual funds prepared by Lipper with respect to
various periods. The Board members also engaged in detailed discussions with
GEAM management about the investment process, focusing on the Fund's investment
objective, the number and experience of portfolio management and supporting
research personnel, the investment style and approach employed and the likely
market cycles for the investment style. The Board members, including the
independent members, concluded that the Fund's performance was acceptable
overall taking into consideration the factors discussed above.
COST OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED FROM THE
RELATIONSHIP WITH THE FUND.
The Board members considered the cost of the services provided by GEAM. The
Board members reviewed the information they had requested from GEAM concerning
its profitability from the fees and services it provides to the Fund and the
financial condition of GEAM for various past periods. The Board members
considered the profit margin information for GEAM's investment company business
as a whole, as well as GEAM's profitability data for the Fund. In this regard,
the Board members considered the expense limitation agreement between the Fund
and GEAM pursuant to which GEAM has agreed to limit the total operating expenses
of the Fund. The Board members reviewed GEAM's assumptions and the methods of
cost allocation used by GEAM in preparing Fund-specific profitability data. The
Board members also discussed with GEAM the basis for its belief that the methods
of allocation used were reasonable and consistent across its business.
The Board members noted and discussed the additional services provided by GEAM
to the Fund compared to other investment products managed by GEAM. The Board
members determined that GEAM should be entitled to earn a reasonable level of
profits for the services it provides to the Fund. The Board members also
recognized that GEAM had made significant investments in its business and had
not fully recovered the sums invested. Based on their review, the Board members,
including the independent members, concluded that they were satisfied that the
level of profitability achieved by GEAM from its relationship with the Fund was
not unreasonable or excessive.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS AND
WHETHER FEE LEVELS WOULD REFLECT SUCH ECONOMIES OF SCALE.
The Board members considered the extent to which economies of scale would be
realized as the Fund grows, and whether fee levels reflect these economies of
scale for the benefit of Fund investors. The Board members considered the
substantial infrastructure investments that GEAM has made with respect to its
operations and its commitment to continue investing resources to enhance
services to Fund shareholders. The Board members recognized the benefits to the
Funds of GEAM's past investment in its operations through the expenditure of
sums to support its substantial infrastructure, and that, with respect to all
GEAM managed mutual funds, GEAM has not yet fully recouped that investment. The
Board members reviewed the applicable advisory fee breakpoints for the Fund and
concluded that no changes were needed. The Board members recognized the
economies of scale benefits derived by the Fund as a result of this fee
structure. The Board members also recognized the benefits to the Fund of being
able to leverage a favorable cost structure achieved with respect to the Fund's
other operating expenses as a result of GEAM's large overall base of assets
under management and its vendor management practices.
COMPARISON OF SERVICES TO BE RENDERED AND FEES TO BE PAID.
The Board members discussed the services provided to the Fund by GEAM, and the
fees charged for those services. The Board members reviewed information
concerning the fee and expense ratios for the Fund, and comparative information
with respect to similar products. They discussed that the Fund's figures were
within the applicable peer group range. In addition, the Board members
considered their discussion with representatives of GEAM about the fees being
charged to the Fund and, to the extent applicable, the effect, if any, of the
Securities and Exchange Commission staff's interpretive guidance concerning soft
dollars. In light of the foregoing, the Board members, including the independent
members, determined that the advisory fees were reasonable in relation to the
services provided to the Fund.
33
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- -------------------------------------------------------------------------------
FALL-OUT BENEFITS.
The Board members considered other actual and potential financial benefits that
GEAM may derive from its relationship with the Fund, including, to the extent
applicable, soft dollar commission benefits generated through Fund portfolio
transactions. The Board members noted, however, that the Fund benefits from the
vast array of resources available through GEAM, and that the Fund represents
only a small portion of the assets managed by GEAM.
CONCLUSION.
No single factor was determinative to the Board members' decision. Based on
their discussion and such other matters as were deemed relevant, the Board
members, including the independent members, concluded that the proposed advisory
fee and projected total expense ratio are reasonable in relation to the services
provided to the Fund. In view of these facts, the Board members, including the
independent members, concluded that the renewal of the advisory agreement was in
the best interests of the Fund and its shareholders.
34
<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.
35
<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 Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
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
36
<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.
37
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL 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 OPERATING OFFICER (AS OF JANUARY 31, 2008)
38
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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 FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
S&P 500 Index Fund
Annual Report
DECEMBER 31, 2007
[GE LOGO OMITTED
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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM .............................................................. 21
TAX INFORMATION ...................................................................................................... 22
ADVISORY AND ADMINISTRATIVE AGREEMENT RENEWAL ........................................................................ 23
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 December 31, 2007
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
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(R) Composite Price Index of stocks (S&P 500
Index) is an unmanaged index and does not reflect the actual cost of investing
in the instruments that comprise the index.
The S&P 500 Index is a market capitalization-weighted index of stocks of 500
large U.S. companies, which is widely used as a measure of large-cap stock
market performance. The results shown for the foregoing index assume the
reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer 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.
- ----------------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUNDS.
1
<page>
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 TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the S&P 500 Index Fund
returned 5.10%. The S&P 500 Index, the Fund's benchmark, returned 5.50% and
the Fund's Lipper peer group of 57 S&P 500 Index Objective funds returned an
average of 5.12% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED
FUND PERFORMANCE?
A. After a tentative October and a highly volatile November, December brought
little in the way of seasonal cheer for the financial markets, and a
challenging 2007 ended in distinctly downbeat fashion. A tricky set of
cross-currents kept U.S. investors on edge throughout the last quarter.
Boosting market sentiment were additional cuts in short-term interest rates,
solid earnings at several large growth companies, and inflows of fresh
capital from flush overseas investors. Conversely, a steady diet of bad news
from the housing market, a wave of huge write-downs at financial firms, and
a renewed surge in commodity prices were all much more troublesome.
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 December 31, 2007, the four largest sectors in the S&P 500
Index were Financials (+17.6%), Information Technology (+16.7%), Energy
(+12.9%) and Healthcare (+12.0%). The highest returning sector for the last
twelve months was Energy (+32%) followed by Materials (+19%). The lowest
returning sectors were Financials (-20%) and Consumer Discretionary (-14%).
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. Over the last twelve-month period, there were 39 index addition/deletion
changes announced by Standard & Poors that impacted the Fund. Not all the
additions and deletions were bought and sold in the Fund, however, as many
changes were as a result of a merger or acquisition, or a spin-off involving
another S&P500 constituent. Additionally, there were numerous index share
changes throughout the period, as well as at each quarter's end. Many of the
share changes also required no trading, as the weight change within the
portfolio was negligible.
2
<page>
S&P 500 Index Fund
- -------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended December
31, 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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 984.47 1.96
- ---------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,022.98 1.99
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.39% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2007 WAS: (1.55)%.
3
S&P 500 Index Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
GEI S&P 500 INDEX S&P 500 INDEX
12/97 $10000 $10000
12/98 12824 12870
12/99 15467 15581
12/00 14009 14150
12/01 12291 12465
12/02 9542 9710
12/03 12240 12499
12/04 13520 13859
12/05 14130 14541
12/06 16310 16837
12/07 17141 17763
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
S&P 500 Index Fund 5.10% 12.43% 5.54%
- --------------------------------------------------------------------------------
S&P 500 Index 5.50% 12.84% 5.91%
- --------------------------------------------------------------------------------
Lipper peer group average* 5.12% 12.39% 5.59%
- --------------------------------------------------------------------------------
Inception date 4/15/85
- --------------------------------------------------------------------------------
S&P 500 Index Fund (ending value $17,141)
S&P 500 Index (ending value $17,763)
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
(EXCLUDES SHORT-TERM INVESTMENTS)
AS OF DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 3.90%
- --------------------------------------------------------------------------------
General Electric Co. 2.85%
- --------------------------------------------------------------------------------
Microsoft Corp. 2.18%
- --------------------------------------------------------------------------------
AT&T, Inc. 1.92%
- --------------------------------------------------------------------------------
Procter & Gamble Co. 1.74%
- --------------------------------------------------------------------------------
Chevron Corp. 1.50%
- --------------------------------------------------------------------------------
Johnson & Johnson 1.45%
- --------------------------------------------------------------------------------
Bank of America Corp. 1.40%
- --------------------------------------------------------------------------------
Apple Computer, Inc. 1.32%
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 1.25%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
AS OF DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $447,465 (in thousands)
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
Financials 17.3%
Information Technology 16.4%
Energy 12.6%
Healthcare 11.7%
Industrials 11.3%
Consumer Staples 10.0%
Consumer Discretionary 8.3%
Telecommunication Services 3.6%
Utilities 3.5%
Materials 3.3%
Short-Term 2.0%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE YEAR, FIVE-YEAR AND TEN-YEAR PERIODS INDICATED IN THE S&P 500 INDEX
OBJECTIVE FUNDS PEER GROUP CONSISTING OF 57, 49 AND 23 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 December 31, 2007
- --------------------------------------------------------------------------------
S&P 500 INDEX FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.1%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 8.4%
Abercrombie & Fitch Co. (Class A) 3,000 $ 239,910
Amazon.Com, Inc. 10,400 963,456(a)
Apollo Group, Inc. (Class A) 4,700 329,705(a)
Autonation, Inc. 4,772 74,730(a)
Autozone, Inc. 1,444 173,150(a)
Bed Bath & Beyond, Inc. 9,400 276,266(a)
Best Buy Company, Inc. 11,900 626,535
Big Lots, Inc. 3,900 62,361(a)
Black & Decker Corp. 2,307 160,683
Brunswick Corp. 3,368 57,424
Carnival Corp. 15,000 667,350
CBS Corp. 23,309 635,170
Centex Corp. 4,120 104,071
Circuit City Stores, Inc. 5,226 21,949
Clear Channel Communications, Inc. 17,200 593,744
Coach, Inc. 12,600 385,308(a)
Comcast Corp. (Class A) 105,458 1,925,663(a)
D.R. Horton, Inc. 9,700 127,749
Darden Restaurants, Inc. 5,029 139,354
Dillard's, Inc. (Class A) 2,295 43,100
DIRECTV Group, Inc. 24,300 561,816(a)
Eastman Kodak Co. 10,175 222,527
Expedia, Inc. 7,100 224,502(a)
Family Dollar Stores, Inc. 5,000 96,150
Ford Motor Co. 70,699 475,804(a)
Fortune Brands, Inc. 5,141 372,003
GameStop Corp. (Class A) 5,400 335,394(a)
Gannett Company, Inc. 8,008 312,312
General Motors Corp. 19,547 486,525
Genuine Parts Co. 5,596 259,095
Goodyear Tire & Rubber Co. 7,319 206,542(a)
H&R Block, Inc. 11,408 211,847
Harley-Davidson, Inc. 8,500 397,035
Harman International
Industries Inc. 1,900 140,049
Harrah's Entertainment, Inc. 6,435 571,106
Hasbro, Inc. 4,696 120,124
Home Depot, Inc. 57,618 1,552,229
IAC/InterActiveCorp. 6,300 169,596(a)
International Game Technology 10,600 465,658
Interpublic Group of
Companies, Inc. 16,830 136,491(a)
J.C. Penney Company, Inc. 7,587 333,752
Johnson Controls, Inc. 20,446 736,874
Jones Apparel Group, Inc. 2,400 38,376
KB Home 2,860 61,776
Kohl's Corp. 10,900 499,220(a)
Leggett & Platt, Incorporated 6,300 109,872
Lennar Corp. (Class A) 4,800 85,872
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Limited Brands, Inc. 10,688 $ 202,324
Liz Claiborne Inc. 3,830 77,941
Lowe's Companies, Inc. 50,056 1,132,267
Macy's, Inc. 14,830 383,652
Marriott International Inc.
(Class A) 10,9443 74,066
Mattel, Inc. 12,251 233,259
McDonald's Corp. 40,490 2,385,266
McGraw-Hill Companies Inc. 11,121 487,211
Meredith Corp. 1,298 71,364
New York Times Co. (Class A) 5,188 90,946
Newell Rubbermaid Inc. 9,556 247,309
News Corp. (Class A) 78,900 1,616,661
Nike Inc. (Class B) 13,108 842,058
Nordstrom, Inc. 6,292 231,105
Office Depot, Inc. 9,800 136,318(a)
OfficeMax, Inc. 2,623 54,191
Omnicom Group, Inc. 11,300 537,089
Polo Ralph Lauren Corp. (Class A) 2,100 129,759
Pulte Homes, Inc. 7,388 77,870
RadioShack Corp. 4,656 78,500
Sears Holdings Corp. 2,619 267,269(a)
Snap-On Incorporated 2,009 96,914
Staples, Inc. 24,250 559,448
Starbucks Corp. 24,698 505,568(a)
Starwood Hotels & Resorts
Worldwide, Inc. 6,700 295,001
Target Corp. 28,249 1,412,450
The E.W. Scripps Co. (Class A) 2,900 130,529
The Gap, Inc. 15,679 333,649
The Sherwin-Williams Co. 3,563 206,797
The Stanley Works 2,826 137,004
The Walt Disney Co. 64,779 2,091,066
Tiffany & Co. 4,500 207,135
Time Warner, Inc. 123,714 2,042,518(d)
TJX Companies, Inc. 15,180 436,121
VF Corp. 3,102 212,983
Viacom Inc. (Class B) 22,513 988,771(a)
Washington Post Co. (Class B) 190 150,372
Wendy's International, Inc. 2,731 70,569
Whirlpool Corp. 2,743 223,911
Wyndham Worldwide Corp. 5,949 140,158
Yum! Brands, Inc. 17,229 659,354
37,346,968
CONSUMER STAPLES -- 10.0%
Altria Group, Inc. 71,779 5,425,057
Anheuser-Busch Companies, Inc. 24,942 1,305,464(d)
Archer-Daniels-Midland Co. 21,586 1,002,238
Avon Products, Inc. 14,828 586,151
Brown-Forman Corp. (Class B) 2,758 204,395
Campbell Soup Co. 7,676 274,263
Clorox Co. 4,684 305,256
Coca-Cola Enterprises, Inc. 9,900 257,697
Colgate-Palmolive Co. 17,272 1,346,525
ConAgra Foods, Inc. 16,768 398,911
Constellation Brands, Inc.
(Class A) 6,800 160,752(a)
Costco Wholesale Corp. 14,866 1,037,052
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
5
<page>
S&P 500 INDEX FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
CVS Corp. 50,127 $ 1,992,548
Dean Foods Co. 4,700 121,542
General Mills, Inc. 11,222 639,654
HJ Heinz Co. 10,897 508,672
Kellogg Co. 9,090 476,589
Kimberly-Clark Corp. 14,436 1,000,992
Kraft Foods, Inc. (Class A) 52,629 1,717,284
McCormick & Company, Inc. 4,300 163,013
Molson Coors Brewing Co. (Class B) 4,798 247,673
Pepsi Bottling Group, Inc. 4,700 185,462
PepsiCo, Inc. 55,074 4,180,117
Procter & Gamble Co. 105,849 7,771,434
Reynolds American Inc. 5,700 375,972
Safeway Inc. 15,000 513,150
Sara Lee Corp. 24,557 394,385
Supervalu Inc. 7,313 274,384
Sysco Corp. 20,944 653,662
The Coca-Cola Co. 67,851 4,164,016(d)
The Estee Lauder Companies Inc.
(Class A) 4,100 178,801
The Hershey Co. 5,884 231,830
The Kroger Co. 23,066 616,093
Tyson Foods, Inc. (Class A) 8,900 136,437
UST Inc. 5,479 300,249
Walgreen Co. 33,800 1,287,104
Wal-Mart Stores, Inc. 80,487 3,825,547
Whole Foods Market, Inc. 4,900 199,920
WM Wrigley Jr. Co. 7,285 426,537
44,886,828
ENERGY -- 12.6%
Anadarko Petroleum Corp. 15,656 1,028,443
Apache Corp. 11,248 1,209,610
Baker Hughes Incorporated 10,750 871,825
BJ Services Co. 9,700 235,322
Chesapeake Energy Corp. 15,600 611,520
Chevron Corp. 71,958 6,715,840
ConocoPhillips 54,497 4,812,085
Consol Energy, Inc. 6,000 429,120
Devon Energy Corp. 15,192 1,350,721
El Paso Corp. 24,182 416,898
ENSCO International Inc. 5,100 304,062
EOG Resources, Inc. 8,400 749,700
Exxon Mobil Corp. 186,275 17,452,105(d)
Halliburton Co. 30,391 1,152,123
Hess Corp. 9,370 945,058(d)
Marathon Oil Corp. 23,842 1,451,024
Murphy Oil Corp. 6,400 542,976
Nabors Industries Ltd. 9,300 254,727(a)
National Oilwell Varco, Inc. 12,200 896,212(a)
Noble Corp. 9,100 514,241
Noble Energy, Inc. 5,900 469,168
Occidental Petroleum Corp. 28,120 2,164,959
Peabody Energy Corp. 9,000 554,760
Range Resources Corp. 5,000 256,800
Rowan Companies, Inc. 3,877 152,986
Schlumberger Ltd. 40,660 3,999,724
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Smith International, Inc. 6,800 $ 502,180
Spectra Energy Corp. 21,477 554,536
Sunoco, Inc. 3,976 288,021
Tesoro Corp. 4,800 228,960
The Williams Companies, Inc. 20,586 736,567
Transocean, Inc. 10,610 1,518,822
Valero Energy Corp. 18,800 1,316,564
Weatherford International Ltd. 11,600 795,760(a)
XTO Energy, Inc. 16,541 849,559
56,332,978
FINANCIALS -- 17.3%
ACE Ltd. 11,200 691,936
AFLAC Incorporated 16,700 1,045,921
Allstate Corp. 19,378 1,012,113(d)
AMBAC Financial Group, Inc. 3,600 92,772
American Capital Strategies Ltd. 6,200 204,352
American Express Co. 39,796 2,070,188(d)
American International Group, Inc. 86,417 5,038,111(d)
Ameriprise Financial, Inc. 8,104 446,611
AON Corp. 10,136 483,386
Apartment Investment &
Management Co. (Class A) (REIT) 3,400 118,082
Assurant, Inc. 3,200 214,080
AvalonBay Communities, Inc. (REIT) 2,800 263,592
Bank of America Corp. 151,293 6,242,349
Bank of New York Mellon Corp. 38,903 1,896,910
BB&T Corp. 18,600 570,462
Boston Properties, Inc. (REIT) 4,100 376,421
Capital One Financial Corp. 13,125 620,288
CB Richard Ellis Group, Inc.
(Class A) 6,500 140,075(a)
Charles Schwab Corp. 32,211 822,991
Chubb Corp. 13,194 720,129
Cincinnati Financial Corp. 5,592 221,108
CIT Group, Inc. 6,600 158,598
Citigroup, Inc. 170,105 5,007,891(d)
CME Group Inc. 1,861 1,276,646
Comerica Incorporated 5,156 224,441
Commerce Bancorp Inc. 6,300 240,282
Countrywide Financial Corp. 19,698 176,100
Developers Diversified Realty
Corp. (REIT) 4,400 168,476
Discover Financial Services 16,798 253,314
E*Trade Financial Corp. 15,100 53,605(a)
Equity Residential (REIT) 9,400 342,818
Federal Home Loan
Mortgage Corp. 21,765 741,534
Federal National Mortgage Assoc. 32,876 1,314,382
Federated Investors Inc. (Class B) 3,100 127,596
Fifth Third Bancorp 18,416 462,794
First Horizon National Corp. 4,400 79,860
Franklin Resources, Inc. 5,600 640,808
General Growth Properties,
Inc. (REIT) 8,500 350,030
Genworth Financial, Inc. (Class A) 14,900 379,205
Goldman Sachs Group, Inc. 13,541 2,911,992
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
6
<page>
S&P 500 INDEX FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Hartford Financial Services
Group, Inc. 10,804 $ 942,001
Host Hotels & Resorts Inc. (REIT) 18,000 306,720
Hudson City Bancorp, Inc. 17,900 268,858
Huntington Bancshares
Incorporated 12,934 190,906
IntercontinentalExchange, Inc. 2,400 462,000(a)
Janus Capital Group, Inc. 5,100 167,535
JP Morgan Chase & Co. 114,452 4,995,830(d)
Keycorp 13,428 314,887
Kimco Realty Corp. (REIT) 8,500 309,400
Legg Mason, Inc. 4,600 336,490
Lehman Brothers Holdings, Inc. 18,000 1,177,920
Leucadia National Corp. 5,500 259,050
Lincoln National Corp. 9,242 538,069
Loews Corp. 14,996 754,899
M&T Bank Corp. 2,600 212,082
Marsh & McLennan
Companies, Inc. 17,569 465,051
Marshall & Ilsley Corp. 9,200 243,616
MBIA Inc. 4,535 84,487
Merrill Lynch & Company, Inc. 29,334 1,574,649
Metlife, Inc. 25,200 1,552,824
MGIC Investment Corp. 2,959 66,370
Moody's Corp. 7,484 267,179
Morgan Stanley 35,896 1,906,437
National City Corp. 21,291 350,450
Northern Trust Corp. 6,500 497,770
NYSE Euronext 9,000 789,930
Plum Creek Timber
Company, Inc. (REIT) 5,700 262,428
PNC Financial Services Group, Inc. 11,608 762,065
Principal Financial Group, Inc. 9,100 626,444
Prologis (REIT) 8,800 557,744
Prudential Financial, Inc. 15,600 1,451,424
Public Storage, Inc. (REIT) 4,300 315,663
Regions Financial Corp. 24,068 569,208
Safeco Corp. 3,081 171,550
Simon Property Group, Inc. (REIT) 7,700 668,822
SLM Corp. 14,200 285,988
Sovereign Bancorp, Inc. 12,850 146,490
State Street Corp. 13,200 1,071,840(c)
SunTrust Banks, Inc. 11,729 732,945
Synovus Financial Corp. 10,750 258,860
T Rowe Price Group, Inc. 9,100 554,008
The Bear Stearns Companies Inc. 3,969 350,264
The Progressive Corp. 23,573 451,659
Torchmark Corp. 3,072 185,948
Travelers Companies, Inc. 22,199 1,194,306
UnumProvident Corp. 11,989 285,218
US Bancorp 58,899 1,869,454
Vornado Realty Trust (REIT) 4,600 404,570
Wachovia Corp. 67,588 2,570,372
Washington Mutual Inc. 30,081 409,402
Wells Fargo & Co. 115,536 3,488,032
XL Capital Ltd. 6,200 311,922
Zions Bancorporation 3,700 172,753
77,367,038
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
HEALTHCARE -- 11.7%
Abbott Laboratories 52,596 $ 2,953,265(d)
Aetna, Inc. 17,208 993,418
Allergan, Inc. 10,604 681,201
AmerisourceBergen Corp. 5,542 248,670
Amgen, Inc. 37,148 1,725,153(a,d)
Applera Corp - Applied
Biosystems Group 5,603 190,054
Barr Pharmaceuticals, Inc. 3,500 185,850(a)
Baxter International, Inc. 21,848 1,268,276
Becton Dickinson & Co. 8,370 699,565
Biogen Idec, Inc. 9,800 557,816(a)
Boston Scientific Corp. 46,060 535,678(a)
Bristol-Myers Squibb Co. 67,008 1,777,052(d)
C.R. Bard, Inc. 3,502 331,990
Cardinal Health, Inc. 12,201 704,608
Celgene Corp. 13,200 609,972(a)
Cigna Corp. 9,689 520,590
Coventry Healthcare, Inc. 5,100 302,175(a)
Covidien Ltd. 17,059 755,543
Eli Lilly & Co. 33,616 1,794,758
Express Scripts, Inc. 8,800 642,400(a)
Forest Laboratories, Inc. 10,900 397,305(a)
Genzyme Corp. 9,000 669,960(a)
Gilead Sciences, Inc. 31,400 1,444,714(a)
Hospira, Inc. 5,539 236,183(a)
Humana Inc. 5,627 423,769(a)
IMS Health Inc. 6,957 160,289
Johnson & Johnson 97,527 6,505,051
King Pharmaceuticals, Inc. 8,833 90,450(a)
Laboratory Corp of
America Holdings 4,000 302,120(a)
McKesson Corp. 9,802 642,129
Medco Health Solutions, Inc. 9,183 931,156(a)
Medtronic Inc. 38,532 1,937,004
Merck & Company, Inc. 74,250 4,314,668
Millipore Corp. 1,945 142,335(a)
Mylan Laboratories Inc. 8,800 123,728
Patterson Companies, Inc. 4,900 166,355(a)
PerkinElmer, Inc. 4,410 114,748
Pfizer Inc. 232,721 5,289,748
Quest Diagnostics Inc. 5,400 285,660
Schering-Plough Corp. 55,402 1,475,909(d)
St. Jude Medical, Inc. 11,492 467,035(a)
Stryker Corp. 8,152 609,117
Tenet Healthcare Corp. 16,695 84,811(a)
Thermo Electron Corp. 14,328 826,439(a)
UnitedHealth Group, Inc. 44,276 2,576,863
Varian Medical Systems, Inc. 4,100 213,856(a)
Waters Corp. 3,300 260,931(a)
Watson Pharmaceuticals, Inc. 3,600 97,704(a)
WellPoint, Inc. 19,500 1,710,735(a)
Wyeth 45,554 2,013,031(d)
Zimmer Holdings, Inc. 7,900 522,585(a)
52,514,422
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
7
<page>
S&P 500 INDEX FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
INDUSTRIALS -- 11.3%
Allied Waste Industries, Inc. 9,000 $ 99,180(a)
Avery Dennison Corp. 3,655 194,227
Boeing Co. 26,382 2,307,370(d)
Burlington Northern
Santa Fe Corp. 10,174 846,782
Caterpillar, Inc. 21,732 1,576,874
CH Robinson Worldwide, Inc. 5,700 308,484
Cintas Corp. 4,800 161,376
Cooper Industries Ltd. 6,042 319,501
CSX Corp. 14,239 626,231
Cummins, Inc. 3,578 455,730
Danaher Corp. 8,400 737,016
Deere & Co. 15,040 1,400,525
Dover Corp. 7,058 325,303
Eaton Corp. 5,000 484,750
Emerson Electric Co. 26,948 1,526,874
Equifax, Inc. 4,300 156,348
Expeditors International
Washington, Inc. 7,400 330,632
FedEx Corp. 10,460 932,718
Fluor Corp. 3,052 444,737
General Dynamics Corp. 13,764 1,224,858
General Electric Co. 344,526 12,771,579(f)
Goodrich Corp. 4,101 289,572
Honeywell International Inc. 25,543 1,572,683
Illinois Tool Works Inc. 14,017 750,470
Ingersoll-Rand Company Ltd.
(Class A) 9,196 427,338
ITT Corp. 6,226 411,165
Jacobs Engineering Group, Inc. 4,100 392,001(a)
L-3 Communications
Holdings, Inc. 4,200 444,948
Lockheed Martin Corp. 11,852 1,247,542
Masco Corp. 12,490 269,909
Monster Worldwide, Inc. 4,400 142,560(a)
Norfolk Southern Corp. 13,118 661,672
Northrop Grumman Corp. 11,722 921,818
Paccar Inc. 12,522 682,199
Pall Corp. 4,278 172,489
Parker Hannifin Corp. 5,872 442,220
Pitney Bowes Inc. 7,732 294,125
Precision Castparts Corp. 4,700 651,890
Raytheon Co. 14,569 884,338
Robert Half International Inc. 5,800 156,832
Rockwell Automation, Inc. 5,168 356,385
Rockwell Collins, Inc. 5,568 400,729
RR Donnelley & Sons Co. 7,199 271,690
Ryder System, Inc. 2,131 100,178
Southwest Airlines Co. 25,449 310,478
Terex Corp. 3,600 236,052(a)
Textron Inc. 8,336 594,357
The Manitowoc Company, Inc. 4,300 209,969
3M Co. 24,480 2,064,154
Trane, Inc. 5,500 256,905
Tyco International Ltd. 16,659 660,529
Union Pacific Corp. 9,054 1,137,363
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
United Parcel Service Inc. (Class B) 35,700 $ 2,524,704
United Technologies Corp. 33,872 2,592,563
W.W. Grainger, Inc. 2,182 190,969
Waste Management, Inc. 17,203 562,022
50,515,913
INFORMATION TECHNOLOGY -- 16.4%
Adobe Systems Incorporated 19,884 849,643(a,d)
Advanced Micro Devices, Inc. 19,574 146,805(a,d)
Affiliated Computer Services, Inc.
(Class A) 3,500 157,850(a)
Agilent Technologies, Inc. 13,185 484,417(a)
Akamai Technologies, Inc. 5,800 200,680(a)
Altera Corp. 11,000 212,520
Analog Devices, Inc. 10,600 336,020
Apple Computer, Inc. 29,835 5,909,717(a)
Applied Materials, Inc. 46,900 832,944(d)
Autodesk, Inc. 7,948 395,492(a)
Automatic Data Processing, Inc. 17,893 796,775
BMC Software, Inc. 6,700 238,788(a)
Broadcom Corp. (Class A) 15,850 414,319(a)
CA, Inc. 13,200 329,340
Ciena Corp. 2,742 93,530(a)
Cisco Systems, Inc. 206,742 5,596,506(a,d)
Citrix Systems, Inc. 6,400 243,264(a)
Cognizant Technology Solutions
Corp. (Class A) 9,500 322,430(a)
Computer Sciences Corp. 5,982 295,930(a)
Compuware Corp. 8,800 78,144(a)
Convergys Corp. 5,000 82,300(a)
Corning Incorporated 53,739 1,289,199
Dell, Inc. 76,948 1,885,995(a,d)
eBay, Inc. 38,700 1,284,453(a)
Electronic Arts, Inc. 10,700 624,987(a)
Electronic Data Systems Corp. 17,600 364,848
EMC Corp. 71,414 1,323,301(a)
Fidelity National Information
Services, Inc. 5,800 241,222
Fiserv, Inc. 5,750 319,068(a)
Google, Inc. (Class A) 7,890 5,455,777(a)
Hewlett-Packard Co. 87,947 4,439,565
Intel Corp. 198,965 5,304,407
International Business
Machines Corp. 46,951 5,075,403
Intuit Inc. 11,500 363,515(a)
Jabil Circuit, Inc. 6,300 96,201
JDS Uniphase Corp. 7,250 96,425(a)
Juniper Networks, Inc. 17,600 584,320(a)
Kla-Tencor Corp. 6,100 293,776
Lexmark International Inc.
(Class A) 3,300 115,038(a)
Linear Technology Corp. 7,600 241,908
LSI Logic Corp. 25,292 134,301(a)
MEMC Electronic Materials, Inc. 7,500 663,675(a)
Microchip Technology Inc. 7,100 223,082
Micron Technology, Inc. 26,654 193,242(a)
Microsoft Corp. 274,254 9,763,442(d)
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
8
<page>
S&P 500 INDEX FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Molex, Inc. 5,150 $ 140,595
Motorola, Inc. 78,750 1,263,150
National Semiconductor Corp. 8,466 191,670
Network Appliance, Inc. 12,000 299,520(a)
Novell, Inc. 12,866 88,389(a)
Novellus Systems, Inc. 3,600 99,252(a)
Nvidia Corp. 18,600 632,772(a)
Oracle Corp. 133,552 3,015,604(a)
Paychex, Inc. 11,725 424,680
QLogic Corp. 4,100 58,220(a)
QUALCOMM, Inc. 56,000 2,203,600
SanDisk Corp. 8,000 265,360(a)
Sun Microsystems, Inc 28,090 509,272(a)
Symantec Corp. 29,308 473,031(a)
Tellabs, Inc. 15,452 101,056(a)
Teradata Corp. 6,400 175,424(a)
Teradyne, Inc. 6,700 69,278(a)
Texas Instruments Incorporated 47,551 1,588,203
Tyco Electronics Ltd. 16,859 625,975
Unisys Corp. 10,709 50,654(a)
VeriSign Inc. 7,300 274,553(a)
Western Union Co. 25,424 617,295
Xerox Corp. 31,790 514,680
Xilinx, Inc. 9,600 209,952
Yahoo! Inc. 46,020 1,070,425(a)
73,357,174
MATERIALS -- 3.3%
Air Products & Chemicals, Inc. 7,432 733,018(d)
Alcoa, Inc. 29,040 1,061,412(d)
Allegheny Technologies
Incorporated 3,451 298,166
Ashland, Inc. 2,007 95,192
Ball Corp. 3,616 162,720
Bemis Co. 3,662 100,266
Domtar Corp. 11 85(a)
Dow Chemical Co. 32,194 1,269,087
E.I. du Pont de Nemours and Co. 30,561 1,347,434
Eastman Chemical Co. 2,859 174,656
Ecolab Inc. 5,852 299,681
Freeport-McMoRan Copper &
Gold Inc. (Class B) 13,055 1,337,354
Hercules Incorporated 4,228 81,812
International Flavors &
Fragrances Inc. 2,747 132,213
International Paper Co. 14,775 478,415
MeadWestvaco Corp. 6,500 203,450
Monsanto Co. 18,516 2,068,052
Newmont Mining Corp. 15,528 758,232
Nucor Corp. 9,936 588,410
Pactiv Corp. 4,248 113,124(a)
PPG Industries, Inc. 5,537 388,864
Praxair, Inc. 10,725 951,415
Rohm & Haas Co. 4,214 223,637
Sealed Air Corp. 5,714 132,222
Sigma-Aldrich Corp. 4,282 233,797
Titanium Metals Corp. 3,000 79,350
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
United States Steel Corp. 3,965 $ 479,408
Vulcan Materials Co. 3,400 268,906
Weyerhaeuser Co. 7,194 530,486
14,590,864
TELECOMMUNICATION SERVICES -- 3.6%
American Tower Corp. (Class A) 14,100 600,660(a)
AT&T, Inc. 206,715 8,591,075
CenturyTel, Inc. 3,850 159,621
Citizens Communications Co. 12,200 155,306
Embarq Corp. 5,370 265,976
Qwest Communications
International Inc. 54,948 385,185(a)
Sprint Nextel Corp. (Series 1) 96,600 1,268,358
Verizon Communications Inc. 98,467 4,302,023
Windstream Corp. 16,743 217,994
15,946,198
UTILITIES -- 3.5%
Allegheny Energy, Inc. 5,700 362,577
Ameren Corp. 6,842 370,905
American Electric Power
Company, Inc. 13,625 634,380(d)
Centerpoint Energy, Inc. 10,618 181,886
CMS Energy Corp. 7,900 137,302
Consolidated Edison, Inc. 9,207 449,762
Constellation Energy Group, Inc. 6,203 635,994
Dominion Resources, Inc. 20,000 949,000
DTE Energy Co. 5,766 253,473
Duke Energy Corp. 42,554 858,314
Dynegy, Inc. (Class A) 17,100 122,094(a)
Edison International 11,142 594,649
Entergy Corp. 6,547 782,497
Exelon Corp. 22,452 1,832,981
FirstEnergy Corp. 10,220 739,315
FPL Group, Inc. 13,962 946,344
Integrys Energy Group, Inc. 2,631 135,996
Nicor Inc. 1,543 65,346
NiSource Inc. 9,515 179,738
Pepco Holdings, Inc. 6,700 196,511
PG&E Corp. 12,054 519,407
Pinnacle West Capital Corp. 3,500 148,435
PPL Corp. 12,844 669,044
Progress Energy, Inc. 8,956 433,739
Public Service Enterprise
Group, Inc. 8,559 840,836
Questar Corp. 5,800 313,780
Sempra Energy 9,075 561,561
TECO Energy, Inc. 7,400 127,354
The AES Corp. 22,700 485,553(a)
The Southern Co. 25,858 1,001,998
Xcel Energy Inc. 14,680 331,328
15,862,099
TOTAL INVESTMENTS IN SECURITIES
(COST $366,458,601) 438,720,482
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
9
<page>
S&P 500 INDEX FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.9%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.6%
GEI Short Term Investment Fund
4.96% 7,252,325 $ 7,252,325(b,e)
Money Market Obligations Trust
4.86% 453 453(g)
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
U.S. GOVERNMENT-- 0.3%
U. S. Treasury Bill
2.88% 03/06/08 $1,500,000 1,492,200
TOTAL SHORT-TERM INVESTMENTS
(COST $8,744,978) 8,744,978
TOTAL INVESTMENTS
(COST $375,203,579) 447,465,460
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (0.0)%* (39,731)
------------
NET ASSETS-- 100.0% $447,425,729
============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI S&P 500 Index had the following long futures contracts open at December
31, 2007:
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- -----------------------------------------------------------------------------------------------------------------------------------
S&P Mini 500
Index Futures March 2008 133 $9,823,380 $(8,047)
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
10
<page>
Notes to Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
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 December 31, 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) GE Asset Management (GEAM), the investment advisor of the Fund, also serves
as investment advisor of the GEI Short-Term Investment Fund.
(f) General Electric Company 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 December 31, 2007.
Abbreviations:
REIT Real Estate Investment Trust
11
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ---------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX FUND
12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
- ---------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- 4/15/85
Net asset value, beginning of period ............... $26.06 $22.94 $22.30 $20.51 $16.18
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.47 0.42 0.36 0.36 0.24
Net realized and unrealized
gains/(losses) on investments ................ 0.86 3.12 0.65 1.79 4.33
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ..... 1.33 3.54 1.01 2.15 4.57
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................... 0.47 0.42 0.37 0.36 0.24
Net realized gains .............................. 0.40 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................ 0.87 0.42 0.37 0.36 0.24
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ..................... $26.52 $26.06 $22.94 $22.30 $20.51
===========================================================================================================================
TOTAL RETURN (A) ................................... 5.10% 15.43% 4.51% 10.46% 28.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ........ $447,426 $497,105 $531,015 $601,008 $597,185
Ratios to average net assets:
Net investment income ........................ 1.62% 1.58% 1.47% 1.62% 1.41%
Expenses ..................................... 0.39% 0.40% 0.40% 0.40% 0.37%
Portfolio turnover rate ......................... 6% 4% 4% 5% 5%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect
of insurance contract charges.
See Notes to Financial Statements.
12
<page>
Statement of Assets
and Liabilities DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
S&P 500
INDEX FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $352,641,393) ..................................... $425,948,903
Investments in affiliated securities, at market (cost $13,817,208) ........................... 12,771,579
Short-term Investments (at amortized cost) ................................................... 1,492,653
Short-term affiliated investments (at amortized cost) ........................................ 7,252,325
Receivable for investments sold .............................................................. 112,446
Income receivables ........................................................................... 676,433
Receivable for fund shares sold .............................................................. 42,711
Other assets ................................................................................. 152
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................................................................. 448,297,202
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Distribution payable to shareholders ......................................................... 71
Payable for investments purchased ............................................................ 152,285
Payable for fund shares redeemed ............................................................. 381,752
Payable to GEAM .............................................................................. 282,170
Variation margin payable ..................................................................... 55,195
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................................................ 871,473
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................................................... $447,425,729
===========================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in .............................................................................. 381,733,767
Undistributed net investment income .......................................................... 14,693
Accumulated net realized gain (loss) ......................................................... (6,576,565)
Net unrealized appreciation/(depreciation) on:
Investments .............................................................................. 72,261,881
Futures .................................................................................. (8,047)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................................................... $447,425,729
===========================================================================================================================
NET ASSETS ...................................................................................... 447,425,729
Shares outstanding ($0.01 par value; unlimited shares authorized) ............................... 16,871,288
Net asset value per share ....................................................................... $26.52
See Notes to Financial Statements.
13
<page>
Statement of Operations
FOR THE YEAR ENDED DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
S&P 500
INDEX FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ......................................................................... $ 8,650,614
Dividend from affiliated investments ............................................. 420,400
Interest ......................................................................... 212,311
Interest from affiliated investments ............................................. 354,946
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ....................................................................... 9,638,271
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ................................................. 1,684,005
Transfer agent ................................................................... 42
Director's fees .................................................................. 12,166
Custody and accounting expenses .................................................. 57,168
Professional fees ................................................................ 41,409
Registration expenses ............................................................ 60,283
Other expenses ................................................................... 28,728
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ..................................................................... 1,883,801
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME .............................................................. 7,754,470
===========================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ................................................................... 9,164,901
Futures ....................................................................... (8,180)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ................................................................... 8,035,009
Futures ....................................................................... (4,988)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments .................................. 17,186,742
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................... $24,941,212
===========================================================================================================================
See Notes to Financial Statements.
14
<page>
Statements of
Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
S&P 500
INDEX FUND
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income ........................................................... $ 7,754,470 $ 7,945,552
Net realized gain on investments, futures, written options,
foreign currency transactions and swaps ........................................ 9,156,721 710,908
Net increase in unrealized appreciation/(depreciation) on investments,
futures, written options, foreign currency translation ......................... 8,030,021 63,299,875
- ---------------------------------------------------------------------------------------------------------------------------
Net increase from operations ..................................................... 24,941,212 71,956,335
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................................ (7,752,640) (7,912,831)
Net realized gains ............................................................... (6,536,642) --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................ (14,289,282) (7,912,831)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations ......................................... 10,651,930 64,043,504
- ---------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ..................................................... 19,505,679 5,786,380
Value of distributions reinvested ................................................ 14,289,211 7,912,831
Cost of shares redeemed .......................................................... (94,126,068) (111,652,724)
- ---------------------------------------------------------------------------------------------------------------------------
Net decrease from share transactions ............................................. (60,331,178) (97,953,513)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................ (49,679,248) (33,910,009)
NET ASSETS
Beginning of period ................................................................ 497,104,977 531,014,986
- ---------------------------------------------------------------------------------------------------------------------------
End of period ...................................................................... $447,425,729 $497,104,977
===========================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ........ $ 14,693 $ 8,613
- ---------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ...................................................................... 718,872 241,604
Issued for distributions reinvested .............................................. 535,778 302,363
Shares redeemed .................................................................. (3,460,599) (4,614,589)
- ---------------------------------------------------------------------------------------------------------------------------
Net decrease in fund shares ........................................................... (2,205,949) (4,070,622)
===========================================================================================================================
See Notes to Financial Statements.
15
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized costs, which approximates market
value.
All assets and liabilities of the Fund's initially expressed in foreign currency
values will be converted into U.S. dollars at the WM exchange rate computed at
11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
16
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
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 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 custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures
17
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
contracts to manage its exposure to the stock and bond markets and fluctuations
in currency values. Buying futures tends to increase the Fund's exposure to the
underlying instrument while selling futures tends to decrease the Fund's
exposure to the underlying instrument, or hedge other Fund investments. The Fund
will not enter into a transaction involving futures for speculative purposes.
The Fund's risks in using these contracts include changes in the value of the
underlying instruments, non-performance of the counterparties under the
contracts' terms and changes in the liquidity of the secondary market for the
contracts. Futures contracts are valued at the settlement price established each
day by the board of trade or exchange on which they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. The Fund will not enter
into a transaction involving options for speculative purposes. The Fund's risks
in using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Options
are valued at the last sale price, or if no sales occurred on that day, at the
last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
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 December 31, 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
- --------------------------------------------------------------------------------------------------
$382,936,519 $126,628,726 $(62,099,785) $64,528,941
18
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
Net Tax Appreciation/ Undistributed Undistributed
(Depreciation) on Income/ Long-Term Gains/ Post
Derivatives, Currency (Accumulated (Accumulated October
and Other Net Assets Ordinary Loss) Capital Loss) Losses
- -------------------------------------------------------------------------------------------
$-- $14,693 $1,148,328 $--
As of December 31, 2007, the Fund has no capital loss carryovers.
During the year ended December 31, 2007, the Fund utilized approximately
$3,373,386 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, 2007.
The tax composition of distributions paid during the years ended December 31,
2007 and December 31, 2006 were as follows:
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
2007 $7,666,833 $6,622,449 $14,289,282
2006 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, 2007 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated
Income Net Realized Gain
- --------------------------------------------------------------------------------
$4,250 $(4,250)
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Expenses of the Company which are directly identifiable to the Fund are
allocated to the portfolio. Expenses which are not directly identifiable to the
Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expenses and relative size of the Fund. All
expenses of the Fund are paid by GEAM and reimbursed by the Fund.
19
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 December 31, 2007, $7,368 was charged to
the Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
4. SUB-ADVISORY FEES
Pursuant to an investment sub-advisory agreement with GEAM, SSgA Funds
Management, Inc. ("SSgA") is the Sub-Adviser to the S&P 500 Index Fund. SSgA is
responsible for the day-to-day portfolio management of the assets of the Fund,
including the responsibility for making decisions to buy, sell or hold a
particular security, under the general supervision of GEAM and the Board.
For its services, GEAM pays SSgA monthly sub-advisory fees which are calculated
as a percentage of the average daily net assets of the Fund.
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended December 31, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$27,565,090 $94,758,154
20
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
GE Investments Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the S&P
500 Index Fund, a series of GE Investments Funds, Inc., including the schedule
of investments, as of December 31, 2007, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2007 by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
S&P 500 Index Fund as of December 31, 2007, the results of its operations,
changes in its net assets and financial highlights for the years described
above, in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Boston, Massachusetts
February 25, 2008
21
<page>
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For the year ended December 31, 2007
SUMMARY
During the year ended December 31, 2007, the Fund paid to shareholders of record
on December 26, 2007, the following long-term capital gain dividends 2007:
FUND NAME PER SHARE AMOUNT
- --------------------------------------------------------------------------------
GE Investments Funds, Inc.-- S&P 500 Index Fund $0.40451
22
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
The Fund Board, including the independent Board members, considered and
unanimously approved the continuance of the Fund's investment advisory and
sub-advisory agreements with GE Asset Management Incorporated ("GEAM") and the
Fund's sub-adviser, SSgA Funds Management, Inc., at meetings held on December 5
and December 12, 2007.
In considering whether to approve the Fund's investment advisory and
sub-advisory agreements, the Board members, including the independent members,
considered and discussed a substantial amount of information and analysis
provided, at the Board's request, by GEAM and the sub-adviser. The Board members
also considered detailed information regarding performance and expenses of other
investment companies, including those with similar investment objectives and
sizes, which was prepared by an independent third party provider, Lipper Inc.
("Lipper").
Before approving the Fund's advisory and sub-advisory agreements, the Board
members reviewed the proposed continuance of the agreements with management of
GEAM and with independent legal counsel. The Board members also reviewed a
memorandum prepared by independent legal counsel discussing the legal standards
for the consideration of the proposed continuances. The independent Board
members discussed the proposed continuances in detail during a private session
with their independent legal counsel at which no representatives of GEAM or the
sub-adviser were present. The independent Board members and their independent
legal counsel requested, and received and considered, additional information
from GEAM following this session.
In advance of the meetings, and in response to their request, the Board members
received from GEAM written responses to their inquiries, which included
substantial exhibits and other materials related to GEAM's business and the
services it provides to the Fund. Also in advance of the meetings, the Board
members received from the sub-adviser a written response to a letter of inquiry
prepared by GEAM at the Board's request, which included substantial exhibits and
other materials related to the business of, and services provided by the
sub-adviser. The Board members took into account their multi-year experience as
Board members and particularly their consideration of these agreements in recent
years, noting that the information was presented in a similar manner and format.
To focus their review, the Board members asked GEAM management and the
sub-adviser, in their oral presentations, to highlight material differences from
the information presented in recent years. During the meetings, the Board
members had an opportunity to discuss this information with GEAM managers,
including senior executives, representatives from the legal, compliance and
finance departments, and investment personnel. The Board members also had an
opportunity to hear presentations by representatives of the sub-adviser. The
Board members posed questions to these representatives and engaged in
substantive discussions with them concerning the sub-adviser's investment
process.
In reaching their determinations relating to continuance of the Fund's
investment advisory and sub-advisory agreements, the Board members considered
all factors they believed relevant, including the factors discussed below. In
their deliberations, the Board members did not identify any particular
information that was all-important or controlling, and each Board member
attributed different weights to the various factors. In particular, the Board
members focused on the following:
THE NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED.
The Board members reviewed the services provided by GEAM and the sub-adviser,
and the Board members, including the independent members, concurred that GEAM
and the sub-adviser provide high quality advisory and administrative services to
the Fund.
In connection with their consideration of GEAM's services specifically, the
Board members focused on the favorable attributes of GEAM, including (i)
effective processes used in overseeing the sub-adviser's activities and with
respect to Fund administration, controllership and compliance activities; (ii)
highly skilled professionals with a depth of experience; (iii) access to
significant technological resources from which the Fund may benefit; and (iv) a
favorable history and reputation. The Board members discussed with senior
officers of GEAM the personnel changes made, and proposed to be made, by GEAM.
The Board members noted that the Fund represents only a small portion of the
assets managed by GEAM, but benefits from a full array of services and resources
provided by GEAM.
23
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
In connection with their consideration of the services provided by the
sub-adviser, the Board members focused on the sub-adviser's favorable
attributes, including its substantial experience managing funds of this type,
its investment philosophy and discipline, its high caliber investment and
trading personnel, its systems and other resources, and its favorable history
and reputation.
In light of the foregoing, the Board members, including the independent members,
concluded that the services provided by GEAM and the sub-adviser were of a high
quality and had benefited the Fund.
INVESTMENT PERFORMANCE OF THE FUND.
The Board members considered the investment performance of the Fund for various
periods. The Board members reviewed detailed comparisons of the performance of
the Fund with the relevant securities index and peer groupings of mutual funds
prepared by Lipper with respect to various periods. The Board members also
engaged in detailed discussions with GEAM management and representatives of the
sub-adviser about the investment process, focusing on the Fund's investment
objective, the number and experience of portfolio management and supporting
research personnel and the investment style and approach. The Board members,
including the independent members, concluded that the Fund's performance was
acceptable overall taking into consideration the factors discussed above.
COST OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED FROM THE
RELATIONSHIP WITH THE FUND.
The Board members considered the cost of the services provided by GEAM and the
sub-adviser. The Board members reviewed the information they had requested from
GEAM and the sub-adviser concerning their profitability from the fees and
services they provide to the Fund and the financial condition of GEAM and the
sub-adviser for various past periods. The Board members considered the profit
margin information for GEAM's investment company business as a whole, as well as
GEAM's profitability data for the Fund. The Board members reviewed GEAM's
assumptions and the methods of cost allocation used by GEAM in preparing
Fund-specific profitability data. The Board members also discussed with GEAM the
basis for its belief that the methods of allocation used were reasonable and
consistent across its business. The Board members reviewed the assumptions and
cost allocation methods used by the sub-adviser in preparing its profitability
data.
The Board members noted and discussed the additional services provided by GEAM
to the Fund compared to other investment products managed by GEAM, and noted the
fact that GEAM, and not the Fund, pays the sub-advisory fees to the sub-adviser.
The Board members determined that GEAM and the sub-adviser should be entitled to
earn a reasonable level of profits for the services they provide to the Fund.
The Board members also recognized that GEAM had made significant investments in
its business and had not fully recovered the sums invested. Based on their
review, the Board members, including the independent members, concluded that
they were satisfied that the level of profitability achieved by GEAM and the
sub-adviser from their relationship with the Fund was not unreasonable or
excessive.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS AND
WHETHER FEE LEVELS WOULD REFLECT SUCH ECONOMIES OF SCALE.
The Board members considered the extent to which economies of scale would be
realized as the Fund grows, and whether fee levels reflect these economies of
scale for the benefit of Fund investors. The Board members considered the
substantial infrastructure investments that GEAM has made with respect to its
operations and its commitment to continue investing resources to enhance
services to Fund shareholders. The Board members recognized the benefits to the
Funds of GEAM's past investment in its operations through the expenditure of
sums to support its substantial infrastructure, and that, with respect to all
GEAM managed mutual funds, GEAM has not yet fully recouped that investment. The
Board members also recognized the benefits to the Fund of being able to leverage
a favorable cost structure achieved with respect to the Fund's other operating
expenses as a result of GEAM's large overall base of assets under management and
its vendor management practices.
COMPARISON OF SERVICES TO BE RENDERED AND FEES TO BE PAID.
The Board members discussed the services provided to the Fund by GEAM and the
sub-adviser, and the fees charged for those services. The Board members reviewed
24
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
information concerning the fee and expense ratios for the Fund, and comparative
information with respect to similar products. They discussed that the Fund's
figures were within the applicable peer group range. In addition, the Board
members considered their discussion with representatives of GEAM and the
sub-adviser about the fees being charged to the Fund and, to the extent
applicable, the effect, if any, of the Securities and Exchange Commission
staff's interpretive guidance concerning soft dollars. In light of the
foregoing, the Board members, including the independent members, determined that
the advisory fees were reasonable in relation to the services provided to the
Fund.
The Board members reviewed comparative fee information with respect to any
comparable mutual fund client accounts managed by the sub-adviser and with
respect to any other client accounts managed by the sub-adviser in a similar
style to that of the Fund. The Board members, including the independent members,
concluded that, based on this information, the sub-advisory fees were reasonable
in light of the services provided to the Fund.
FALL-OUT BENEFITS.
The Board members considered other actual and potential financial benefits that
GEAM and the sub-adviser may derive from their relationship with the Fund,
including, to the extent applicable, soft dollar commission benefits generated
through Fund portfolio transactions. The Board members noted, however, that the
Fund benefits from the vast array of resources available through GEAM, and that
the Fund represents only a small portion of the assets managed by GEAM.
CONCLUSION.
No single factor was determinative to the Board members' decision. Based on
their discussion and such other matters as were deemed relevant, the Board
members, including the independent members, concluded that the proposed advisory
fee and projected total expense ratio are reasonable in relation to the services
provided to the Fund. In view of these facts, the Board members, including the
independent members, concluded that the renewal of the advisory agreement was in
the best interests of the Fund and its shareholders, and that renewal of the
sub-advisory agreement was in the best interests of the shareholders of the
Fund.
25
<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.
26
<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 Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
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
<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.
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 FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL 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 OPERATING OFFICER (AS OF JANUARY 31, 2008)
29
[This page intentionally left blank.]
<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 FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
Small-Cap Equity Fund
Annual Report
DECEMBER 31, 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM .............................................................. 18
TAX INFORMATION ...................................................................................................... 19
ADVISORY AND ADMINISTRATIVE AGREEMENT RENEWAL ........................................................................ 20
ADDITIONAL INFORMATION ............................................................................................... 23
INVESTMENT TEAM ...................................................................................................... 26
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance December 31, 2007
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
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(R))* 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
2,000 of the smallest U.S.-domiciled publicly traded common stocks that are
included in the Russell 3000(R) Index. The Russell 3000(R) Index is comprised of
the 3,000 largest U.S. domiciled companies. The results shown for the foregoing
index assume the reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer 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.
- --------------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUNDS.
* RUSSELL INVESTMENT GROUP OWNS THE RUSSELL INDEX DATA, INCLUDING ALL APPLICABLE
TRADEMARKS AND COPYRIGHTS, USED BY GE ASSET MANAGEMENT IN THESE MATERIALS. ANY
UNAUTHORIZED USE OR REDISTRIBUTION OF SUCH RUSSELL INDEX DATA IS STRICTLY
PROHIBITED. RUSSELL INVESTMENT GROUP IS NOT RESPONSIBLE FOR THE CONFIGURATION
OF THIS MATERIAL OR FOR ANY INACCURACY IN GE ASSET MANAGEMENT'S PRESENTATION
THEREOF.
1
<page>
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 TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the Small-Cap Equity
Fund returned 2.39%. The Russell 2000 Index, the Fund's benchmark, returned
-1.59% and the Fund's Lipper peer group of 123 Small-Cap Core Funds returned
an average of -1.64% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED
FUND PERFORMANCE?
A. For the full year in 2007, the Fund outperformed the Russell 2000 Index
largely by making sound decisions in the Financials sector, an area ravaged
by the subprime-induced credit crunch. The Fund's small allocation to
companies with subprime exposure helped us avoid much of the carnage from
the credit crisis, which aided results considerably. Starting in the second
quarter of 2007, uncertainty about the strength of the economy and corporate
earnings began to build. Deteriorating financial strength among banks,
brokers and other financial services companies moved from rumor to fact as
companies large and small began writing down balance sheet assets. Further
deterioration in the housing market started a vicious cycle of asset
write-downs, while financial institutions sought out billions in new
investment from foreign sources. The tight capital environment increased the
likelihood of a financial slowdown in the United States that may spread to
other economies. In the fourth quarter, the Fed continued to respond to
these conditions, reducing interest rates and lowering its target for the
federal funds rate twice to 4.25%.
Q. WHAT WERE THE PRIMARY DRIVERS OF
FUND PERFORMANCE?
A. The Fund primarily benefited from good decision making in the Financials and
Industrials sectors. The Financials sector was the worst performer in the
Index, yet the Fund was able to outperform in this area due to its small
allocation to names with subprime exposure, an industry that was ravaged
following the credit crisis. The Fund's top performer
2
<page>
Q&A
- --------------------------------------------------------------------------------
was GFI Group (+53%), which climbed despite the challenging backdrop in the
sector. As severe dislocations impacted the credit markets, demand for
credit protection increased proportionately. This led to significantly
higher trading volume for GFI Group, one of the largest brokerage providers
in derivatives for credit protection. Another area of strength came from
solid stock selection in our largest allocation, the Industrials sector. The
best performers were Harsco (+71%) and Woodward Governor (+73%), top
long-term holdings of the Fund.
The Fund was negatively impacted by weakness among its Technology and
Healthcare holdings. Our underperformance in Technology came from names in
the Software and Service industry. MoneyGram International (-44%) declined
as a result of the subprime fallout which led to a revaluation in the
company's investment portfolio. The uncertainty in the value of related
investments led to the pullback. Also, Global Cash Access Holdings (-63%)
fell after the company lowered guidance and delayed filing its financial
statements. The Fund also received weak results from holdings in Healthcare.
Although our Healthcare names performed well, it was not enough to offset
the strong relative performance of the benchmark's holdings within the
sector.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. We take a bottom-up approach and look for companies with modest valuations
that are capable of growing earnings regardless of the economic environment.
Stocks that are candidates for our portfolio demonstrate characteristics
such as increasing net income, improving free cash flow, and increasing
return on equity. Companies that demonstrate consistency in these areas are
strong candidates for inclusion in the portfolio. As always, our discipline
and focus is on identifying companies that have strong balance sheets with
growing earnings and free cash flow.
3
<page>
Small-Cap Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended December
31, 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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 939.06 4.26
- ---------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,020.61 4.43
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.87% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2007 WAS: (6.09)%.
4
Small-Cap Equity Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
GEI SMALL-CAP EQUITY RUSSELL 2000 INDEX
4/28/00 $ 10000 $ 10000
6/00 9890 10240.84
12/00 11325.9 9650.02
6/01 12029.37 10312.23
12/01 12455.23 9896.45
6/02 12465.6 9432.91
12/02 10729.52 7876.43
6/03 11116.07 9287.89
12/03 13316.94 11601.44
6/04 14247.25 12385.21
12/04 15334.17 13727.92
6/05 15930.88 13554.49
12/05 16795.59 14348.21
6/06 17667.94 15525.13
12/06 19023.86 16983.05
6/07 20742.48 18074.18
12/07 19478.46 16712.22
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE SINCE
YEAR YEAR INCEPTION
- --------------------------------------------------------------------------------
Small-Cap Equity Fund 2.39% 12.67% 9.07%
- --------------------------------------------------------------------------------
Russell 2000 Index -1.59% 16.24% 6.93%
- --------------------------------------------------------------------------------
Lipper peer group average* -1.64% 15.15% N/A
- --------------------------------------------------------------------------------
Inception date 4/28/00
- --------------------------------------------------------------------------------
Small-Cap Equity Fund (ending value $19,478)
Russell 2000 Index (ending value $16,712)
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 DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Harsco Corp. 3.52%
- --------------------------------------------------------------------------------
Varian, Inc. 2.75%
- --------------------------------------------------------------------------------
DRS Technologies, Inc. 2.73%
- --------------------------------------------------------------------------------
Interactive Data Corp. 2.73%
- --------------------------------------------------------------------------------
Teledyne Technologies Inc. 2.71%
- --------------------------------------------------------------------------------
Woodward Governor Co. 2.65%
- --------------------------------------------------------------------------------
Central European Distribution Corp. 2.62%
- --------------------------------------------------------------------------------
KV Pharmaceutical Co. (Class A) 2.61%
- --------------------------------------------------------------------------------
GFI Group, Inc. 2.39%
- --------------------------------------------------------------------------------
Raymond James Financial, Inc. 2.32%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
AS OF DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $104,030 (in thousands)
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
Industrials 25.0%
Financials 19.3%
Consumer Discretionary 15.3%
Healthcare 13.9%
Information Technology 10.7%
Energy 5.6%
Materials 4.4%
Consumer Staples 4.1%
Utilities 1.7%
Short-Term 0.0%**
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE YEAR AND FIVE-YEAR PERIODS INDICATED IN THE SMALL-CAP CORE FUNDS PEER
GROUP CONSISTING OF 123 AND 89 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** LESS THAN 0.1%.
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 December 31, 2007
- --------------------------------------------------------------------------------
SMALL-CAP EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 100.0%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 15.3%
Aaron Rents, Inc. 79,000 $ 1,519,960
Aeropostale, Inc. 89,600 2,374,400(a)
American Eagle Outfitters 19,000 394,630
Arbitron, Inc. 53,800 2,236,466
Bright Horizons Family
Solutions, Inc. 45,800 1,581,932(a)
CBRL Group, Inc. 23,300 754,687
Interactive Data Corp. 86,000 2,838,860
Jarden Corp. 61,700 1,456,737(a)
LKQ Corp. 82,600 1,736,252(a)
The Talbots, Inc. 15,700 185,574
Triarc Companies, Inc. (Class B) 97,600 854,976
15,934,474
CONSUMER STAPLES -- 4.1%
Central European
Distribution Corp. 47,000 2,729,760(a)
Smithfield Foods, Inc. 53,700 1,553,004(a)
4,282,764
ENERGY -- 5.6%
Dril-Quip Inc. 36,900 2,053,854(a)
NATCO Group, Inc. (Class A) 18,100 980,115(a)
Oil States International, Inc. 60,800 2,074,496(a)
St. Mary Land & Exploration Co. 18,000 694,980
5,803,445
FINANCIALS -- 19.3%
BioMed Realty Trust, Inc. (REIT) 91,200 2,113,104
Cullen/Frost Bankers, Inc. 16,500 835,890
DCT Industrial Trust, Inc. (REIT) 85,800 798,798
Digital Realty Trust, Inc. (REIT) 2,800 107,436
Federal Realty Investment
Trust (REIT) 12,000 985,800
GFI Group, Inc. 26,000 2,488,720(a)
Global Cash Access Holdings, Inc. 108,200 655,692(a)
HCC Insurance Holdings, Inc. 78,100 2,239,908
Hilb Rogal & Hobbs Co. 59,300 2,405,801
Jackson Hewitt Tax Service, Inc. 3,6001 14,300
Jones Lang LaSalle Inc. 9,500 676,020
Omega Healthcare Investors,
Inc. (REIT) 136,000 2,182,800
Raymond James Financial, Inc. 73,800 2,410,308
Sandy Spring Bancorp, Inc. 16,400 456,248
Sterling Bancorp 24,200 330,088
Webster Financial Corp. 12,800 409,216
Westamerica Bancorporation 19,000 846,450
20,056,579
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
HEALTHCARE -- 13.9%
AMN Healthcare Services, Inc. 52,800 $ 906,576(a)
Computer Programs and
Systems, Inc. 39,900 907,326
Cubist Pharmaceuticals, Inc. 27,100 555,821(a)
Healthways, Inc. 7,300 426,612(a)
HMS Holdings Corp. 24,100 800,361(a)
Immunicon Corp. 66,400 55,112(a)
inVentiv Health, Inc. 20,900 647,064(a)
KV Pharmaceutical Co. (Class A) 95,200 2,717,008(a)
Medical Action Industries Inc. 84,700 1,765,995(a)
Molina Healthcare, Inc. 51,700 2,000,790(a)
Thoratec Corp. 42,900 780,351(a)
Varian, Inc. 43,800 2,860,140(a)
14,423,156
INDUSTRIALS -- 25.0%
Applied Industrial
Technologies, Inc. 31,300 908,326
Baldor Electric Co. 36,900 1,242,054
Comfort Systems USA, Inc. 58,100 742,518
DRS Technologies, Inc. 52,400 2,843,748
Genesee & Wyoming Inc. (Class A) 82,200 1,986,774(a)
Harsco Corp. 57,200 3,664,804
Herman Miller Inc. 50,300 1,629,217
Mueller Industries, Inc. 54,900 1,591,551
NCI Building Systems, Inc. 31,000 892,490(a)
Old Dominion Freight Line 39,300 908,223(a)
Oshkosh Truck Corp. 46,900 2,216,494
Quanta Services, Inc. 67,200 1,763,328(a)
Teledyne Technologies Inc. 52,900 2,821,157(a)
Universal Technical Institute, Inc. 3,300 56,100(a)
Woodward Governor Co. 40,500 2,751,975
26,018,759
INFORMATION TECHNOLOGY -- 10.7%
ACI Worldwide Inc. 21,900 416,976(a)
BigBand Networks, Inc. 23,400 120,276(a)
Blackbaud, Inc. 66,500 1,864,660
CommScope, Inc. 35,600 1,751,876(a)
Micros Systems, Inc. 30,400 2,132,864(a)
Microsemi Corp. 9,800 216,972(a)
Mobility Electronics, Inc. 33,000 51,150(a)
Parametric Technology Corp. 83,100 1,483,335(a)
Rudolph Technologies, Inc. 68,900 779,948(a)
Semtech Corp. 71,500 1,109,680(a)
SRA International, Inc. (Class A) 8,200 241,490(a)
Varian Semiconductor Equipment
Associates, Inc. 5,300 196,100(a)
Zebra Technologies Corp. (Class A) 21,700 752,990(a)
11,118,317
MATERIALS -- 4.4%
Commercial Metals Co. 76,700 2,258,815
Packaging Corporation of America 67,700 1,909,140
Pioneer Drilling Co. 34,500 409,860(a)
4,577,815
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
<page>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
UTILITIES -- 1.7%
IDACORP, Inc. 51,500 $ 1,813,830
TOTAL INVESTMENTS IN SECURITIES
(COST $94,448,524) 104,029,139
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
4.96% 1,000 1,000(b,c)
(COST $1,000)
TOTAL INVESTMENTS
(COST $94,449,524) 104,030,139
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (0.0)%* (19,982)
------------
NET ASSETS-- 100.0% $104,010,157
============
* Less than 0.1%
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
<page>
Notes to Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
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) GE Asset Management (GEAM), the investment advisor of the Fund, also serves
as investment advisor of the GEI Short-Term Investment Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of December 31, 2007.
Abbreviations:
REIT Real Estate Investment Trust
8
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ---------------------------------------------------------------------------------------------------------------------------
SMALL-CAP EQUITY FUND
12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
- ---------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- 4/28/00
Net asset value, beginning of period ............. $14.39 $14.44 $13.62 $12.74 $10.27
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.06 0.05 0.02 0.08 0.02
Net realized and unrealized
gains/(losses) on investments .............. 0.31 1.87 1.28 1.85 2.46
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ... 0.36 1.92 1.30 1.93 2.48
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ......................... 0.06 0.04 0.03 0.07 0.01
Net realized gains ............................ 2.53 1.93 0.45 0.98 --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............................. 2.59 1.97 0.48 1.05 0.01
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ................... $12.17 $14.39 $14.44 $13.62 $12.74
===========================================================================================================================
TOTAL RETURN (A) ................................. 2.39% 13.27% 9.53% 15.15% 24.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ...... $104,010 $127,381 $128,142 $117,158 $86,330
Ratios to average net assets:
Net investment income ...................... 0.31% 0.31% 0.11% 0.67% 0.17%
Expenses ................................... 0.87% 0.86% 0.86% 0.88% 0.86%
Portfolio turnover rate ....................... 25% 52% 33% 101% 119%
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.
See Notes to Financial Statements.
9
<page>
Statement of Assets
and Liabilities DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
SMALL-CAP
EQUITY
FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $94,448,524) ...................................... $104,029,139
Short-term affiliated investments (at amortized cost) ........................................ 1,000
Receivable for investments sold .............................................................. 543,607
Income receivables ........................................................................... 102,084
Receivable for fund shares sold .............................................................. 5,853
Other assets ................................................................................. 55
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................................................................. 104,681,738
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ............................................................ 300,171
Payable for fund shares redeemed ............................................................. 140,264
Payable to GEAM .............................................................................. 130,696
Payable to custodian ......................................................................... 100,450
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................................................ 671,581
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................................................... $104,010,157
===========================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in .............................................................................. 94,071,333
Undistributed (distribution in excess of) net investment income .............................. 36,460
Accumulated net realized gain (loss) ......................................................... 321,749
Net unrealized appreciation/(depreciation) on:
Investments .............................................................................. 9,580,615
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................................................... $104,010,157
===========================================================================================================================
NET ASSETS ...................................................................................... 104,010,157
Shares outstanding ($0.01 par value; unlimited shares authorized) ............................... 8,545,959
Net asset value per share ....................................................................... $12.17
See Notes to Financial Statements.
10
<page>
Statement of Operations
FOR THE YEAR ENDED DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
SMALL-CAP
EQUITY
FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend .......................................................................... $ 1,152,834
Interest* ......................................................................... 103,619
Interest from affiliated investments .............................................. 91,163
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ........................................................................ 1,347,616
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees .................................................. 985,089
Transfer agent .................................................................... 43
Director's fees ................................................................... 3,254
Custody and accounting expenses ................................................... 36,827
Professional fees ................................................................. 21,321
Registration expenses ............................................................. 4,535
Other expenses .................................................................... 12,259
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ...................................................................... 1,063,328
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ............................................................... 284,288
===========================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments .................................................................... 10,756,527
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments .................................................................... (7,235,808)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ............................ 3,520,719
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ $ 3,805,007
===========================================================================================================================
* Income attributable to security lending activity, net of rebate expenses
$45,240.
See Notes to Financial Statements.
11
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
SMALL-CAP
EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income ............................................................ $ 284,288 $ 342,034
Net realized gain on investments, futures, written options,
foreign currency transactions and swaps ......................................... 10,756,527 22,145,575
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation .......... (7,235,808) (6,549,704)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase from operations ...................................................... 3,805,007 15,937,905
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................................. (410,572) (348,798)
Net realized gains ................................................................ (17,923,908) (15,076,626)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................. (18,334,480) (15,425,424)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ............................... (14,529,473) 512,481
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ...................................................... 2,430,205 10,121,601
Value of distributions reinvested ................................................. 18,334,520 15,425,391
Cost of shares redeemed ........................................................... (29,605,821) (26,821,168)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease from share transactions .............................................. (8,841,096) (1,274,176)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL (DECREASE) IN NET ASSETS ...................................................... (23,370,569) (761,695)
NET ASSETS
Beginning of period ................................................................. 127,380,726 128,142,421
- ------------------------------------------------------------------------------------------------------------------------------------
End of period ....................................................................... $104,010,157 $127,380,726
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ......... $ 36,460 $ 36,157
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ....................................................................... 159,845 657,522
Issued for distributions reinvested ............................................... 1,494,256 1,064,554
Shares redeemed ................................................................... (1,960,515) (1,744,050)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in fund shares ............................................................ (306,414) (21,974)
====================================================================================================================================
See Notes to Financial Statements.
12
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized costs, which approximates market
value.
All assets and liabilities of the Fund's initially expressed in foreign currency
values will be converted into U.S. dollars at the WM exchange rate computed
at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security,
or if it is believed that a price for a portfolio security does not represent
its fair value, the security may be valued using procedures approved by the
Fund's Board of Directors that are designed to establish its "fair" value. Those
procedures require that the fair value of a security be established by the fair
valuation committee. The fair valuation committee follows different protocols
for different types of investments and circumstances. The fair value procedures
may be used to value any investment by the Fund in the appropriate
circumstances. Examples of the types of securities that may be fair valued
include: thinly traded or illiquid investments, high-yield securities or foreign
securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
13
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
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 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 custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates
14
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 December 31, 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
- ---------------------------------------------------------------------------------------------------------------------------
$94,506,860 $18,599,237 $(9,075,958) $9,523,279
Net Tax Appreciation/ Undistributed Undistributed Post
(Depreciation) on Income/ Long-Term Gains/ October
Derivatives, Currency (Accumulated (Accumulated Losses
and Other Net Assets Ordinary Loss) Capital Loss) (see Detail Below)
- ---------------------------------------------------------------------------------------------------------------------------
$-- $36,460 $379,085 $--
As of December 31, 2007, 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, 2007.
The tax composition of distributions paid during the years ended December 31,
2007 and December 31, 2006 were as follows:
Long-Term
Ordinary Capital
Income Gains Total
- --------------------------------------------------------------------------------
2007 $3,273,697 $15,060,783 $18,334,480
2006 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.
15
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
The reclassifications for the year ended December 31, 2007 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated
Income Net Realized Gain
- --------------------------------------------------------------------------------
$126,587 $(126,587)
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Expenses of the Company which are directly identifiable to the Fund are
allocated to the portfolio. Expenses which are not directly identifiable to the
Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expenses and relative size of the Fund. All
expenses of the Fund are paid by GEAM and reimbursed by the Fund.
3. LINE OF CREDIT
The Company 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. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established November 7, 2007. Generally, borrowings under the
credit facilities would accrue interest at the Federal Funds Rate plus 50 basis
points and would be borne by the borrowing Fund. The maximum amount allowed to
be borrowed by any one Fund is the lesser of (i) its prospectus limitation or
(ii) 20% of its net assets. The credit facilities was not utilized by the Fund
during the period ended December 31, 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 December 31, 2007, $1,954 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.
16
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 December 31, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$29,643,155 $51,072,328
SECURITY LENDING At December 31, 2007, the Fund did not participate in
securities lending.
17
<page>
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
GE Investments Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Small-Cap Equity Fund, a series of GE Investments Funds, Inc., including the
schedule of investments, as of December 31, 2007, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2007 by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Small-Cap Equity Fund as of December 31, 2007, the results of its operations,
changes in its net assets and financial highlights for the years described
above, in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Boston, Massachusetts
February 25, 2008
18
<page>
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For the year ended December 31, 2007
SUMMARY
During the year ended December 31, 2007, the Fund paid to shareholders of record
on December 26, 2007, the following long-term capital gain dividends 2007:
FUND NAME PER SHARE AMOUNT
- -------------------------------------------------------------------------------
GE Investments Funds, Inc.-- Small Cap Equity Fund $2.12338
19
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
The Fund Board, including the independent Board members, considered and
unanimously approved the continuance of the Fund's investment advisory and
sub-advisory agreements with GE Asset Management Incorporated ("GEAM") and the
Fund's sub-adviser, Palisade Capital Management, L.L.C., at meetings held on
December 5 and December 12, 2007.
During the Fund Board meeting on December 12, 2007 and at prior 2007 Board
meetings, GEAM explained to the Board that it continues to evaluate whether to
add one or more additional sub-advisers principally to address potential
investment capacity constraints. A small decrease in the total assets managed by
the Fund's sub-adviser in GEAM sponsored mutual funds during 2007 alleviated the
more immediate concern regarding anticipated investment capacity constraints.
This small decrease in small-cap assets overall allowed GEAM to continue to
monitor the Fund and analyze the various options, in light of current investment
conditions. GEAM expects to complete the analysis and to report further to the
Board during the first half of 2008 as to whether to add additional
sub-advisers. Were one or more additional sub-advisers added, GEAM still may
limit the aggregate assets the sub-adviser manages within its investment
discipline even if Fund assets grow.
In considering whether to approve the Fund's investment advisory and
sub-advisory agreements, the Board members, including the independent members,
considered and discussed a substantial amount of information and analysis
provided, at the Board's request, by GEAM and the sub-adviser. The Board members
also considered detailed information regarding performance and expenses of other
investment companies, including those with similar investment objectives and
sizes, which was prepared by an independent third party provider, Lipper Inc.
("Lipper").
Before approving the Fund's advisory and sub-advisory agreements, the Board
members reviewed the proposed continuance of the agreements with management of
GEAM and with independent legal counsel. The Board members also reviewed a
memorandum prepared by independent legal counsel discussing the legal standards
for the consideration of the proposed continuances. The independent Board
members discussed the proposed continuances in detail during a private session
with their independent legal counsel at which no representatives of GEAM or the
sub-adviser were present. The independent Board members and their independent
legal counsel requested, and received and considered, additional information
from GEAM following this session.
In advance of the meetings, and in response to their request, the Board members
received from GEAM written responses to their inquiries, which included
substantial exhibits and other materials related to GEAM's business and the
services it provides to the Fund. Also in advance of the meetings, the Board
members received from the sub-adviser a written response to a letter of inquiry
prepared by GEAM at the Board's request, which included substantial exhibits and
other materials related to the business of, and services provided by the
sub-adviser. The Board members took into account their multi-year experience as
Board members and particularly their consideration of these agreements in recent
years, noting that the information was presented in a similar manner and format.
To focus their review, the Board members asked GEAM management and the
sub-adviser, in their oral presentations, to highlight material differences from
the information presented in recent years. During the meetings, the Board
members had an opportunity to discuss this information with GEAM managers,
including senior executives, representatives from the legal, compliance and
finance departments, and investment personnel. The Board members also had an
opportunity to hear presentations by representatives of the sub-adviser. The
Board members posed questions to these representatives and engaged in
substantive discussions with them concerning the sub-adviser's investment
process.
In reaching their determinations relating to continuance of the Fund's
investment advisory and sub-advisory agreements, the Board members considered
all factors they believed relevant, including the factors discussed below. In
their deliberations, the Board members did not identify any particular
information that was all-important or controlling, and each Board member
attributed different weights to the various factors. In particular, the Board
members focused on the following:
THE NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED.
The Board members reviewed the services provided by GEAM and the sub-adviser,
and the Board members, including the independent members found that the high
20
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- -------------------------------------------------------------------------------
quality advisory and administrative services performed by GEAM, and the
improving quality of the advisory and administrative services performed by the
sub-adviser, continue to be satisfactory.
In connection with their consideration of GEAM's services specifically, the
Board members focused on the favorable attributes of GEAM, including (i) an
investment philosophy oriented toward long-term performance; (ii) effective
processes used in overseeing the sub-adviser's activities and with respect to
Fund administration, controllership and compliance activities; (iii) highly
skilled professionals with a depth of experience; (iv) access to significant
technological resources from which the Fund may benefit; and (v) a favorable
history and reputation. The Board members discussed with senior officers of GEAM
the personnel changes made, and proposed to be made, by GEAM. The Board members
noted that the Fund represents only a small portion of the assets managed by
GEAM, but benefits from a full array of services and resources provided by GEAM.
In connection with their consideration of the services provided by the
sub-adviser, the Board members focused on the sub-adviser's favorable attributes
relating to its investment philosophy and discipline, its experienced investment
and trading personnel, its systems and other resources, including research
capabilities, and its satisfactory history and reputation. The Board members
also considered the sub-adviser's ability to effectively manage the Fund in
conformity with the Fund's investment objective and strategies, given the Fund
asset size.
In light of the foregoing, the Board members, including the independent members,
concluded that the high quality of advisory and administrative services provided
by GEAM, and the improving quality of the advisory and administrative services
provided by the sub-adviser, continue to be satisfactory.
INVESTMENT PERFORMANCE OF THE FUND
The Board members considered the investment performance of the Fund for various
periods. The Board members reviewed detailed comparisons of the performance of
the Fund with the relevant securities indexes and peer groupings of mutual funds
prepared by Lipper with respect to various periods. The Board members also
engaged in detailed discussions with GEAM management and representatives of the
sub-adviser about the investment process, focusing on the Fund's investment
objective, the number and experience of portfolio management and support
research personnel, the investment style and approach employed, the likely
market cycles for the investment style, and the relative underperformance of the
Fund in certain periods in light of the sub-adviser's commitment to long-term
satisfactory performance with respect to the Fund's investment objective and
investment approach. The Board members, including the independent members,
having been concerned about the Fund's performance in prior years, in particular
the underperformance that occurred in 2003, noted that more recent performance
has shown improvement. The Board members look forward to having the opportunity
to review GEAM's ongoing reports and recommendations relating to the Fund's
portfolio management.
COST OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED FROM THE
RELATIONSHIP WITH THE FUND.
The Board members considered the cost of the services provided by GEAM and the
sub-adviser. The Board members reviewed the information they had requested from
GEAM and the sub-adviser concerning their profitability from the fees and
services they provide to the Fund and the financial condition of GEAM and the
sub-adviser for various past periods. The Board members considered the profit
margin information for GEAM's investment company business as a whole, as well as
GEAM's profitability data for the Fund. The Board members reviewed GEAM's
assumptions and the methods of cost allocation used by GEAM in preparing
Fund-specific profitability data. The Board members also discussed with GEAM the
basis for its belief that the methods of allocation used were reasonable and
consistent across its business. The Board members reviewed the assumptions and
cost allocation methods used by the sub-adviser in preparing its profitability
data.
The Board members noted and discussed the additional services provided by GEAM
to the Fund compared to other investment products managed by GEAM, and noted the
fact that GEAM, and not the Fund, pays the sub-advisory fees to the sub-adviser.
The Board members determined that GEAM and the sub-adviser should be entitled to
earn a reasonable level of profits for the
21
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
services they provide to the Fund. The Board members also recognized that GEAM
had made significant investments in its business and had not fully recovered the
sums invested. Based on their review, the Board members, including the
independent members, concluded that they were satisfied that the level of
profitability achieved by GEAM and the sub-adviser from their relationship with
the Fund was not unreasonable or excessive.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS AND
WHETHER FEE LEVELS WOULD REFLECT SUCH ECONOMIES OF SCALE.
The Board members considered the extent to which economies of scale would be
realized as the Fund grows, and whether fee levels reflect these economies of
scale for the benefit of Fund investors. The Board members considered the
substantial infrastructure investments that GEAM has made with respect to its
operations and its commitment to continue investing resources to enhance
services to Fund shareholders. The Board members recognized the benefits to the
Funds of GEAM's past investment in its operations through the expenditure of
sums to support its substantial infrastructure, and that, with respect to all
GEAM managed mutual funds, GEAM has not yet fully recouped that investment. The
Board members also recognized the benefits to the Fund of being able to leverage
a favorable cost structure achieved with respect to the Fund's other operating
expenses as a result of GEAM's large overall base of assets under management and
its vendor management practices.
COMPARISON OF SERVICES TO BE RENDERED AND FEES TO BE PAID
The Board members discussed the services provided to the Fund by GEAM and the
sub-adviser, and the fees charged for those services. The Board members reviewed
information concerning the fee and expense ratios for the Fund, and comparative
information with respect to similar products. They discussed that the Fund's
figures were within the applicable peer group range. In addition, the Board
members considered their discussion with representatives of GEAM and the
sub-adviser about the fees being charged to the Fund and, to the extent
applicable, the effect, if any, of the Securities and Exchange Commission
staff's interpretive guidance concerning soft dollars. In light of the
foregoing, the Board members, including the independent members, determined that
the advisory fees were reasonable in relation to the services provided to the
Fund.
The Board members reviewed comparative fee information with respect to any
comparable mutual fund client accounts managed by the sub-adviser, if any, and
with respect to any other client accounts managed by the sub-adviser in a
similar style to that of the Fund. The Board members, including the independent
members, concluded that, based on this information, the sub-advisory fees were
reasonable in light of the services provided to the Fund.
FALL-OUT BENEFITS
The Board members considered other actual and potential financial benefits that
GEAM and the sub-adviser may derive from their relationship with the Fund,
including, to the extent applicable, soft dollar commission benefits generated
through Fund portfolio transactions. The Board members noted, however, that the
Fund benefits from the vast array of resources available through GEAM, and that
the Fund represents only a small portion of the assets managed by GEAM.
CONCLUSION
No single factor was determinative to the Board members' decision. Based on
their discussion and such other matters as were deemed relevant, the Board
members, including the independent members, concluded that the proposed advisory
fee and projected total expense ratios are reasonable in relation to the
services provided to the Fund. In view of these facts, the Board members,
including the independent members, concluded that the renewal of the advisory
agreement was in the best interests of the Fund and its shareholders, and that
renewal of the sub-advisory agreement was in the best interests of the
shareholders of the Fund.
22
<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.
23
<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 Senior Vice President and Deputy
General Counsel of GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
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
24
<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.
25
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL 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 OPERATING OFFICER (AS OF JANUARY 31, 2008)
26
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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 FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
Real Estate Securities Fund
Annual Report
DECEMBER 31, 2007
[GE LOGO OMITTED]
<page>
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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM .............................................................. 18
TAX INFORMATION ...................................................................................................... 19
ADVISORY AND ADMINISTRATIVE AGREEMENT RENEWAL ........................................................................ 20
ADDITIONAL INFORMATION ............................................................................................... 23
INVESTMENT TEAM ...................................................................................................... 26
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance December 31, 2007
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
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.
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.
- -------------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUNDS.
1
<page>
Real Estate Securities Fund
- --------------------------------------------------------------------------------
URDANG SECURITIES MANAGEMENT, INC. (URDANG) IS THE SUB-ADVISER FOR THE REAL
ESTATE SECURITIES FUND. URDANG IS A WHOLLY OWNED SUBSIDIARY OF URDANG CAPITAL
MANAGEMENT, INC. (URDANG CAPITAL). URDANG CAPITAL IS WHOLLY OWNED BY THE BANK OF
NEW YORK MELLON CORPORATION (BANK OF NEW YORK) AND OPERATES AS PART OF BANK OF
NEW YORK'S ASSET MANAGEMENT DIVISION. AS A WHOLLY OWNED SUBSIDIARY OF URDANG
CAPITAL, URDANG IS A SECOND TIER SUBSIDIARY OF BANK OF NEW YORK. URDANG IS A
REGISTERED INVESTMENT ADVISER THAT WAS FORMED IN 1995 TO FOCUS EXCLUSIVELY ON
OPPORTUNITIES IN THE REAL ESTATE SECURITIES MARKET, INCLUDING PUBLICLY TRADED
REAL ESTATE INVESTMENT TRUSTS (REITS).
THE REAL ESTATE SECURITIES FUND IS CO-MANAGED BY 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 TWELVE-MONTH
PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the Real Estate
Securities Fund returned (14.86%). The National Association of Real Estate
Investment Trusts Equity Index, the Fund's benchmark, returned (15.69%) and
the Fund's Lipper peer group of 61 Real Estate funds returned an average of
(14.73%) for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED
FUND PERFORMANCE?
A. In the first half of 2007, merger and acquisition (M&A) activities and a
favorable economic outlook propelled REITs higher. By mid-year however,
disruptions in the debt markets triggered by concern over credit risk in a
distant corner of the capital markets (sub-prime residential mortgages)
mushroomed, eventually triggering a swift and dramatic re-pricing of risk
across the credit spectrum that devolved into the current credit crisis that
threatens to push the economy into recession. Debt, equity and REIT prices
began to deteriorate mid-year, culminating in a fourth quarter crescendo.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund outperformed the benchmark by 83 basis points for the reporting
period (net of fees without load). Stock selection was a major contributor
of out-performance, while sector selection and cash also played a minor role
in the positive out-performance. An underweight in the office, hotel and
self-storage sectors and an overweight in the net lease and healthcare
sectors drove our sector selection returns. Stock selection within office,
shopping center, industrial and healthcare contributed to the majority of
stock selection returns. A large underweight in the timber REITs and stock
selection within hotels where M&A activities had earlier in the year created
an enormous dispersion between individual stocks within the sector
negatively impacted performance.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. Early in the credit crisis we allocated away from REITs with high financial
leverage, unfunded development, and those most exposed to the economic cycle
in favor of defensive sectors with strong cash flows from long-term leases
and ample balance sheet capacity. As the year drew on, we further increased
exposure to the defensive sectors of healthcare, net lease and shopping
centers, and moved the portfolio further
2
<page>
Q&A
- --------------------------------------------------------------------------------
awayfrom the economically sensitive hotel, apartment, and office sectors.
The largest individual stock holding changes during the year include
additions to National Retail Properties Trust (NNN), HCP Inc. (HCP) and UDR
Inc. (UDR), and the elimination of positions in Equity Office Properties
(EOP), Archstone-Smith (ASN) and Hilton Hotels (HLT), all three of which
were taken private
3
<page>
Real Estate Securities Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended December
31, 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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 908.48 4.57
- ------------------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,020.36 4.68
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.92% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2007
WAS: (9.15)%.
4
<page>
Real Estate Securities Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
GEI REAL ESTATE WILSHIRE RES NAREIT
SECURITIES INDEX EQUITY INDEX
12/97 $10000 $10000 $10000
12/98 8232 8257 8250
12/99 8214 7994 7869
12/00 10886 10434 9943
12/01 12175 11512 11329
12/02 12011 11810 11761
12/03 16510 16188 16129
12/04 21842 21835 21222
12/05 24415 24854 23803
12/06 32478 33718 32149
12/07 27652 27759 27104
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Real Estate Securities Fund -14.86% 18.15% 10.71%
- --------------------------------------------------------------------------------
NAREIT Equity Index -15.69% 18.18% 10.49%
- --------------------------------------------------------------------------------
Lipper peer group average* -14.73% 18.66% 10.55%
- --------------------------------------------------------------------------------
Inception date 5/1/95
- --------------------------------------------------------------------------------
Real Estate Securities Fund (ending value $27,652)
NAREIT Equity Index (ending value $27,104)
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 DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Simon Property Group, Inc. 7.48%
- --------------------------------------------------------------------------------
General Growth Properties, Inc. 5.85%
- --------------------------------------------------------------------------------
Kimco Realty Corp. 5.29%
- --------------------------------------------------------------------------------
Prologis 4.87%
- --------------------------------------------------------------------------------
Vornado Realty Trust 4.79%
- --------------------------------------------------------------------------------
National Retail Properties, Inc. 4.12%
- --------------------------------------------------------------------------------
UDR, Inc. 3.92%
- --------------------------------------------------------------------------------
Nationwide Health Properties Inc. 3.86%
- --------------------------------------------------------------------------------
Boston Properties, Inc. 3.73%
- --------------------------------------------------------------------------------
HCP, Inc. 3.71%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
AS OF DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $96,039 (in thousands)
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
Shopping Centers 14.9%
Regional Malls 14.6%
Multifamily 14.4%
Office 13.0%
Healthcare 10.5%
Industrial 9.3%
Freestanding 6.3%
Diversified 6.1%
Hotel 5.2%
Self Storage 2.3%
Real Estate Operating Company 1.1%
Specialty 1.0%
Office/Industrial 0.9%
Short-Term 0.4%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE YEAR, FIVE-YEAR AND TEN-YEAR PERIODS INDICATED IN THE REAL ESTATE
FUNDS PEER GROUP CONSISTING OF 61, 38 AND 11 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
<page>
REAL ESTATE SECURITIES FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK (REIT) -- 94.2%+
- --------------------------------------------------------------------------------
DIVERSIFIED -- 6.1%
Cousins Properties, Inc. 58,330 $ 1,289,093
Vornado Realty Trust 52,270 4,597,147
5,886,240
FREESTANDING -- 6.2%
National Retail Properties, Inc. 169,080 3,953,090
Realty Income Corp. 76,000 2,053,520
6,006,610
HEALTHCARE -- 10.5%
HCP, Inc. 102,480 3,564,254
Health Care REIT Inc. 28,350 1,266,962
Healthcare Realty Trust Inc. 61,460 1,560,469
Nationwide Health Properties Inc. 118,100 3,704,797
10,096,482
HOTEL -- 3.5%
Sunstone Hotel Investors, Inc. 78,910 1,443,264
Host Hotels & Resorts Inc. 111,470 1,899,449
3,342,713
INDUSTRIAL -- 9.2%
AMB Property Corp. 52,780 3,038,017
First Industrial Realty Trust, Inc. 34,840 1,205,464
Prologis 73,830 4,679,345
8,922,826
MULTIFAMILY -- 14.3%
American Campus
Communities, Inc. 18,000 483,300
AvalonBay Communities, Inc. 21,770 2,049,428
BRE Properties, Inc. 71,750 2,908,028
Education Realty Trust, Inc. 80,160 900,998
Essex Property Trust, Inc. 24,140 2,353,409
Home Properties Inc. 29,530 1,324,420
UDR, Inc. 189,480 3,761,178
13,780,761
OFFICE -- 10.9%
Alexandria Real Estate
Equities, Inc. 26,750 2,719,673
Boston Properties, Inc. 39,030 3,583,344
Brandywine Realty Trust 10,090 180,914
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Highwoods Properties, Inc. 48,600 $ 1,427,868
Kilroy Realty Corp. 7,850 431,436
SL Green Realty Corp. 23,880 2,231,825
10,575,060
OFFICE/INDUSTRIAL -- 0.9%
Liberty Property Trust 29,440 848,166
REGIONAL MALLS -- 14.5%
General Growth Properties, Inc. 136,330 5,614,069
Macerich Co. 16,660 1,183,860
Simon Property Group, Inc. 82,740 7,186,796
13,984,725
SELF STORAGE -- 2.3%
Public Storage, Inc. 30,430 2,233,866
SHOPPING CENTERS -- 14.8%
Acadia Realty Trust 43,100 1,103,791
Developers Diversified Realty Corp. 49,310 1,888,080
Federal Realty Investment Trust 37,710 3,097,877
Kimco Realty Corp. 139,490 5,077,436
Regency Centers Corp. 49,190 3,172,263
14,339,447
SPECIALTY -- 1.0%
Digital Realty Trust, Inc. 26,000 997,620
TOTAL COMMON STOCK (REIT)
(COST $100,390,336) 91,014,516
- --------------------------------------------------------------------------------
COMMON STOCK -- 4.7%
- --------------------------------------------------------------------------------
HOTEL -- 1.7%
Starwood Hotels & Resorts
Worldwide, Inc. 37,280 1,641,438
OFFICE -- 1.9%
Brookfield Properties Corp. 98,160 1,889,580
REAL ESTATE OPERATING COMPANY -- 1.1%
Forest City Enterprises, Inc.
(Class A) 23,830 1,059,005
TOTAL COMMON STOCK
(COST $6,602,606) 4,590,023
TOTAL INVESTMENTS IN SECURITIES
(COST $106,716,327) 95,604,539
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
<page>
REAL ESTATE SECURITIES FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.5%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
4.96% 434,599 $ 434,599(a,b)
(COST $434,599)
TOTAL INVESTMENTS
(COST $107,150,926) 96,039,138
OTHER ASSETS AND LIABILITIES,
NET-- 0.6% 611,074
-----------
NET ASSETS-- 100.0% $96,650,212
===========
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
<page>
Notes to Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
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) Coupon amount represents effective yield.
(b) GE Asset Management (GEAM), the investment advisor of the Fund, also serves
as investment advisor of the GEI Short-Term Investment Fund.
+ Percentages are based on net assets as of December 31, 2007.
Abbreviations:
REIT Real Estate Investment Trust
8
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
- ------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- 5/1/95
Net asset value, beginning of period ................ $21.49 $19.20 $19.54 $16.78 $13.14
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................ 0.72 0.65 0.70 0.65 0.50
Net realized and unrealized
gains/(losses) on investments ................ (3.87) 5.68 1.62 4.76 4.42
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ...... (3.15) 6.33 2.32 5.41 4.92
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................ 0.75 0.48 0.75 0.52 0.41
Net realized gains ............................... 6.72 3.56 1.91 2.13 0.87
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................. 7.47 4.04 2.66 2.65 1.28
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ...................... $10.87 $21.49 $19.20 $19.54 $16.78
====================================================================================================================================
TOTAL RETURN (A) .................................... (14.86)% 33.03% 11.78% 32.29% 37.38%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ......... $96,650 $178,317 $143,801 $146,221 $98,294
Ratios to average net assets:
Net investment income ......................... 2.59% 3.08% 3.21% 4.15% 4.65%
Expenses ...................................... 0.90% 0.88% 0.89% 0.90% 0.89%
Portfolio turnover rate .......................... 106% 92% 52% 78% 52%
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.
See Notes to Financial Statements.
9
<page>
Statement of Assets
and Liabilities DECEMBER 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESATE
SECURITIES
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (Cost $106,716,327) ...................................... $95,604,539
Short-term affiliated investments (at amortized cost) ......................................... 434,599
Receivable for investments sold ............................................................... 1,102,880
Income receivables ............................................................................ 691,960
Receivable for fund shares sold ............................................................... 1,916
Other assets .................................................................................. 62
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS .............................................................................. 97,835,956
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ............................................................. 942,434
Payable for fund shares redeemed .............................................................. 109,274
Payable to GEAM ............................................................................... 134,036
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ......................................................................... 1,185,744
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ....................................................................................... $96,650,212
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ............................................................................... 109,556,435
Undistributed (distribution in excess of) net investment income ............................... 286,853
Accumulated net realized gain (loss) .......................................................... (2,081,288)
Net unrealized appreciation/(depreciation) on:
Investments ............................................................................... (11,111,788)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ....................................................................................... $96,650,212
====================================================================================================================================
NET ASSETS ....................................................................................... 96,650,212
Shares outstanding ($0.01 par value; unlimited shares authorized) ................................ 8,895,323
Net asset value per share ........................................................................ $10.87
See Notes to Financial Statements.
10
<page>
Statement of Operations
FOR THE YEAR ENDED DECEMBER 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESATE
SECURITIES
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ........................................................................ $ 4,471,034
Interest from affiliated investments ............................................ 101,176
Less: Foreign taxes withheld .................................................... (16,111)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ...................................................................... 4,556,099
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ................................................ 1,205,759
Transfer agent .................................................................. 42
Director's fees ................................................................. 3,588
Custody and accounting expenses ................................................. 37,491
Professional fees ............................................................... 25,112
Registration expenses ........................................................... 4,914
Other expenses .................................................................. 22,254
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .................................................................... 1,299,160
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ............................................................. 3,256,939
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN ON:
Investments .................................................................. 29,837,725
DECREASE IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments .................................................................. (51,608,095)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments ................................. (21,770,370)
- ------------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................. $(18,513,431)
====================================================================================================================================
See Notes to Financial Statements.
11
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE
SECURITIES
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) ..................................................... $ 3,256,939 $ 4,078,747
Net realized gain on investments .................................................. 29,837,725 24,153,309
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments .................................................................. (51,608,095) 15,955,603
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ........................................... (18,513,431) 44,187,659
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................................. (3,999,441) (3,335,137)
Net realized gains ................................................................ (35,719,010) (24,834,755)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................. (39,718,451) (28,169,892)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations ............................... (58,231,882) 16,017,767
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ...................................................... 4,445,242 20,203,690
Value of distributions reinvested ................................................. 39,718,451 28,169,892
Cost of shares redeemed ........................................................... (67,599,080) (29,874,788)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ................................... (23,435,387) 18,498,794
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................. (81,667,269) 34,516,561
NET ASSETS
Beginning of period ................................................................. 178,317,481 143,800,920
- ------------------------------------------------------------------------------------------------------------------------------------
End of period ....................................................................... $ 96,650,212 $178,317,481
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ......... $ 286,853 $ 338,045
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ....................................................................... 197,070 870,622
Issued for distributions reinvested ............................................... 3,637,222 1,316,352
Shares redeemed ................................................................... (3,235,096) (1,380,231)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in fund shares ............................................................ 599,196 806,743
====================================================================================================================================
See Notes to Financial Statements.
12
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized costs, which approximates market
value.
All assets and liabilities of the Fund's initially expressed in foreign currency
values will be converted into U.S. dollars at the WM exchange rate computed at
11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
13
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
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 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 custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net unrealized gain or loss from investments. Net realized
gains or losses on foreign currency transactions represent net gains or losses
on sales and maturities of foreign currency contracts, disposition of foreign
currencies, the difference between the amount of net investment income and
withholding taxes accrued and the U.S. dollar amount actually received or paid,
and gains or losses between the trade and settlement date on purchases and sales
of securities. Net unrealized foreign exchange gains and losses arising from
changes in the value of other assets and liabilities as a result of changes in
foreign exchange rates are included as increases or decreases in unrealized
appreciation/depreciation on foreign currency related transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures
14
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
contracts to manage its exposure to the stock and bond markets and fluctuations
in currency values. Buying futures tends to increase the Fund's exposure to the
underlying instrument while selling futures tends to decrease the Fund's
exposure to the underlying instrument, or hedge other Fund investments. The Fund
will not enter into a transaction involving futures for speculative purposes.
The Fund's risks in using these contracts include changes in the value of the
underlying instruments, non-performance of the counterparties under the
contracts' terms and changes in the liquidity of the secondary market for the
contracts. Futures contracts are valued at the settlement price established each
day by the board of trade or exchange on which they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. The Fund will not enter
into a transaction involving options for speculative purposes. The Fund's risks
in using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Options
are valued at the last sale price, or if no sales occurred on that day, at the
last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
REAL ESTATE INVESTMENT TRUSTS Dividend income, attributable to real estate
investment trusts ("REITs"), is recorded based on management's estimate of the
income included in the distributions received. Distributions received in excess
of this amount are recorded as a reduction of the cost of the investments. The
actual amounts of income and return of capital are determined by each REIT only
after its fiscal year-end, and may differ from the estimated amounts.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
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.
15
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
At December 31, 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
- ------------------------------------------------------------------------------------------------------------------------------------
$108,563,646 $3,621,426 $(16,145,934) $(12,524,508)
Net Tax Appreciation/ Undistributed Undistributed Post
(Depreciation) on Income/ Long-Term Gains/ October
Derivatives, Currency (Accumulated (Accumulated Losses
and Other Net Assets Ordinary Loss) Capital Loss) (see Detail Below)
- ------------------------------------------------------------------------------------------------------------------------------------
$-- $286,853 $-- $(668,568)
As of December 31, 2007, 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, 2007 as follows:
Capital Currency
- --------------------------------------------------------------------------------
$668,568 $--
The tax composition of distributions paid during the years ended December 31,
2007 and December 31, 2006 were as follows:
Ordinary Long-Term Return of
Income Capital Gains Capital Total
- --------------------------------------------------------------------------------
2007 $5,956,613 $33,613,314 $148,524 $39,718,451
2006 4,582,222 23,587,670 -- 28,169,892
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, 2007 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated Paid in
Income Net Realized Gain Capital
- --------------------------------------------------------------------------------
$691,310 $(542,786) $(148,524)
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
16
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
EXPENSES Expenses of the Company which are directly identifiable to the Fund are
allocated to the portfolio. Expenses which are not directly identifiable to the
Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expenses and relative size of the Fund. All
expenses of the Fund are paid by GEAM and reimbursed by the Fund.
3. LINE OF CREDIT
The Company 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. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established November 7, 2007. Generally, borrowings under the
credit facilities would accrue interest at the Federal Funds Rate plus 50 basis
points and would be borne by the borrowing Fund. The maximum amount allowed to
be borrowed by any one Fund is the lesser of (i) its prospectus limitation or
(ii) 20% of its net assets. The credit facilities were not utilized by the Fund
during the period ended December 31, 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%
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending December 31, 2007, $2,388 was charged to
the Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. SUB-ADVISORY FEES
Pursuant to an investment sub-advisory agreement with GEAM, Urdang Securities
Management, Inc. ("Urdang") is the Sub-Adviser to the Fund. Urdang is
responsible for the day-to-day portfolio management of the assets of the Fund,
including the responsibility for making decisions to buy, sell or hold a
particular security, under the general supervision of GEAM and the Board.
For their services, GEAM pays Urdang monthly sub-advisory fees which are
calculated as a percentage of the average daily net assets of the Fund.
6. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and short-term options,
for the period ended December 31, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$150,492,533 $204,193,520
17
<page>
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
GE Investments Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the Real
Estate Securities Fund, a series of GE Investments Funds, Inc., including the
schedule of investments, as of December 31, 2007, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2007 by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Real Estate Securities Fund as of December 31, 2007, the results of its
operations, changes in its net assets and financial highlights for the years
described above, in conformity with U.S. generally accepted accounting
principles.
KPMG LLP
Boston, Massachusetts
February 25, 2008
18
<page>
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For the year ended December 31, 2007
SUMMARY
During the year ended December 31, 2007, the Fund paid to shareholders of record
on December 26, 2007, the following long-term capital gain dividends 2007:
FUND NAME PER SHARE AMOUNT
- --------------------------------------------------------------------------------
GE Investments Funds, Inc.-- Real Estate Securities Fund $6.32841
19
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
The Fund Board, including the independent Board members, considered and
unanimously approved the continuance of the Fund's investment advisory and
sub-advisory agreements with GE Asset Management Incorporated ("GEAM") and the
Fund's sub-adviser, Urdang Securities Management, Inc. at meetings held on
December 5 and December 12, 2007.
In considering whether to approve the Fund's investment advisory and
sub-advisory agreements, the Board members, including the independent members,
considered and discussed a substantial amount of information and analysis
provided, at the Board's request, by GEAM and the sub-adviser. The Board members
also considered detailed information regarding performance and expenses of other
investment companies, including those with similar investment objectives and
sizes, which was prepared by an independent third party provider, Lipper Inc.
("Lipper").
Before approving the Fund's advisory and sub-advisory agreements, the Board
members reviewed the proposed continuance of the agreements with management of
GEAM and with independent legal counsel. The Board members also reviewed a
memorandum prepared by independent legal counsel discussing the legal standards
for the consideration of the proposed continuances. The independent Board
members discussed the proposed continuances in detail during a private session
with their independent legal counsel at which no representatives of GEAM or the
sub-adviser were present. The independent Board members and their independent
legal counsel requested, and received and considered, additional information
from GEAM following this session.
In advance of the meetings, and in response to their request, the Board members
received from GEAM written responses to their inquiries, which included
substantial exhibits and other materials related to GEAM's business and the
services it provides to the Fund. Also in advance of the meetings, the Board
members received from the sub-adviser a written response to a letter of inquiry
prepared by GEAM at the Board's request, which included substantial exhibits and
other materials related to the business of, and services provided by the
sub-adviser. The Board members took into account their multi-year experience as
Board members and particularly their consideration of these agreements in recent
years, noting that the information was presented in a similar manner and format.
To focus their review, the Board members asked GEAM management and the
sub-adviser, in their oral presentations, to highlight material differences from
the information presented in recent years. During the meetings, the Board
members had an opportunity to discuss this information with GEAM managers,
including senior executives, representatives from the legal, compliance and
finance departments, and investment personnel. The Board members also had an
opportunity to hear presentations by representatives of the sub-adviser. The
Board members posed questions to these representatives and engaged in
substantive discussions with them concerning the sub-adviser's investment
process.
In reaching their determinations relating to continuance of the Fund's
investment advisory and sub-advisory agreements, the Board members considered
all factors they believed relevant, including the factors discussed below. In
their deliberations, the Board members did not identify any particular
information that was all-important or controlling, and each Board member
attributed different weights to the various factors. In particular, the Board
members focused on the following, recognizing, with respect to the Fund's
sub-advisory agreement, that the sub-adviser had only recently begun managing
the Fund's portfolio following approval of the agreement by shareholders during
the first quarter of 2006:
THE NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED.
The Board members reviewed the services provided by GEAM and the sub-adviser,
and the Board members, including the independent members, concurred that GEAM
and the sub-adviser provide high quality advisory and administrative services to
the Fund.
In connection with their consideration of GEAM's services specifically, the
Board members focused on the favorable attributes of GEAM, including (i) an
investment philosophy oriented toward long-term performance; (ii) effective
processes used in overseeing the sub-adviser's activities and with respect to
Fund administration, controllership and compliance activities; (iii) highly
skilled professionals with a depth of experience; (iv) access to significant
technological resources from which the Fund may benefit; and (v) a favorable
history and reputation. The Board
20
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
members discussed with senior officers of GEAM the personnel changes made, and
proposed to be made, by GEAM. The Board members noted that the Fund represents
only a small portion of the assets managed by GEAM, but benefits from a full
array of services and resources provided by GEAM.
In connection with their consideration of the services provided by the
sub-adviser, the Board members focused on the sub-adviser's favorable attributes
relating to its investment philosophy and discipline, its high caliber
investment and trading personnel, its systems and other resources, including
research capabilities, and its favorable history and reputation.
In light of the foregoing, the Board members, including the independent members,
concluded that the services provided by GEAM and the sub-adviser were of a high
quality and had benefited the Fund.
INVESTMENT PERFORMANCE OF THE FUND.
The Board members considered the investment performance of the Fund for various
periods, with emphasis on the period since the commencement of the sub-adviser's
management of the Fund's portfolio. The Board members reviewed detailed
comparisons of the performance of the Fund with the relevant securities indexes
and peer groupings of mutual funds prepared by Lipper with respect to various
periods. The Board members engaged in detailed discussions with GEAM management
and representatives of the sub-adviser about the investment process, focusing on
the Fund's investment objective, the number and experience of portfolio
management and supporting research personnel, the investment style and approach
employed, and the likely market cycles for the investment style. The Board
members, including the independent members, concluded that the Fund's
performance was acceptable overall taking into consideration the factors
discussed above.
COST OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED FROM THE
RELATIONSHIP WITH THE FUND.
The Board members considered the cost of the services provided by GEAM and the
sub-adviser. The Board members reviewed the information they had requested from
GEAM and the sub-adviser concerning their profitability from the fees and
services they provide to the Fund and the financial condition of GEAM and the
sub-adviser for various past periods. The Board members considered the profit
margin information for GEAM's investment company business as a whole, as well as
GEAM's profitability data for the Fund. The Board members reviewed GEAM's
assumptions and the methods of cost allocation used by GEAM in preparing
Fund-specific profitability data. The Board members also discussed with GEAM the
basis for its belief that the methods of allocation used were reasonable and
consistent across its business. The Board members reviewed the assumptions and
cost allocation methods used by the sub-adviser in preparing its profitability
data.
The Board members noted and discussed the additional services provided by GEAM
to the Fund compared to other investment products managed by GEAM, and noted the
fact that GEAM, and not the Fund, pays the sub-advisory fees to the sub-adviser.
The Board members determined that GEAM and the sub-adviser should be entitled to
earn a reasonable level of profits for the services they provide to the Fund.
The Board members also recognized that GEAM had made significant investments in
its business and had not fully recovered the sums invested. Based on their
review, the Board members, including the independent members, concluded that
they were satisfied that the level of profitability achieved by GEAM and the
sub-adviser from their relationship with the Fund was not unreasonable or
excessive.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS AND
WHETHER FEE LEVELS WOULD REFLECT SUCH ECONOMIES OF SCALE.
The Board members considered the extent to which economies of scale would be
realized as the Fund grows, and whether fee levels reflect these economies of
scale for the benefit of Fund investors. The Board members considered the
substantial infrastructure investments that GEAM has made with respect to its
operations and its commitment to continue investing resources to enhance
services to Fund shareholders. The Board members recognized the benefits to the
Fund of GEAM's past investment in its operations through the expenditure of sums
to support its substantial infrastructure, and that, with respect to all GEAM
managed mutual funds, GEAM
21
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
has not yet fully recouped that investment. The Board members also recognized
the benefits to the Fund of being able to leverage a favorable cost structure
achieved with respect to the Fund's other operating expenses as a result of
GEAM's large overall base of assets under management and its vendor management
practices. The Board members reviewed the applicable advisory fee breakpoints
for the Fund and concluded that no changes were needed. The Board members
recognized the economies of scale benefits derived by the Fund as a result of
this fee structure.
COMPARISON OF SERVICES TO BE RENDERED AND FEES TO BE PAID.
The Board members discussed the services provided to the Fund by GEAM and the
sub-adviser, and the fees charged for those services. The Board members reviewed
information concerning the fee and expense ratios for the Fund, and comparative
information with respect to similar products. They discussed that the Fund's
figures were within the applicable peer group range. In addition, the Board
members considered their discussion with representatives of GEAM and the
sub-adviser about the fees being charged to the Fund and, to the extent
applicable, the effect, if any, of the Securities and Exchange Commission
staff's interpretive guidance concerning soft dollars. In light of the
foregoing, the Board members, including the independent members, determined that
the advisory fees were reasonable in relation to the services provided to the
Fund.
The Board members reviewed comparative fee information with respect to any
comparable mutual fund client accounts managed by the sub-adviser, if any, and
with respect to any other client accounts managed by the sub-adviser in a
similar style to that of the Fund. The Board members, including the independent
members, concluded that, based on this information, the sub-advisory fees were
reasonable in light of the services provided to the Fund.
FALL-OUT BENEFITS.
The Board members considered other actual and potential financial benefits that
GEAM and the sub-adviser may derive from their relationship with the Fund,
including, to the extent applicable, soft dollar commission benefits generated
through Fund portfolio transactions. The Board members noted, however, that the
Fund benefits from the vast array of resources available through GEAM, and that
the Fund represents only a small portion of the assets managed by GEAM.
CONCLUSION.
No single factor was determinative to the Board members' decision. Based on
their discussion and such other matters as were deemed relevant, the Board
members, including the independent members, concluded that the proposed advisory
fee and projected total expense ratio are reasonable in relation to the services
provided to the Fund. In view of these facts, the Board members, including the
independent members, concluded that the renewal of the advisory agreement was in
the best interests of the Fund and its shareholders, and that renewal of the
sub-advisory agreement was in the best interests of the shareholders of the
Fund.
22
<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.
23
<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 Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
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
24
<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.
25
<page>
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL 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 OPERATING OFFICER (AS OF JANUARY 31, 2008)
26
<page>
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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 FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
International Equity Fund
Annual Report
DECEMBER 31, 2007
[GE LOGO OMITTED]
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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM .............................................................. 19
TAX INFORMATION ...................................................................................................... 20
ADVISORY AND ADMINISTRATIVE AGREEMENT RENEWAL ........................................................................ 21
ADDITIONAL INFORMATION ............................................................................................... 24
INVESTMENT TEAM ...................................................................................................... 27
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance December 31, 2007
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
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(R) EAFE(R) Index) is
an unmanaged index and do not reflect the actual cost of investing in the
instruments that comprise the index. The MSCI(R) EAFE(R) Index is a market
capitalization-weighted index of equity securities of companies domiciled in
various countries. The Index is designed to represent the performance of
developed stock markets outside the U.S. and Canada and excludes certain market
segments unavailable to U.S. based investors. The results shown for the
foregoing index assume the reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer 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.
- -------------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUNDS.
1
<page>
International Equity Fund
- --------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT
INCLUDES BRIAN HOPKINSON, RALPH R. LAYMAN, PAUL NESTRO, JONATHAN L. PASSMORE,
MICHAEL J. SOLECKI AND MAKOTO SUMINO. AS LEAD PORTFOLIO MANAGER FOR THE FUND,
MR. LAYMAN (PICTURED BELOW) OVERSEES THE ENTIRE TEAM AND ASSIGNS A PORTION OF
THE FUND TO EACH MANAGER, INCLUDING HIMSELF. EACH PORTFOLIO MANAGER IS LIMITED
TO THE MANAGEMENT OF HIS OR HER PORTION OF THE FUND, THE SIZE OF THE PORTION
WHICH MR. LAYMAN DETERMINES ON AN ANNUAL BASIS. THE PORTFOLIO MANAGERS DO NOT
OPERATE INDEPENDENTLY OF EACH OTHER, RATHER, THE TEAM OPERATES COLLABORATIVELY,
COMMUNICATING PURCHASES OR SALES OF SECURITIES ON BEHALF OF THE FUND.
RALPH R. LAYMAN IS 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 INTERNATIONAL EQUITY
FUND SINCE 1997. MR. LAYMAN JOINED GE ASSET MANAGEMENT IN 1991 AS SENIOR VICE
PRESIDENT FOR INTERNATIONAL INVESTMENTS AND BECAME AN EXECUTIVE VICE PRESIDENT
IN 1992 AND PRESIDENT - INTERNATIONAL EQUITIES IN MARCH 2007.
BRIAN HOPKINSON IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A
PORTFOLIO MANAGER FOR THE FUND SINCE 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 HAS BEEN A MEMBER OF
THE PORTFOLIO MANAGEMENT TEAM FOR THE INTERNATIONAL EQUITY FUND SINCE FEBRUARY
2007. MR. NESTRO JOINED GE ASSET MANAGEMENT IN 1993 AS A PERFORMANCE AND
ATTRIBUTION ANALYST IN U.S. EQUITIES. HE BECAME A SENIOR PERFORMANCE AND
ATTRIBUTION ANALYST IN 1994 AND SINCE 1996 HAS BEEN AN ANALYST AND PORTFOLIO
MANAGER IN THE INTERNATIONAL EQUITIES GROUP.
JONATHAN L. PASSMORE IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS
SERVED AS A PORTFOLIO MANAGER OF THE INTERNATIONAL EQUITY FUND SINCE JANUARY
2002. PRIOR TO JOINING GE ASSET MANAGEMENT IN JANUARY 2001, HE WAS WITH MERRILL
LYNCH FOR SIX YEARS, MOST RECENTLY AS DIRECTOR, INTERNATIONAL EQUITY.
MICHAEL J. SOLECKI IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS
SERVED AS A PORTFOLIO MANAGER OF THE INTERNATIONAL EQUITY FUND SINCE SEPTEMBER
1997. HE JOINED GE ASSET MANAGEMENT IN 1990 AS AN INTERNATIONAL EQUITY ANALYST.
HE BECAME A VICE PRESIDENT FOR INTERNATIONAL EQUITY PORTFOLIOS IN 1996 AND
SENIOR VICE PRESIDENT IN 2000.
MAKOTO SUMINO IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A
MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE INTERNATIONAL EQUITY FUND SINCE
FEBRUARY 2007. MR. SUMINO JOINED GE ASSET MANAGEMENT IN SEPTEMBER 1996 AS A
SECURITIES ANALYST AND PORTFOLIO MANAGER. HE BECAME DEPUTY DIRECTOR OF THE
INTERNATIONAL EQUITY RESEARCH TEAM IN JANUARY 2001 AND DIRECTOR IN APRIL 2005.
Q. HOW DID THE INTERNATIONAL EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND
LIPPER PEER GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the International
Equity Fund returned 22.98%. The MSCI EAFE Index, the Fund's benchmark,
returned 11.18% and the Fund's Lipper peer group of 135 International Core
funds returned an average of 12.63% for the same period.
[PHOTO OMITTED]
2
<page>
Q&A
- --------------------------------------------------------------------------------
Q. WHAT MARKET CONDITIONS IMPACTED
FUND PERFORMANCE?
A. Strong corporate performance in revenue and cash generation and continued
productivity enhancements more than compensated for a rising input cost
environment, currency headwinds and the turmoil created by the collapse of
the sub-prime mortgage market. Market volatility at certain times of the
year was extreme and the dilemma facing central bankers torn between rising
inflation concerns and diminishing market liquidity was a constant talking
point late in the year.
Q. WHAT DOMESTIC OR WORLD EVENTS HAD A MAJOR IMPACT ON THE FINANCIAL MARKETS?
A. The developing sub-prime crisis spread throughout the financial sector as
the year progressed. Initially confined to over-zealous mortgage lenders in
the U.S., it was soon apparent that many financial institutions around the
globe would be affected. The full extent of the problem is as yet unknown
but the reduction in market liquidity plus grave concerns over the quality
of borrowers at all levels of the economy have served to tighten credit
conditions throughout the entire global system. Key, however, is the
dramatic fall in available liquidity, the fuel for asset prices in many
segments of the economy.
Q. WHICH STOCKS & SECTORS SIGNIFICANTLY AFFECTED
FUND PERFORMANCE?
A. Materials companies in the agricultural/chemicals field (Potash - Canada)
and mining industry (CVRD - Brazil; BHP Billiton - UK) were top performers
for the Fund. Other major contributions came from industrials such as
Orascom Construction (Egypt), ABB (Switzerland) and Alstom (France); energy
companies, Petrobras (Brazil) and Saipem (Italy); and telecom services
holdings Telenor (Norway) and MTN (South Africa).
However, the Fund was negatively impacted by consumer staples stocks such as
Seven and I Holdings (Japan) and the Fund's holdings in the financial sector
such as Mitsubishi UFJ and Nomura (Japan), which while modest, still had a
negative impact.
Two consistent themes here are the high growth coming from emerging markets
(influencing materials, energy and telecom) and infrastructure development
in both the developed and developing worlds (industrials).
Q. DID THE WEIGHTINGS/COUNTRY ALLOCATIONS OF THE FUND CHANGE? WHY?
A. The Fund added to its consumer staples holdings through the purchase of food
manufacturers with global operations, attractive valuations and a business
outlook that were particularly attractive in this challenging environment.
The Fund reduced its overall position in healthcare due to concerns over the
current pipeline and regulatory environments, but added to energy through
purchases of gas related companies with strong market positions while
eliminating a small oil holding in China. The Fund also reduced its position
in the financials sector via the sale of European banks exposed to the
credit crisis, and adjusted its holdings in consumer discretionary by moving
out of underperforming Japanese retail and into a broad market watch
manufacturer.
Q. WHAT WERE THE MAJOR BUYS AND SELLS FOR THE
PERIOD AND WHY?
A. The Fund made the following new additions its portfolio holdings in the last
fiscal year: Danone (France), a major food producer; Ibiden (Japan), a
manufacturer of technology for computer chips and filters for diesel
engines, two high growth areas; Novozymes (Denmark), for its important role
in enzymes and micro-organisms. The Fund also increased its position in the
following companies: Nestle, for its global superiority; Roche, as a
standout drug company in a challenged sector; Siemens, for its restructuring
and new management approach. However, the Fund eliminated the following
companies from its portfolio holdings during the last fiscal year: Credit
Suisse Group and ING Group, as they are being confronted by the credit
crisis; Novartis, Glaxo and Sanofi for their problems in the pharmaceutical
space; and Chiyoda Corp, for its inability to control costs in a buoyant
environment.
3
<page>
International Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended December
31, 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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,093.81 6.12
- ---------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,019.23 5.85
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.15% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2007 WAS: 9.38%.
4
International Equity Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
GEI MSCI EAFE
INTERNATIONAL EQUITY INDEX
12/97 $10000 $10000
12/98 11745 11999
12/99 15307 15235
12/00 13360 13077
12/01 10573 10250
12/02 8053 8616
12/03 11106 11941
12/04 12867 14359
12/05 15208 16302
12/06 18963 20596
12/07 23319 22899
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
International Equity Fund 22.98% 23.69% 8.84%
- --------------------------------------------------------------------------------
MSCI EAFE Index 11.18% 21.59% 8.64%
- --------------------------------------------------------------------------------
Lipper peer group average* 12.63% 20.64% 8.66%
- --------------------------------------------------------------------------------
Inception date 5/1/95
- --------------------------------------------------------------------------------
International Equity Fund (ending value $23,319)
MSCI EAFE (ending value $22,899)
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 EQUITY HOLDINGS
AS OF DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Telenor ASA 2.81%
- --------------------------------------------------------------------------------
Nestle S.A. (Regd.) 2.69%
- --------------------------------------------------------------------------------
Nokia OYJ 2.59%
- --------------------------------------------------------------------------------
Roche Holding AG 2.58%
- --------------------------------------------------------------------------------
BHP Billiton PLC 2.45%
- --------------------------------------------------------------------------------
Vodafone Group, PLC 2.32%
- --------------------------------------------------------------------------------
Cia Vale do Rio Doce ADR 2.17%
- --------------------------------------------------------------------------------
Siemens AG (Regd.) 2.17%
- --------------------------------------------------------------------------------
Saipem S.p.A. 2.11%
- --------------------------------------------------------------------------------
Koninklijke Philips Electronics N.V. 2.11%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
AS OF DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $83,837 (in thousands)
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
Continental Europe 49.3%
Japan 16.3%
United Kingdom 14.3%
Latin America 5.1%
Emerging Europe 3.6%
Pacific Rim 3.3%
Emerging Asia 3.1%
Canada 2.9%
United States 2.1%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE YEAR, FIVE-YEAR AND TEN-YEAR PERIODS INDICATED IN THE INTERNATIONAL
CORE PEER GROUP CONSISTING OF 135, 113 AND 46 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 December 31, 2007
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 94.8%+
- --------------------------------------------------------------------------------
AUSTRALIA -- 1.0%
Brambles Ltd. 33,688 $ 341,055
Paladin Resources Ltd. 77,707 463,286(a)
804,341
BRAZIL -- 1.4%
Petroleo Brasileiro S.A. ADR 12,256 1,179,272
CANADA -- 2.9%
Canadian National Railway Co. 15,603 737,504
Potash Corp of Saskatchewan 11,843 1,721,736
2,459,240
DENMARK -- 1.4%
Group 4 Securicor PLC 86,278 416,160
Novozymes (Series B) 6,731 768,118
1,184,278
EGYPT -- 0.8%
Orascom Construction
Industries 6,497 676,041
FINLAND -- 2.6%
Nokia OYJ 55,949 2,169,343
FRANCE -- 12.5%
Accor S.A. 3,787 302,862
Alstom 3,784 813,263
AXA S.A. 14,261 571,090
BNP Paribas 8,579 930,936(d)
Credit Agricole S.A. 14,180 478,284
Groupe Danone 17,097 1,534,796
LVMH Moet Hennessy
Louis Vuitton S.A. 3,692 446,298
Renault S.A. 2,394 339,549
Schneider Electric S.A. 2,644 358,269
Suez S.A. 11,901 810,312
Total S.A. 17,923 1,489,192
Unibail-Rodamco (REIT) 1,911 418,873
Veolia Environnement 15,248 1,392,219
Vinci S.A. 8,481 628,042
10,513,985
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
GERMANY -- 9.3%
Allianz AG (Regd.) 1,319 $ 285,313
Bayer AG 16,680 1,524,919
DaimlerChrysler AG (Regd.) 5,772 561,190
E.ON AG 7,323 1,558,773
Linde AG 8,599 1,137,153
Metro AG 6,666 559,812
RWE AG 2,498 350,611
Siemens AG (Regd.) 11,409 1,815,843
7,793,614
GREECE -- 1.2%
Hellenic Telecommunications
Organization S.A. 27,395 1,009,332
HONG KONG -- 0.9%
Esprit Holdings Ltd. 18,000 269,859
Sun Hung Kai Properties Ltd. 24,930 528,820
798,679
INDIA -- 0.7%
Larsen & Toubro Ltd. 4,715 498,236
Reliance Capital Ltd. ADR 1,702 111,715(a,b)
609,951
ITALY -- 4.9%
Banca Intesa S.p.A. 128,638 1,017,487
Saipem S.p.A. 44,062 1,767,064
UniCredito Italiano S.p.A. 163,977 1,361,738
4,146,289
JAPAN -- 16.2%
Asahi Glass Company Ltd. 43,003 577,017
Bank of Yokohama Ltd. 70,506 494,801
East Japan Railway Co. 112 924,352
Hoya Corp. 5,100 162,521
Ibiden Company Ltd. 16,599 1,151,522
Komatsu Ltd. 18,811 511,887
Mitsubishi Estate Company Ltd. 53,982 1,302,256
Mitsubishi Heavy Industries Ltd. 148,000 637,229
Mitsubishi UFJ Financial
Group, Inc. 132,464 1,241,461
Nidec Corp. 5,762 427,063
Nintendo Company Ltd. 200 119,769
Nomura Holdings, Inc. 88,599 1,502,888
Shiseido Company Ltd. 36,000 852,348
Sony Financial Holdings Inc. 163 623,023(a)
Sumitomo Realty & Development
Company Ltd. 12,000 297,006
Toray Industries Inc. 215,999 1,691,797
Toyota Motor Corp. 21,304 1,151,825
13,668,765
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
6
<page>
INTERNATIONAL EQUITY FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
MEXICO -- 1.1%
America Movil S.A. de C.V.
ADR (Series L) 14,533 $ 892,181
NETHERLANDS -- 2.1%
Koninklijke Philips
Electronics N.V. 40,890 1,764,801
NORWAY -- 4.3%
Acergy S.A. 36,393 812,665
Orkla ASA 22,735 440,686
Telenor ASA 98,501 2,353,749
3,607,100
RUSSIA -- 1.3%
Mobile Telesystems OJSC ADR 3,564 362,780
OAO Gazprom ADR 12,537 710,848
1,073,628
SINGAPORE -- 1.3%
CapitaLand Ltd. 103,000 448,651
Singapore Telecommunications Ltd. 247,314 687,246
1,135,897
SOUTH AFRICA -- 1.5%
Anglo Platinum Ltd. 2,319 342,726
MTN Group, Ltd. 50,996 955,548
1,298,274
SOUTH KOREA -- 1.5%
Kookmin Bank 2,100 154,799(a)
Kookmin Bank ADR 5,749 421,517
Samsung Electronics
Company Ltd. 200 118,797
Samsung Electronics
Company Ltd. GDR 1,815 531,341(b)
1,226,454
SPAIN -- 1.6%
ACS Actividades de Construccion
y Servicios S.A. 1,057 62,820
Banco Santander Central
Hispano S.A. (Regd.) 58,633 1,267,864
1,330,684
SWEDEN -- 0.8%
Sandvik AB 40,598$ 698,807
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SWITZERLAND -- 8.4%
ABB Ltd. (Regd.) 44,924 $ 1,294,370
Nestle S.A. (Regd.) 4,919 2,259,312(d)
Roche Holding AG 12,523 2,163,582
Swatch Group AG 1,897 571,789
Swiss Reinsurance 3,061 217,513
Syngenta AG (Regd) 2,386 608,012
7,114,578
TAIWAN -- 0.9%
Taiwan Semiconductor
Manufacturing
Company Ltd. 399,061 762,823
UNITED KINGDOM -- 14.2%
BG Group, PLC 57,114 1,307,448
BHP Billiton PLC 66,710 2,052,979(d)
British American Tobacco PLC 3,130 122,431
Diageo PLC 47,960 1,031,071
Group 4 Securicor PLC 72,323 352,357
Lloyds TSB Group, PLC 47,146 442,967
National Grid PLC 39,310 652,614
Prudential PLC 58,507 829,224
Reed Elsevier PLC 28,297 382,749
Rio Tinto PLC (Regd.) 10,534 1,114,921
Royal Bank of Scotland
Group, PLC 92,021 813,306
Tesco PLC 95,563 907,862
Vodafone Group, PLC 520,673 1,946,456
11,956,385
TOTAL COMMON STOCK
(COST $55,833,945) 79,874,742
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 2.6%
- --------------------------------------------------------------------------------
All America Latina Logistica S.A. 26,600 344,306
Cia Vale do Rio Doce ADR 64,982 1,818,196
TOTAL PREFERRED STOCK
(COST $1,019,375) 2,162,502
TOTAL INVESTMENTS IN SECURITIES
(COST $56,852,216) 82,037,244
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
7
<page>
INTERNATIONAL EQUITY FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.1%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
4.96% 1,799,754 $ 1,799,754(c,e)
(COST $1,799,754)
TOTAL INVESTMENTS
(COST $58,651,970) 83,836,998
OTHER ASSETS AND LIABILITIES,
NET-- 0.5% 435,363
-----------
NET ASSETS-- 100.0% $84,272,361
===========
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI International Equity Fund had the following short futures contracts open
at December 31, 2007
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
DJ Euro Stoxx 50
Index Futures March 2008 4 $(259,368) $(3,421)
FTSE 100 Index
Futures March 2008 1 (128,493) 896
TOPIX Index
Futures March 2008 1 (131,585) 95
-------
$(2,430)
=======
The GEI International Equity was invested in the following sectors at December
31, 2007
SECTOR PERCENTAGE (BASED ON MARKET VALUE)
- --------------------------------------------------------------------------------
Financials 18.80%
Materials 15.24%
Industrials 14.47%
Telecommunication Services 9.79%
Energy 9.22%
Consumer Staples 8.67%
Consumer Discretionary 6.91%
Information Technology 6.49%
Utilities 5.68%
Healthcare 2.58%
Short-Term 2.15%
-------
100.00%
=======
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
8
<page>
Notes to Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
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 December 31, 2007, these securities amounted to
$643,056 or 0.76% of net assets. These securities have been determined to
be liquid using procedures established by the Board of Trustees.
(c) Coupon amount represents effective yield.
(d) At December 31, 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) GE Asset Management (GEAM), the investment advisor of the Fund, also serves
as investment advisor of the GEI Short-Term Investment Fund.
+ Percentages are based on net assets as of December 31, 2007.
Abbreviations:
ADR American Depository Receipt
GDR Global Depository Receipt
REGD. Registered
REIT Real Estate Investment Trust
9
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ---------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
- ---------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- 5/1/95
Net asset value, beginning of period ................ $14.08 $11.42 $9.76 $8.52 $6.23
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................ 0.23 0.15 0.13 0.11 0.07
Net realized and unrealized
gains/(losses) on investments ................. 2.98 2.67 1.65 1.24 2.29
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ...... 3.21 2.82 1.78 1.35 2.36
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................ 0.23 0.16 0.12 0.11 0.07
Net realized gains ............................... 2.39 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................. 2.62 0.16 0.12 0.11 0.07
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ...................... $14.67 $14.08 $11.42 $9.76 $8.52
===========================================================================================================================
TOTAL RETURN (A) .................................... 22.98% 24.69% 18.19% 15.85% 37.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ......... $84,272 $80,648 $65,450 $55,714 $45,198
Ratios to average net assets:
Net investment income ......................... 1.30% 1.16% 1.19% 1.31% 1.13%
Expenses ...................................... 1.13% 1.13% 1.25% 1.15% 1.07%
Portfolio turnover rate .......................... 32% 34% 53% 38% 35%
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.
See Notes to Financial Statements.
10
<page>
Statement of Assets
and Liabilities DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL
EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $56,852,216) ......................................... $82,037,244
Short-term affiliated investments (at amortized cost) ........................................... 1,799,754
Foreign cash (cost $360,739) .................................................................... 366,494
Receivable for investments sold ................................................................. 78,108
Income receivables .............................................................................. 104,739
Receivable for fund shares sold ................................................................. 13,784
Variation margin receivable ..................................................................... 4,894
Other assets .................................................................................... 135,009
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ................................................................................ 84,540,026
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ............................................................... 111,538
Payable for fund shares redeemed ................................................................ 544
Payable to GEAM ................................................................................. 155,583
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................................................... 267,665
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ......................................................................................... $84,272,361
===========================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ................................................................................. 55,944,149
Undistributed (distribution in excess of) net investment income ................................. (27,047)
Accumulated net realized gain (loss) ............................................................ 3,163,302
Net unrealized appreciation/(depreciation) on:
Investments ................................................................................. 25,185,028
Futures ..................................................................................... (2,430)
Foreign currency related transactions ....................................................... 9,359
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ......................................................................................... $84,272,361
===========================================================================================================================
NET ASSETS ......................................................................................... 84,272,361
Shares outstanding ($0.01 par value; unlimited shares authorized) .................................. 5,746,261
Net asset value per share .......................................................................... $14.67
See Notes to Financial Statements.
11
<page>
Statement of Operations
FOR THE YEAR ENDED DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL
EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ...................................................................... $ 2,148,585
Interest* ..................................................................... 63,806
Interest from affliated investments ........................................... 75,713
Less: Foreign taxes withheld .................................................. (198,891)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME .................................................................... 2,089,213
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees .............................................. 860,294
Transfer agent ................................................................ 84
Director's fees ............................................................... 2,200
Custody and accounting expenses ............................................... 71,779
Professional fees ............................................................. 19,821
Registration expenses ......................................................... 3,682
Other expenses ................................................................ 16,730
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .................................................................. 974,590
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ........................................................... 1,114,623
===========================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ................................................................ 14,617,144
Futures .................................................................... 56,577
Foreign currency transactions .............................................. (1,821)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ................................................................ 2,247,089
Futures .................................................................... (4,631)
Foreign currency transactions .............................................. 6,310
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments ............................... 16,919,674
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................ $18,035,291
===========================================================================================================================
* Income attributable to security lending activity, net of rebate expenses
$46,403.
See Notes to Financial Statements.
12
<page>
Statements of
Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL
EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income ............................................................ $ 1,114,623 $ 847,096
Net realized gain on investments, futures and
foreign currency transactions ................................................... 14,671,900 7,318,705
Net increase in unrealized appreciation/(depreciation)
on investments, futures and foreign currency translation ........................ 2,248,768 7,918,422
- ---------------------------------------------------------------------------------------------------------------------------
Net increase from operations ...................................................... 18,035,291 16,084,223
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................................. (1,127,887) (903,051)
Net realized gains ................................................................ (11,637,475) --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................. (12,765,362) (903,051)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations .......................................... 5,269,929 15,181,172
- ---------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ...................................................... 21,702,440 18,473,402
Value of distributions reinvested ................................................. 12,765,354 903,051
Cost of shares redeemed ........................................................... (36,113,216) (19,359,985)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ................................... (1,645,422) 16,468
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS ........................................................ 3,624,507 15,197,640
NET ASSETS
Beginning of period ................................................................. 80,647,854 65,450,214
- ---------------------------------------------------------------------------------------------------------------------------
End of period ....................................................................... $ 84,272,361 $ 80,647,854
===========================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ......... $ (27,047) $ (11,962)
- ---------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ....................................................................... 1,420,389 1,476,929
Issued for distributions reinvested ............................................... 877,947 64,322
Shares redeemed ................................................................... (2,280,758) (1,544,654)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ................................................. 17,578 (3,403)
===========================================================================================================================
See Notes to Financial Statements.
13
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized costs, which approximates market
value.
All assets and liabilities of the Fund's initially expressed in foreign currency
values will be converted into U.S. dollars at the WM exchange rate computed at
11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
14
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
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 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
obectives or policies. The Fund's custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond
15
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
markets and fluctuations in currency values. Buying futures tends to increase
the Fund's exposure to the underlying instrument while selling futures tends to
decrease the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security.
The Fund records an unrealized gain or loss equal to the daily variation margin.
Should market conditions move unexpectedly, the Fund may not achieve the
anticipated benefits of the futures contracts and may incur a loss. The Fund
recognizes a realized gain or loss on the expiration or closing of a futures
contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. The Fund will not enter
into a transaction involving options for speculative purposes. The Fund's risks
in using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Options
are valued at the last sale price, or if no sales occurred on that day, at the
last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
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.
16
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 December 31, 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
- ---------------------------------------------------------------------------------------------------------------------------
$58,758,679 $26,312,238 $(1,233,919) $25,078,319
Net Tax Appreciation/ Undistributed Undistributed Post
(Depreciation) on Income/ Long-Term Gains/ October
Derivatives, Currency (Accumulated (Accumulated Losses
and Other Net Assets Ordinary Loss) Capital Loss) (see Detail Below)
- ---------------------------------------------------------------------------------------------------------------------------
$8,033 $303,774 $2,968,393 $(30,307)
As of December 31, 2007, the Fund has no capital loss carryovers. Capital loss
carryovers are available to offset future realized capital gains to the extent
provided in the Internal Revenue Code and regulations thereunder. To the extent
that these carryover losses are used to offset future capital gains, it is
probable that the gains so offset will not be distributed to shareholders
because they would be taxable as ordinary income.
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund elected to defer losses incurred after October 31, 2007 as follows:
Capital Currency
- --------------------------------------------------------------------------------
$-- $30,307
The tax composition of distributions paid during the years ended December 31,
2007 and December 31, 2006 were as follows:
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
2007 $1,502,823 $11,262,539 $12,765,362
2006 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, 2007 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated
Income Net Realized Gain
- --------------------------------------------------------------------------------
$(1,821) $1,821
17
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Expenses of the Company which are directly identifiable to the Fund are
allocated to the portfolio. Expenses which are not directly identifiable to the
Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expenses and relative size of the Fund. All
expenses of the Fund are paid by GEAM and reimbursed by the Fund.
3. LINE OF CREDIT
The Company 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.
In addition, the Company has a $100 million uncommitted, unsecured line of
credit with State Street, which was established November 7, 2007. Generally,
borrowings under the credit facilities would accrue interest at the Federal
Funds Rate plus 50 basis points and would be borne by the borrowing Fund. The
maximum amount allowed to be borrowed by any one Fund is the lesser of (i) its
prospectus limitation, or (ii) 20% of its net assets. The credit facilities were
not utilized by the Fund during the period ended December 31, 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 December 31, 2007, $1,304 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 December 31, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$26,634,101 $41,137,952
SECURITY LENDING At December 31, 2007, the Fund did not participate in
securities lending.
18
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
GE Investments Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
International Equity Fund, a series of GE Investments Funds, Inc., including the
schedule of investments, as of December 31, 2007, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2007 by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
International Equity Fund as of December 31, 2007, the results of its
operations, changes in its net assets and financial highlights for the years
described above, in conformity with U.S. generally accepted accounting
principles.
KPMG LLP
Boston, Massachusetts
February 25, 2008
19
<page>
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For the year ended December 31, 2007
SUMMARY
During the year ended December 31, 2007, the Fund paid to shareholders of record
on December 26, 2007, the following long-term capital gain dividends 2007:
FUND NAME PER SHARE AMOUNT
- ------------------------------------------------------------------------------
GE Investments Funds, Inc.-- International Equity Fund $2.31290
The following funds intend to make an election under Internal Revenue Code
Section 853. The election will allow shareholders to treat their attributable
share of foreign taxes paid by the Funds to be paid by them directly. For the
fiscal year ended December 31, 2007, the total amount of income received by the
Funds from sources within foreign countries and possessions of the United States
and the amount of taxes paid by the Funds follows:
TOTAL FOREIGN TOTAL FOREIGN
FUND NAME SOURCE INCOME TAXES PAID
- ---------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.-- International Equity Fund $2,331,460 $195,231
20
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
The Fund Board, including the independent Board members, considered and
unanimously approved the continuance of the Fund's investment advisory agreement
with GE Asset Management Incorporated ("GEAM") at meetings held on December 5
and December 12, 2007.
In considering whether to approve the Fund's investment advisory agreement, the
Board members, including the independent members, considered and discussed a
substantial amount of information and analysis provided, at the Board's request,
by GEAM. The Board members also considered detailed information regarding
performance and expenses of other investment companies, if any, with similar
investment objectives and sizes, which was prepared by an independent third
party provider, Lipper Inc. ("Lipper"). The Board members reviewed the fees
charged by GEAM for other mutual funds and investment products other than mutual
funds that employ the same investment strategy as the Fund.
Before approving the Fund's advisory agreement, the Board members reviewed the
proposed continuance of the agreement with management of GEAM and with
independent legal counsel. The Board members also reviewed a memorandum prepared
by independent legal counsel discussing the legal standards for the
consideration of the proposed continuance. The independent Board members
discussed the proposed continuance in detail during a private session with their
independent legal counsel at which no representatives of GEAM were present. The
independent Board members and their independent legal counsel requested, and
received and considered, additional information from GEAM following this
session.
In advance of the meetings, and in response to their request, the Board members
received from GEAM written responses to their inquiries, which included
substantial exhibits and other materials related to GEAM's business and the
services it provides to the Fund. The Board members took into account their
multi-year experience as Board members and particularly their consideration of
these agreements in recent years, noting that the information was presented in a
similar manner and format. To focus their review, the Board members asked GEAM
management, in its oral presentation, to highlight material differences from the
information presented in recent years. During the meetings, the Board members
had an opportunity to discuss this information with GEAM managers, including
senior executives, representatives from the legal, compliance and finance
departments, and investment personnel. The Board members posed questions to
these representatives and engaged in substantive discussions with them
concerning GEAM's investment process.
In reaching their determination relating to continuance of the agreement, the
Board members considered all factors they believed relevant, including the
factors discussed below. In their deliberations, the Board members did not
identify any particular information that was all-important or controlling, and
each Board member attributed different weights to the various factors. In
particular, the Board members focused on the following:
THE NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED.
The Board members reviewed the services provided by GEAM, and the Board members,
including the independent members, concurred that GEAM provides high quality
advisory and administrative services to the Fund.
In connection with their consideration of GEAM's services, the Board members
focused on the favorable attributes of GEAM, including (i) an investment
philosophy oriented toward long-term performance; (ii) effective processes used
for selecting investments, selecting brokers and with respect to Fund
administration, controllership and compliance activities; (iii) highly skilled
professionals, including analysts, research professionals and portfolio managers
with a depth of experience; (iv) access to significant technological resources
from which the Fund may benefit; and (v) a favorable history and reputation. The
Board members discussed with senior officers of GEAM the personnel changes made,
and proposed to be made, by GEAM. The Board members noted that the Fund
represents only a small portion of the assets managed by GEAM, but benefits from
a full array of services and resources provided by GEAM. In light of these
discussions, the Board members, including the independent members, concluded
that GEAM's services were of a high quality and had benefited the Fund.
21
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE FUND.
The Board members considered the investment performance of the Fund for various
periods. The Board members reviewed detailed comparisons of the performance of
the Fund with the relevant securities indexes and peer groupings of mutual funds
prepared by Lipper with respect to various periods. The Board members also
engaged in detailed discussions with GEAM management about the investment
process, focusing on the Fund's investment objective, the number and experience
of portfolio management and supporting research personnel, the investment style
and approach employed, are the likely market cycles for the investment style.
The Board members, including the independent members, concluded that the Fund's
performance was acceptable overall taking into consideration the factors
discussed above.
COST OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED FROM THE
RELATIONSHIP WITH THE FUND.
The Board members considered the cost of the services provided by GEAM. The
Board members reviewed the information they had requested from GEAM concerning
its profitability from the fees and services it provides to the Fund and the
financial condition of GEAM for various past periods. The Board members
considered the profit margin information for GEAM's investment company business
as a whole, as well as GEAM's profitability data for the Fund. The Board members
reviewed GEAM's assumptions and the methods of cost allocation used by GEAM in
preparing Fund-specific profitability data. The Board members also discussed
with GEAM the basis for its belief that the methods of allocation used were
reasonable and consistent across its business.
The Board members noted and discussed the additional services provided by GEAM
to the Fund compared to other investment products managed by GEAM. The Board
members determined that GEAM should be entitled to earn a reasonable level of
profits for the services it provides to the Fund. The Board members also
recognized that GEAM had made significant investments in its business and had
not fully recovered the sums invested. Based on their review, the Board members,
including the independent members, concluded that they were satisfied that the
level of profitability achieved by GEAM from its relationship with the Fund was
not unreasonable or excessive.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS AND
WHETHER FEE LEVELS WOULD REFLECT SUCH ECONOMIES OF SCALE.
The Board members considered the extent to which economies of scale would be
realized as the Fund grows, and whether fee levels reflect these economies of
scale for the benefit of Fund investors. The Board members considered the
substantial infrastructure investments that GEAM has made with respect to its
operations and its commitment to continue investing resources to enhance
services to Fund shareholders. The Board members recognized the benefits to the
Funds of GEAM's past investment in its operations through the expenditure of
sums to support its substantial infrastructure, and that, with respect to all
GEAM managed mutual funds, GEAM has not yet fully recouped that investment. The
Board members reviewed the applicable advisory fee breakpoints for the Fund and
concluded that no changes were needed. The Board members recognized the
economies of scale benefits derived by the Fund as a result of this fee
structure. The Board members also recognized the benefits to the Fund of being
able to leverage a favorable cost structure achieved with respect to the Fund's
other operating expenses as a result of GEAM's large overall base of assets
under management and its vendor management practices.
COMPARISON OF SERVICES TO BE RENDERED AND FEES TO BE PAID.
The Board members discussed the services provided to the Fund by GEAM, and the
fees charged for those services. The Board members reviewed information
concerning the fee and expense ratios for the Fund, and comparative information
with respect to similar products. They discussed that the Fund's figures were
within the applicable peer group range. In addition, the Board members
considered their discussion with representatives of GEAM about the fees being
charged to the Fund and, to the extent applicable, the effect, if any, of the
Securities and Exchange Commission staff's interpretive guidance concerning soft
dollars. In light of the foregoing, the Board members, including the independent
members, determined that the advisory fees were reasonable in relation to the
services provided to the Fund.
22
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
FALL-OUT BENEFITS.
The Board members considered other actual and potential financial benefits that
GEAM may derive from its relationship with the Fund, including, to the extent
applicable, soft dollar commission benefits generated through Fund portfolio
transactions. The Board members noted, however, that the Fund benefits from the
vast array of resources available through GEAM, and that the Fund represents
only a small portion of the assets managed by GEAM.
CONCLUSION.
No single factor was determinative to the Board members' decision. Based on
their discussion and such other matters as were deemed relevant, the Board
members, including the independent members, concluded that the proposed advisory
fee and projected total expense ratio are reasonable in relation to the services
provided to the Fund. In view of these facts, the Board members, including the
independent members, concluded that the renewal of the advisory agreement was in
the best interests of the Fund and its shareholders.
23
<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.
24
<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 Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
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
25
<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.
26
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL 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 OPERATING OFFICER (AS OF JANUARY 31, 2008)
27
[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 FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
Premier Growth Equity Fund
Annual Report
DECEMBER 31, 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM .............................................................. 17
TAX INFORMATION ...................................................................................................... 18
ADVISORY AND ADMINISTRATIVE AGREEMENT RENEWAL ........................................................................ 19
ADDITIONAL INFORMATION ............................................................................................... 22
INVESTMENT TEAM ...................................................................................................... 25
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance December 31, 2007
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
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(R) Composite Price Index of stocks (S&P 500
Index) is an unmanaged index and does not reflect the actual cost of investing
in the instruments that comprise the index. The S&P 500 Index is a market
capitalization-weighted index of stocks of 500 large U.S. companies, which is
widely used as a measure of large-cap stock market performance. The results
shown for the foregoing index assume the reinvestment of net dividends or
interest.
The peer universe of the underlying annuity funds used in our peer 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.
- --------------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUNDS.
1
<page>
Premier Growth Equity Fund
- --------------------------------------------------------------------------------
DAVID B. CARLSON IS AN EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER -
U.S. EQUITIES AT GE ASSET MANAGEMENT. HE MANAGES THE OVERALL U.S. EQUITY
INVESTMENTS FOR GE ASSET MANAGEMENT. MR. CARLSON IS PORTFOLIO MANAGER FOR THE
PREMIER GROWTH EQUITY FUND AND HAS SERVED IN THAT CAPACITY SINCE THE FUND'S
COMMENCEMENT. MR. CARLSON JOINED GE ASSET MANAGEMENT IN 1982 AS A SECURITIES
ANALYST FOR INVESTMENT OPERATIONS. HE BECAME A VICE PRESIDENT FOR MUTUAL FUND
PORTFOLIOS IN 1987, A SENIOR VICE PRESIDENT IN 1989 AND A DIRECTOR AND EXECUTIVE
VICE PRESIDENT IN 2003.
Q. HOW DID THE PREMIER GROWTH EQUITY FUND
PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE TWELVE-MONTH
PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the Premier Growth
Equity Fund returned 5.34%. The S&P 500 Index, the Fund's benchmark,
returned 5.50% and the Fund's Lipper peer group of 204 Large-Cap Growth
funds returned an average of 12.84% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED
FUND PERFORMANCE?
A. In the first half of the year, stocks rallied amid strong corporate
earnings, record M&A activity, cooling inflation worries and the absence of
Fed tightening. The market's climb was interrupted by global liquidity
concerns in February, and again in late June and July of 2007, amid a credit
crunch brought about by rising sub-prime mortgage defaults. However Fed
monetary easing propelled the markets higher, and by early October the S&P
500 reached a record high of 1,565. However, stocks pulled back sharply
during the balance of the fourth quarter, reflecting investor concerns over
the economic impact of the housing- and credit-market turmoil and
record-high oil prices. In this environment, the growth style of investing
outperformed the value style for the first time in seven years. Large caps
also outperformed small, as these higher-quality companies are perceived to
have the financial strength and scale to sustain earnings growth during a
significant economic slowdown.
Eight out of ten S&P 500 sectors had positive returns, and each of these was
in the double-digits, led by sectors tilted toward global infrastructure
investment and booming commodity prices, including energy (+35%) and
materials (+23%). Utilities (+20%) were a good place to be, and technology
(+16%) showed strength as the sector's high proportion of non-US revenues
promised some insulation from a slowing domestic economy. The two sectors
that lagged brought the index return down into the mid-single digits, as the
S&P 500 returned +5.5% for the year. Financials (-19%) lagged the most,
facing credit cycle headwinds. Consumer discretionary (-13%) also
underperformed the broad market as the possibility of recession loomed.
Q. WHAT WERE THE PRIMARY DRIVERS OF
FUND PERFORMANCE?
A. This year the Fund benefited tremendously from its underweight in financials
and strong stock selection, such as overweighting outperforming companies,
I.E. global insurer AFLAC (+38%). The Fund sidestepped the
[PHOTO OMITTED]
2
<page>
Q&A
- --------------------------------------------------------------------------------
worst of the housing- and credit market turmoil by emphasizing companies
that derive the majority of their revenues from fee-based activities, such
as global custodian State Street (+22%). While global commercial real estate
broker and leasing agent CB Richard Ellis (-35%) suffered amid receding
liquidity, the Fund's positioning and strong stock selection within
financials more than offset any drag from this name.
In addition, our underweight and strong stock selection within financials,
key holdings leveraged to the strong growth in developing countries around
the globe also bolstered Fund returns. These outperforming stock selections
included agricultural bioengineering company Monsanto (+115%), and global
oil services giants Transocean (+67%) and Schlumberger (+57%). Several media
holdings also boosted returns, including Liberty Global (+30.7%) and Liberty
Capital (+18.9%), as did the Fund's sole consumer staple holding, PepsiCo,
which rallied +21% since its addition to the Fund this year.
In terms of negative contributions, Amgen (-32%) hurt the most within
healthcare, as it suffered amid safety concerns regarding its anemia drugs,
and increased FDA scrutiny. Although we are constructive on Amgen's
long-term product pipeline, over the course of the year we reduced our
weighting in the company to reflect its changing risk profile. Zimmer
(-16%), Lincare (-12%) and Medtronic (-5%) also detracted from healthcare
performance. In technology, positive contributions from Iron Mountain (+30%
since its addition) and Microsoft (+21%) were offset by moderate pullbacks
in Molex (-4%), Yahoo! (-9%) and Paychex (-6%). However, we believed the
fundamentals remained in tact and maintained conviction in each of our tech
company's long-term growth prospects. In addition, underweighting high
momentum, high-P/E tech names like Apple (+134%) and Google (+50%) also
weighed on the year's returns. Finally, we have underweighted industrials
companies as they generally lack the long-term double-digit growth the
Premier Growth strategy seeks; however industrials within the S&P 500 had
risen +12% this year, curtailing relative performance.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. There were no significant changes in the Fund during the period. We had a
swap in the retail sector from Home Depot to Lowes and reduced our
overweight in this sector. We initiated positions in PepsiCo, American
Tower, Iron Mountain, Goldman Sachs and Research in Motion and eliminated
Liberty Media/Interactive, Fannie Mae, First Data and Linear Technology in
addition to Home Depot. We also eliminated student lender, Sallie Mae, after
a +40% rally on a buyout bid. We increased our exposure to technology as an
area we believe can grow through the U.S. economic slowdown. Technology
stocks make up about 35% of the portfolio, with consumer discretionary and
healthcare at about 15% 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
<page>
Premier Growth Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended December
31, 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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 995.80 3.63
- ------------------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,021.35 3.67
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.72% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2007 WAS: (0.42)%.
4
Premier Growth Equity Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
GEI PREMIER S&P 500
GROWTH EQUITY INDEX
12/97 $10,000 $10,000
12/98 13,653 12,870
12/99 18,604 15,581
12/00 17,631 14,150
12/01 16,020 12,465
12/02 12,653 9,710
12/03 16,312 12,499
12/04 17,459 13,859
12/05 17,684 14,541
12/06 19,288 16,837
12/07 20,317 17,763
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Premier Growth Equity Fund 5.34% 9.93% 7.35%
- --------------------------------------------------------------------------------
S&P 500 Index 5.50% 12.84% 5.91%
- --------------------------------------------------------------------------------
Lipper peer group average* 12.84% 12.34% 5.22%
- --------------------------------------------------------------------------------
Inception date 12/12/97
- --------------------------------------------------------------------------------
Premier Growth Equity Fund (ending value $20,317)
S&P 500 Index (ending value $17,763)
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 DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Monsanto Co. 4.02%
- --------------------------------------------------------------------------------
Transocean, Inc. 4.01%
- --------------------------------------------------------------------------------
Western Union Co. 3.96%
- --------------------------------------------------------------------------------
State Street Corp. 3.89%
- --------------------------------------------------------------------------------
AFLAC Incorporated 3.86%
- --------------------------------------------------------------------------------
Microsoft Corp. 3.81%
- --------------------------------------------------------------------------------
Dover Corp. 3.78%
- --------------------------------------------------------------------------------
Schlumberger Ltd. 3.70%
- --------------------------------------------------------------------------------
UnitedHealth Group, Inc. 3.69%
- --------------------------------------------------------------------------------
Intuit Inc. 3.57%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
AS OF DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $95,162 (in thousands)
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
Information Technology 35.4%
Consumer Discretionary 16.5%
Healthcare 14.1%
Financials 10.8%
Energy 7.7%
Materials 4.0%
Industrials 3.8%
Consumer Staples 3.5%
Short-Term 2.4%
Telecommunication Services 1.8%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE YEAR, FIVE-YEAR AND TEN-YEAR PERIODS INDICATED IN THE LARGE-CAP GROWTH
FUNDS PEER GROUP CONSISTING OF 204, 165 AND 54 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 December 31, 2007
- --------------------------------------------------------------------------------
PREMIER GROWTH EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.0%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 16.5%
Bed Bath & Beyond, Inc. 82,437 $ 2,422,823(a)
Carnival Corp. 72,675 3,233,311
Comcast Corp. (Class A) 127,996 2,319,278(a)
Liberty Global, Inc. (Series C) 74,627 2,730,602(a)
Liberty Media Holding Corp -
Capital (Series A) 28,853 3,361,086(a)
Lowe's Companies, Inc. 70,506 1,594,846
15,661,946
CONSUMER STAPLES -- 3.6%
PepsiCo, Inc. 44,473 3,375,501
ENERGY -- 7.8%
Schlumberger Ltd. 35,795 3,521,154
Transocean, Inc. 26,684 3,819,815
7,340,969
FINANCIALS -- 10.8%
AFLAC Incorporated 58,574 3,668,490
CB Richard Ellis Group, Inc.
(Class A) 84,607 1,823,281(a)
Goldman Sachs Group, Inc. 4,990 1,073,100
State Street Corp. 45,557 3,699,228(c)
10,264,099
HEALTHCARE -- 14.1%
Amgen, Inc. 44,473 2,065,326(a)
Johnson & Johnson 30,372 2,025,812
Lincare Holdings Inc. 52,066 1,830,641(a)
Medtronic Inc. 49,896 2,508,272
UnitedHealth Group, Inc. 60,309 3,509,984
Zimmer Holdings, Inc. 21,694 1,435,058(a)
13,375,093
INDUSTRIALS -- 3.8%
Dover Corp. 78,099 3,599,583
INFORMATION TECHNOLOGY -- 35.5%
Analog Devices, Inc. 54,235 1,719,250
Cisco Systems, Inc. 121,487 3,288,653(a,d)
Corning Incorporated 77,013 1,847,542
eBay, Inc. 74,844 2,484,072(a)
Intuit Inc. 107,385 3,394,440(a,d)
Iron Mountain Incorporated 33,409 1,236,801(a)
Microsoft Corp. 101,962 3,629,847
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Molex, Inc. (Class A) 88,295 $ 2,319,510(d)
Paychex, Inc. 81,787 2,962,325
QUALCOMM, Inc. 85,691 3,371,941
Research In Motion Ltd. 8,895 1,008,693(a)
Western Union Co. 155,112 3,766,119
Yahoo! Inc. 112,809 2,623,937(a)
33,653,130
MATERIALS -- 4.1%
Monsanto Co. 34,276 3,828,286
TELECOMMUNICATION SERVICES -- 1.8%
American Tower Corp. (Class A) 40,568 1,728,197(a)
TOTAL INVESTMENTS IN SECURITIES
(COST $80,653,163) 92,826,804
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.5%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
4.96% 2,334,724 2,334,724(b,e)
(COST $2,334,724)
TOTAL INVESTMENTS
(COST $82,987,887) 95,161,528
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (0.5)% (441,085)
-----------
NET ASSETS-- 100.0% $94,720,443
===========
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Premier Growth Equity had the following long futures contracts open at
December 31, 2007:
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE APPRECIATION
- --------------------------------------------------------------------------------
S&P 500
Index March 2008 1 $369,300 $3,287
See Notes to Schedule of Investments on page 7 and Notes to Financial
Statements.
6
<page>
Notes to Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
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 December 31, 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) GE Asset Management (GEAM), the investment advisor of the Fund, also serves
as investment advisor of the GEI Short-Term Investment Fund.
+ Percentages are based on net assets as of December 31, 2007.
7
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
PREMIER GROWTH EQUITY FUND
12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
- ------------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- 12/12/97
Net asset value, beginning of period ............................ $82.17 $75.65 $74.95 $70.46 $54.74
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ........................................ 0.23 0.35 0.24 0.47 0.11
Net realized and unrealized
gains/(losses) on investments ............................. 4.19 6.51 0.73 4.48 15.72
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS .................. 4.42 6.86 0.97 4.95 15.83
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................................ 0.23 0.34 0.27 0.46 0.11
Net realized gains ........................................... 7.41 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................................. 7.64 0.34 0.27 0.46 0.11
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD .................................. $78.95 $82.17 $75.65 $74.95 $70.46
====================================================================================================================================
TOTAL RETURN (A) ................................................ 5.34% 9.07% 1.29% 7.03% 28.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ..................... $94,720 $110,538 $126,682 $137,801 $143,202
Ratios to average net assets:
Net investment income ..................................... 0.24% 0.41% 0.30% 0.62% 0.20%
Expenses .................................................. 0.72% 0.71% 0.71% 0.71% 0.70%
Portfolio turnover rate ...................................... 29% 27% 34% 22% 24%
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.
See Notes to Financial Statements.
8
<page>
Statement of Assets
and Liabilities DECEMBER 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
PREMIER
GROWTH
EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $80,653,163) ........................................ $92,826,804
Short-term affiliated investments (at amortized cost) .......................................... 2,334,724
Income receivables ............................................................................. 61,894
Receivable for fund shares sold ................................................................ 499
Other assets ................................................................................... 49
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................................................................... 95,223,970
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed ............................................................... 391,595
Payable to GEAM ................................................................................ 109,857
Variation margin payable ....................................................................... 2,075
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES .......................................................................... 503,527
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................................................................ $94,720,443
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ................................................................................ 82,525,018
Undistributed (distribution in excess of) net investment income ................................ 11,369
Accumulated net realized gain (loss) ........................................................... 7,128
Net unrealized appreciation/(depreciation) on:
Investments ................................................................................ 12,173,641
Futures .................................................................................... 3,287
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................................................................ $94,720,443
====================================================================================================================================
NET ASSETS ........................................................................................ 94,720,443
Shares outstanding ($0.01 par value; unlimited shares authorized) ................................. 1,199,725
Net asset value per share ......................................................................... $78.95
See Notes to Financial Statements.
9
<page>
Statement of Operations
FOR THE YEAR ENDED DECEMBER 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
PREMIER
GROWTH
EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend .......................................................................... $ 851,961
Interest* ......................................................................... 54,653
Interest from affiliated investments .............................................. 95,902
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ........................................................................ 1,002,516
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees .................................................. 681,231
Transfer agent .................................................................... 105
Director's fees ................................................................... 2,666
Custody and accounting expenses ................................................... 35,733
Professional fees ................................................................. 20,125
Registration expenses ............................................................. 4,336
Other expenses .................................................................... 8,559
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ...................................................................... 752,755
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ............................................................... 249,761
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments .................................................................... 10,438,283
Futures ........................................................................ 50,224
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments .................................................................... (5,070,960)
Futures ........................................................................ 3,250
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments ................................... 5,420,797
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ $ 5,670,558
====================================================================================================================================
* Income attributable to security lending activity, net of rebate expenses
$4,172.
See Notes to Financial Statements.
10
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
PREMIER
GROWTH
EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income ........................................................... $ 249,761 $ 478,425
Net realized gain on investments, futures, written options,
foreign currency transactions and swaps ........................................ 10,488,507 6,381,334
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation ......... (5,067,710) 2,887,353
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase from operations ..................................................... 5,670,558 9,747,112
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................................ (256,356) (460,461)
Net realized gains ............................................................... (8,134,986) --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................ (8,391,342) (460,461)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations .............................. (2,720,784) 9,286,651
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ..................................................... 1,994,787 2,711,181
Value of distributions reinvested ................................................ 8,391,337 460,457
Cost of shares redeemed .......................................................... (23,483,075) (28,602,300)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease from share transactions ............................................. (13,096,951) (25,430,662)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................ (15,817,735) (16,144,011)
NET ASSETS
Beginning of period ................................................................ 110,538,178 126,682,189
- ------------------------------------------------------------------------------------------------------------------------------------
End of period ...................................................................... $ 94,720,443 $110,538,178
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ........ $ 11,369 $ 17,964
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ...................................................................... 23,508 34,867
Issued for distributions reinvested .............................................. 105,818 5,588
Shares redeemed .................................................................. (274,777) (369,756)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in fund shares ........................................................... (145,451) (329,301)
====================================================================================================================================
See Notes to Financial Statements.
11
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTION
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized costs, which approximates market
value.
All assets and liabilities of the Fund's initially expressed in foreign currency
values will be converted into U.S. dollars at the WM exchange rate computed at
11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would
12
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
be applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
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 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 custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
13
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund 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 December 31, 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
- ------------------------------------------------------------------------------------------------------------------------------------
$84,373,661 $16,681,012 $(5,893,145) $10,787,867
14
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
Net Tax Appreciation/ Undistributed Undistributed
(Depreciation) on Income/ Long-Term Gains/ Post
Derivatives, Currency (Accumulated (Accumulated October
and Other Net Assets Ordinary Loss) Capital Loss) Losses
- ------------------------------------------------------------------------------------------------------------------------------------
$-- $60,130 $1,347,428 $--
As of December 31, 2007, the Fund has no capital loss carryovers as indicated
below. Capital loss carryovers are available to offset future realized capital
gains to the extent provided in the Internal Revenue Code and regulations
thereunder. To the extent that these carryover losses are used to offset future
capital gains, it is probable that the gains so offset will not be distributed
to shareholders because they would be taxable as ordinary income.
Any net capital and currency losses incurred after October 31, within the Fund's
tax year, are deemed to arise on the first day of the Fund's next tax year if
the Fund so elects to defer such losses.
The Fund incurred no such losses after October 31, 2007.
The tax composition of distributions paid during the years ended December 31,
2007 and December 31, 2006 were as follows:
Ordinary Long-Term
Income Capital Gains Total
- --------------------------------------------------------------------------------
2007 $477,858 $7,913,484 $8,391,342
2006 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 returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Expenses of the Company which are directly identifiable to the Fund are
allocated to the portfolio. Expenses which are not directly identifiable to the
Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expenses and relative size of the Fund. All
expenses of the Fund are paid by GEAM and reimbursed by the Fund.
3. LINE OF CREDIT
The Company 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. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established November 7, 2007. Generally, borrowings under the
credit facilities would accrue interest at the Federal Funds Rate plus 50 basis
points and would be borne by the borrowing Fund. The maximum amount allowed to
be
15
<page>
Notes to Financial Statements December 31, 2007
- -------------------------------------------------------------------------------
borrowed by any one Fund is the lesser of (i) its prospectus limitation or (ii)
20% of its net assets. The credit facilities was not utilized by the Fund during
the period ended December 31, 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 December 31, 2007, $1,625 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 December 31, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$29,305,958 $49,906,748
SECURITY LENDING At December 31, 2007, the Fund did not participate in
securities lending.
16
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
GE Investments Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Premier Growth Equity Fund, a series of GE Investments Funds, Inc., including
the schedule of investments, as of December 31, 2007, and the related statement
of operations for the year then ended, the statements of changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2007 by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Premier Growth Equity Fund as of December 31, 2007, the results of its
operations, changes in its net assets and financial highlights for the years
described above, in conformity with U.S. generally accepted accounting
principles.
KPMG LLP
Boston, Massachusetts
February 25, 2008
17
<page>
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For the year ended December 31, 2007
SUMMARY
During the year ended December 31, 2007, the Fund paid to shareholders of record
on December 26, 2007, the following long-term capital gain dividends 2007:
FUND NAME PER SHARE AMOUNT
- --------------------------------------------------------------------------------
GE Investments Funds, Inc.-- Premier Growth Equity Fund $7.20347
18
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
The Fund Board, including the independent Board members, considered and
unanimously approved the continuance of the Fund's investment advisory agreement
with GE Asset Management Incorporated ("GEAM") at meetings held on December 5
and December 12, 2007.
In considering whether to approve the Fund's investment advisory agreement, the
Board members, including the independent members, considered and discussed a
substantial amount of information and analysis provided, at the Board's request,
by GEAM. The Board members also considered detailed information regarding
performance and expenses of other investment companies, including those with
similar investment objectives and sizes, which was prepared by an independent
third party provider, Lipper Inc. ("Lipper"). The Board members reviewed the
fees charged by GEAM for other mutual funds and investment products other than
mutual funds that employ the same investment strategy as the Fund.
Before approving the Fund's advisory agreement, the Board members reviewed the
proposed continuance of the agreement with management of GEAM and with
independent legal counsel. The Board members also reviewed a memorandum prepared
by independent legal counsel discussing the legal standards for the
consideration of the proposed continuance. The independent Board members
discussed the proposed continuance in detail during a private session with their
independent legal counsel at which no representatives of GEAM were present. The
independent Board members and their independent legal counsel requested, and
received and considered, additional information from GEAM following this
session.
In advance of the meetings, and in response to their request, the Board members
received from GEAM written responses to their inquiries, which included
substantial exhibits and other materials related to GEAM's business and the
services it provides to the Fund. The Board members took into account their
multi-year experience as Board members and particularly their consideration of
these agreements in recent years, noting that the information was presented in a
similar manner and format. To focus their review, the Board members asked GEAM
management, in its oral presentation, to highlight material differences from the
information presented in recent years. During the meetings, the Board members
had an opportunity to discuss this information with GEAM managers, including
senior executives, representatives from the legal, compliance and finance
departments, and investment personnel. The Board members posed questions to
these representatives and engaged in substantive discussions with them
concerning GEAM's investment process.
In reaching their determination relating to continuance of the agreement, the
Board members considered all factors they believed relevant, including the
factors discussed below. In their deliberations, the Board members did not
identify any particular information that was all-important or controlling, and
each Board member attributed different weights to the various factors. In
particular, the Board members focused on the following:
THE NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED.
The Board members reviewed the services provided by GEAM, and the Board members,
including the independent members, concurred that GEAM provides high quality
advisory and administrative services to the Fund.
In connection with their consideration of GEAM's services, the Board members
focused on the favorable attributes of GEAM, including (i) an investment
philosophy oriented toward long-term performance; (ii) effective processes used
for selecting investments, selecting brokers and with respect to Fund
administration, controllership and compliance activities; (iii) highly skilled
professionals, including analysts, research professionals and portfolio managers
with a depth of experience; (iv) access to significant technological resources
from which the Fund may benefit; and (v) a favorable history and reputation. The
Board members discussed with senior officers of GEAM the personnel changes made,
and proposed to be made, by GEAM. The Board members noted that the Fund
represents only a small portion of the assets managed by GEAM, but benefits from
a full array of services and resources provided by GEAM. In light of these
discussions, the Board members, including the independent members, concluded
that GEAM's services were of a high quality and had benefited the Fund.
19
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE FUND.
The Board members considered the investment performance of the Fund for various
periods. The Board members reviewed detailed comparisons of the performance of
the Fund with the relevant securities indexes and peer groupings of mutual funds
prepared by Lipper with respect to various periods. The Board members also
engaged in detailed discussions with GEAM management about the investment
process, focusing on the Fund's investment objective, the number and experience
of portfolio management and supporting research personnel, the investment style
and approach employed, the likely market cycles for the investment style, and
the relative underperformance of the Fund in certain periods in light of GEAM's
commitment to long-term satisfactory performance with respect to the Fund's
investment objective and investment approach. The Board members, including the
independent members, concluded that the Fund's performance was acceptable
overall taking into consideration the factors discussed above.
COST OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED FROM THE
RELATIONSHIP WITH THE FUND.
The Board members considered the cost of the services provided by GEAM. The
Board members reviewed the information they had requested from GEAM concerning
its profitability from the fees and services it provides to the Fund and the
financial condition of GEAM for various past periods. The Board members
considered the profit margin information for GEAM's investment company business
as a whole, as well as GEAM's profitability data for the Fund. The Board members
reviewed GEAM's assumptions and the methods of cost allocation used by GEAM in
preparing Fund-specific profitability data. The Board members also discussed
with GEAM the basis for its belief that the methods of allocation used were
reasonable and consistent across its business.
The Board members noted and discussed the additional services provided by GEAM
to the Fund compared to other investment products managed by GEAM. The Board
members determined that GEAM should be entitled to earn a reasonable level of
profits for the services it provides to the Fund. The Board members also
recognized that GEAM had made significant investments in its business and had
not fully recovered the sums invested. Based on their review, the Board members,
including the independent members, concluded that they were satisfied that the
level of profitability achieved by GEAM from its relationship with the Fund was
not unreasonable or excessive.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS AND
WHETHER FEE LEVELS WOULD REFLECT SUCH ECONOMIES OF SCALE.
The Board members considered the extent to which economies of scale would be
realized as the Fund grows, and whether fee levels reflect these economies of
scale for the benefit of Fund investors. The Board members considered the
substantial infrastructure investments that GEAM has made with respect to its
operations and its commitment to continue investing resources to enhance
services to Fund shareholders. The Board members recognized the benefits to the
Fund of GEAM's past investment in its operations through the expenditure of sums
to support its substantial infrastructure, and that, with respect to all GEAM
managed mutual funds, GEAM has not yet fully recouped that investment. The Board
members also recognized the benefits to the Fund of being able to leverage a
favorable cost structure achieved with respect to the Fund's other operating
expenses as a result of GEAM's large overall base of assets under management and
its vendor management practices.
COMPARISON OF SERVICES TO BE RENDERED AND FEES TO BE PAID.
The Board members discussed the services provided to the Fund by GEAM, and the
fees charged for those services. The Board members reviewed information
concerning the fee and expense ratios for the Fund, and comparative information
with respect to similar products. They discussed that the Fund's figures were
within the applicable peer group range. In addition, the Board members
considered their discussion with representatives of GEAM about the fees being
charged to the Fund and, to the extent applicable, the effect, if any, of the
Securities and Exchange Commission staff's interpretive guidance concerning soft
dollars. In light of the foregoing, the Board members, including the independent
members, determined that the advisory fees were reasonable in relation to the
services provided to the Fund.
20
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
FALL-OUT BENEFITS.
The Board members considered other actual and potential financial benefits that
GEAM may derive from its relationship with the Fund, including, to the extent
applicable, soft dollar commission benefits generated through Fund portfolio
transactions. The Board members noted, however, that the Fund benefits from the
vast array of resources available through GEAM, and that the Fund represents
only a small portion of the assets managed by GEAM.
CONCLUSION.
No single factor was determinative to the Board members' decision. Based on
their discussion and such other matters as were deemed relevant, the Board
members, including the independent members, concluded that the proposed advisory
fee and projected total expense ratio are reasonable in relation to the services
provided to the Fund. In view of these facts, the Board members, including the
independent members, concluded that the renewal of the advisory agreement was in
the best interests of the Fund and its shareholders.
21
<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.
22
<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 Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
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
23
<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.
24
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL 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 OPERATING OFFICER (AS OF JANUARY 31, 2008)
25
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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 FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
Money Market Fund
Annual Report
DECEMBER 31, 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 ..................................................................................... 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM .............................................................. 17
ADVISORY AND ADMINISTRATIVE AGREEMENT RENEWAL ........................................................................ 18
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 December 31, 2007
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
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.
- --------------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUNDS.
1
<page>
Money Market Fund
- --------------------------------------------------------------------------------
THE MONEY MARKET FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES
JAMES C. GANNON, WILLIAM M. HEALEY AND ANDREW A. MASELLI. AS LEAD PORTFOLIO
MANAGER FOR THE MONEY MARKET FUND, MR. HEALEY (PICTURED BELOW) HAS OVERSIGHT
RESPONSIBILITIES OVER THE FUND.
WILLIAM M. HEALEY IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS
SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE MONEY MARKET FUND SINCE JANUARY
1, 2008, AND 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.
ANDREW A. MASELLI IS AN ASSISTANT PORTFOLIO MANAGER OF GE ASSET MANAGEMENT. HE
HAS SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE MONEY MARKET FUND SINCE
APRIL 2003. MR. MASELLI JOINED GE ASSET MANAGEMENT IN 1998 AS A DATA INTEGRITY
ANALYST IN TRADE OPERATIONS, WHERE HE HELD VARIOUS POSITIONS BOTH IN EQUITIES
AND FIXED INCOME SUPPORT. IN 2002, HE WAS PROMOTED TO SENIOR TRADE SUPPORT
SPECIALIST WORKING ON THE SHORT-TERM DESK AND BECAME AN ASSISTANT PORTFOLIO
MANAGER IN JUNE 2005.
JAMES C. GANNON IS AN ASSISTANT PORTFOLIO MANAGER OF GE ASSET MANAGEMENT. HE HAS
SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE MONEY MARKET FUND SINCE DECEMBER
2000. SINCE JOINING GE ASSET MANAGEMENT IN 1995, MR. GANNON SERVED IN VARIOUS
POSITIONS AT GE ASSET MANAGEMENT INCLUDING TRADE OPERATIONS SPECIALIST IN FIXED
INCOME, AND BECAME AN ASSISTANT PORTFOLIO MANAGER IN FEBRUARY 2003.
Q. HOW DID THE MONEY MARKET FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the Money Market Fund
returned 4.92%. The 90-day Treasury Bill, the Fund's benchmark, returned
4.46% and the Fund's Lipper peer group of 107 Money Market funds returned an
average of 4.78% for the same period.
Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE TWELVE-MONTH PERIOD
ENDING DECEMBER 31, 2007.
A. The U.S. economy will most likely post a GDP growth of approximately 2% in
2007, held back by recessionary conditions in the housing market. Rising
delinquencies and defaults in sub-prime mortgage loans resulted in large
pricing dislocations of securities backed by these loan types. In the
fallout, Wall Street broker/dealers were forced in the third and fourth
quarters to take write-downs in the billions from owning such securities as
well as structured vehicles backed by these security types. Investor's lack
of confidence in valuations of sub-prime mortgages spread to all risky
assets, significantly widening yield spreads in high grade and high yield
credit and emerging market debt. A flight to the safety of U.S. treasuries
pushed interest rates down, which generated a 9% total return for the
treasury sector.
[PHOTO OMITTED]
2
<page>
Q&A
- --------------------------------------------------------------------------------
By year-end, 2 and 10-year note yields had fallen by 176 and 68 bps to
finish at 3.05% and 4.02% respectively. All other U.S. fixed income sectors
posted positive returns for the year, but less than that of treasuries. The
Fed responded to the housing recession/sub-prime crisis by reducing the fed
funds target by 100 basis points to 4.25% starting in September, while also
injecting reserves into the financial system to provide liquidity to banks
unwilling to lend to each other. At the December meeting, the FOMC stated
"the upside risks to inflation roughly balance the downside risks to
growth". However, market pricing at year-end indicated further rate cuts
in 2008.
Q. WHAT WERE THE PRIMARY DRIVERS OF
FUND PERFORMANCE?
A. The primary driver behind Fund performance was the positioning of the
portfolios average maturity during the year to take advantage of the
changing yields at the short end of the yield curve. As the Federal Reserve
began lowering the fed funds target, the average maturity of the Fund was
lengthened to take advantage of declining yields.
3
<page>
Money Market Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended December
31, 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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,024.26 2.40
- ---------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,022.59 2.40
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.47% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2007 WAS: 2.43%.
4
<page>
Money Market Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
GEI MONEY MARKET 90 DAY T-BILL
12/97 $10000 $10000
12/98 10526 10490
12/99 11053 10991
12/00 11742 11651
12/01 12210 12054
12/02 12391 12251
12/03 12488 12377
12/04 12606 12550
12/05 12958 12953
12/06 13560 13579
12/07 14228 14185
Money Market Fund (ending value $14,228)
90-Day T-Bill (ending value $14,185)
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 DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Money Market Fund 4.92% 2.80% 3.59%
- --------------------------------------------------------------------------------
90 Day T-Bill 4.46% 2.98% 3.56%
- --------------------------------------------------------------------------------
Lipper peer group average* 4.78% 2.67% 3.46%
- --------------------------------------------------------------------------------
Inception date 7/1/85
- --------------------------------------------------------------------------------
FUND YIELD AT DECEMBER 31, 2007
- --------------------------------------------------------------------------------
FUND IBC'S MONEY FUND**
- --------------------------------------------------------------------------------
7-DAY CURRENT 4.46%+ 3.99%
- --------------------------------------------------------------------------------
7-DAY EFFECTIVE 4.56% 4.07%
- --------------------------------------------------------------------------------
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 DECEMBER 31, 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 ONE YEAR, FIVE-YEAR AND TEN-YEAR PERIODS INDICATED IN THE MONEY MARKET
FUNDS PEER GROUP CONSISTING OF 107, 94 AND 66 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
<page>
MONEY MARKET FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
MONEY MARKET FUND
Portfolio Composition based on a Market Value of $340,047
(in thousands) as of December 31, 2007
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
Certificates of Deposit 54.1%
U.S. Governments 14.6%
Commercial Paper 13.7%
Corporate Notes 9.7%
Repurchase Agreements 4.8%
Time Deposit 3.1%
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 99.8%+
- --------------------------------------------------------------------------------
U.S. GOVERNMENTS -- 14.6%
U.S. AGENCIES
Federal Home Loan
Bank Discount Notes
4.39% 02/15/08 $16,960,000 $ 16,867,992(a)
Federal Home Loan
Mortgage Corp.
Discount Notes
4.05% 01/08/08 15,930,000 15,916,712(a)
Federal National
Mortgage Assoc.
Discount Notes
4.24% 03/31/08 17,000,000 16,822,350(a)
49,607,054
COMMERCIAL PAPER -- 13.7%
Bank of America Corp.
4.87% 04/15/08 17,460,000 17,212,250
ING Group.
5.14% 01/04/08 7,000,000 6,997,002
5.45% 01/07/08 9,880,000 9,871,025
JP Morgan
4.95% 04/01/08 12,680,000 12,521,341
46,601,618
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 4.7%
Barclays Bank
4.75% dated 12/31/07, to be
repurchased at $5,401,425 on
01/02/08 collateralized by
$5,511,998 U.S. Government
Agency Bonds, 6.00%, maturing
01/12/22 and 06/29/22 $ 5,400,000 $ 5,400,000
Deutsche Bank
4.75% dated 12/31/07, to be
repurchased at $10,802,850
on 01/02/08 collateralized by
$11,016,001 U.S. Government
Agency Bonds, 5.00% and
6.50%, maturing 01/01/36
and 09/01/37 10,800,000 10,800,000
16,200,000
CORPORATE NOTES -- 9.7%
American Express Credit Corp.
5.35% 03/05/08 6,940,000 6,940,451(c)
Merrill Lynch & Company, Inc.
4.98% 08/22/08 15,000,000 15,000,000(c)
Morgan Stanley Group Inc.
5.35% 02/02/09 11,130,000 11,130,000(c)
33,070,451
TIME DEPOSIT -- 3.1%
Royal Bank of Canada
4.25% 01/02/08 3,000,000 3,000,000
State Street Corp.
3.75% 01/02/08 7,607,598 7,607,598(b)
10,607,598
CERTIFICATES OF DEPOSIT -- 54.0%
Bank of Montreal
5.20% 06/06/08 14,000,000 14,000,000
Barclays Bank PLC
5.25% 03/03/08 16,750,000 16,750,000
BNP Paribas
4.68% 04/28/08 10,530,000 10,530,000
Calyon
5.33% 01/15/08 15,000,000 15,000,000
Canadian Imperial Bank
4.90% 10/22/08 10,580,000 10,580,000(c)
5.15% 01/31/08 7,000,000 7,000,000
Citibank
4.68% 04/24/08 6,580,000 6,580,000
4.90% 01/24/08 6,580,000 6,580,000
Credit Suisse
5.20% 04/14/08 15,430,000 15,430,000
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
<page>
MONEY MARKET FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
Deutsche Bank
4.70% 02/04/08 $13,000,000 $ 13,000,000
Dexia Credit
4.83% 02/08/08 12,000,000 12,000,000
Dresdner Bank AG
5.30% 01/10/08 4,560,000 4,560,000
Fortis Bank
4.77% 01/31/08 12,940,000 12,940,000
Rabobank Nederland
4.50% 05/09/08 5,740,000 5,740,000
4.59% 04/09/08 5,740,000 5,740,000
Societe Generale
5.20% 02/04/08 2,770,000 2,770,000
5.38% 03/27/08 13,000,000 13,000,000
Toronto-Dominion
4.70% 05/13/08 5,880,000 5,880,000
4.80% 03/13/08 5,880,000 5,880,000
183,960,000
TOTAL SHORT-TERM INVESTMENTS
(COST $340,046,721) 340,046,721
OTHER ASSETS AND LIABILITIES,
NET-- 0.2% 643,695
------------
NET ASSETS-- 100.0% $340,690,416
============
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
<page>
Notes to Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
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) Coupon amount represents effective yield.
(b) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(c) Variable or floating rate security. The stated rate represents the rate at
December 31, 2007.
+ Percentages are based on net assets as of December 31, 2007.
8
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ---------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND
12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
- ---------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE ..................................... -- -- -- -- 7/1/85
Net asset value, beginning of period ............... $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.05 0.05 0.03 0.01 0.01
Net realized and unrealized
gains on investments ......................... -- -- -- -- 0.00(b)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS ............ 0.05 0.05 0.03 0.01 0.01
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................... 0.05 0.05 0.03 0.01 0.01
Return of capital ............................... -- -- 0.00(b) -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................ 0.05 0.05 0.03 0.01 0.01
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ..................... $1.00 $1.00 $1.00 $1.00 $1.00
===========================================================================================================================
TOTAL RETURN (A) ................................... 4.92% 4.65% 2.79% 0.95% 0.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ........ $340,690 $279,622 $250,149 $278,703 $392,533
Ratios to average net assets:
Net investment income ........................ 4.81% 4.58% 2.74% 0.92% 0.80%
Net expenses ................................. 0.48% 0.49% 0.49% 0.47% 0.43%
Gross expenses ............................... 0.48% 0.49% 0.49% 0.47% 0.43%
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.
See Notes to Financial Statements.
9
<page>
Statement of Assets
and Liabilities DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
MONEY
MARKET
FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Short-term Investments (at amortized cost) ...................................................... $340,046,721
Income receivables .............................................................................. 2,145,732
Receivable for fund shares sold ................................................................. 17,348
Other assets .................................................................................... 141
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ................................................................................ 342,209,942
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed ................................................................ 1,319,822
Payable to GEAM ................................................................................. 199,704
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................................................... 1,519,526
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ......................................................................................... $340,690,416
===========================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ................................................................................. 340,754,137
Undistributed (distribution in excess of) net investment income ................................. 148
Accumulated net realized gain (loss) ............................................................ (63,869)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ......................................................................................... $340,690,416
===========================================================================================================================
NET ASSETS ......................................................................................... 340,690,416
Shares outstanding ($0.01 par value; unlimited shares authorized) .................................. 340,743,971
Net asset value per share .......................................................................... $1.00
See Notes to Financial Statements.
10
<page>
Statement of Operations
FOR THE YEAR ENDED DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
MONEY
MARKET
FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Interest ......................................................................... $ 16,547,727
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ....................................................................... 16,547,727
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ................................................. 1,396,687
Transfer agent ................................................................... 60
Director's fees .................................................................. 7,685
Custody and accounting expenses .................................................. 39,293
Professional fees ................................................................ 26,358
Registration expenses ............................................................ 6,969
Other expenses ................................................................... 18,100
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ..................................................................... 1,495,152
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME .............................................................. 15,052,575
===========================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................... $15,052,575
===========================================================================================================================
See Notes to Financial Statements.
11
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
MONEY
MARKET
FUND
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006
- ------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income .......................................................... $ 15,052,575 $ 12,896,680
- ------------------------------------------------------------------------------------------------------------------------------
Net increase from operations .................................................... 15,052,575 12,896,680
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ........................................................... (15,052,427) (12,896,680)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................................................... (15,052,427) (12,896,680)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations ........................................ 148 --
- ------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares .................................................... 248,224,006 176,527,442
Value of distributions reinvested ............................................... 15,052,427 12,896,680
Cost of shares redeemed ......................................................... (202,208,593) (159,950,239)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase from share transactions ............................................ 61,067,840 29,473,883
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS ...................................................... 61,067,988 29,473,883
NET ASSETS
Beginning of period ............................................................... 279,622,428 250,148,545
- ------------------------------------------------------------------------------------------------------------------------------
End of period ..................................................................... $ 340,690,416 $ 279,622,428
==============================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ....... $ 148 $ --
- ------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ..................................................................... 248,224,004 176,527,116
Issued for distributions reinvested ............................................. 15,052,426 12,897,006
Shares redeemed ................................................................. (202,208,593) (159,950,239)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in fund shares .......................................................... 61,067,837 29,473,883
==============================================================================================================================
See Notes to Financial Statements.
12
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service.
Values obtained from pricing services are based on various factors such as
market transactions, dealer supplied valuations, security characteristics and
other market data. In the absence of a reliable price from such a pricing
service, debt securities may be valued based on dealer supplied valuations or
quotations. The Fund's written or purchased options are valued at the last sales
price, or if no sales occurred that day, at the last reported bid price. All
portfolio securities of the Money Market Fund and any short-term securities held
by any other Fund with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized costs, which approximates market
value.
All assets and liabilities of the Fund's initially expressed in foreign currency
values will be converted into U.S. dollars at the WM exchange rate computed at
11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
13
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Notes to Financial Statements December 31, 2007
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GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
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 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 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 Custodian or a third party custodian takes
possession of the collateral pledged for investments in repurchase agreements on
behalf of the Fund. The Fund values the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest, is
at least equal to 102% of the repurchase price. In the event the seller defaults
and the value of the security declines, or if the seller enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
14
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Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 December 31, 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
- ---------------------------------------------------------------------------------------------------------------------------
$340,046,721 $-- $-- $--
Net Tax Appreciation/ Undistributed Undistributed
(Depreciation) on Income/ Long-Term Gains/ Post
Derivatives, Currency (Accumulated (Accumulated October
and Other Net Assets Ordinary Loss) Capital Loss) Losses
- ---------------------------------------------------------------------------------------------------------------------------
$-- $148 $(63,869) $--
As of December 31, 2007, the Fund has capital loss carryovers as indicated
below. Capital loss carryovers are available to offset future realized capital
gains to the extent provided in the Internal Revenue Code and regulations
thereunder. To the extent that these carryover losses are used to offset future
capital gains, it is probable that the gains so offset will not be distributed
to shareholders because they would be taxable as ordinary income.
Amount Expires
- --------------------------------------------------------------------------------
$63,869 12/31/10
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, 2007.
The tax composition of distributions paid during the years ended December 31,
2007 and December 31, 2006 were as follows:
Long-Term
Ordinary Capital
Income Gains Total
- --------------------------------------------------------------------------------
2007 $15,052,427 $-- $15,052,427
2006 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.
There were no reclassifications for the year ended December 31, 2007.
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did
15
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
not have an impact on the Fund's net assets and financial statements. The Funds'
2004, 2005, 2006 and 2007 calendar years tax returns are still open to
examination by the Federal and applicable state tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Expenses of the Company which are directly identifiable to the Fund are
allocated to the portfolio. Expenses which are not directly identifiable to the
Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expenses and relative size of the Fund. All
expenses of the Fund are paid by GEAM and reimbursed by the Fund.
3. LINE OF CREDIT
The Trust 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. In addition, the Trust has a $100
million uncommitted, unsecured line of credit with State Street, which was
established November 7, 2007. Generally, borrowings under the credit facilities
would accrue interest at the Federal Funds Rate plus 50 basis points and would
be borne by the borrowing Fund. The maximum amount allowed to be borrowed by any
one Fund is the lesser of (i) its prospectus limitation or (ii) 20% of its net
assets. The credit facilities were not utilized by the Fund during the period
ended December 31, 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. 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 December 31, 2007, $4,556 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.)
16
<page>
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
GE Investments Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Money Market Fund, a series of GE Investments Funds, Inc., including the
schedule of investments, as of December 31, 2007, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2007 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Money Market Fund as of December 31, 2007, the results of its operations,
changes in its net assets and financial highlights for the years described
above, in conformity with U.S. generally accepted accounting principles.
KPMG
Boston, Massachusetts
February 25, 2008
17
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
The Fund Board, including the independent Board members, considered and
unanimously approved the continuance of the Fund's investment advisory agreement
with GE Asset Management Incorporated ("GEAM") at meetings held on December 5
and December 12, 2007.
In considering whether to approve the Fund's investment advisory agreement, the
Board members, including the independent members, considered and discussed a
substantial amount of information and analysis provided, at the Board's request,
by GEAM. The Board members also considered detailed information regarding
performance and expenses of other investment companies, including those with
similar investment objectives and sizes, which was prepared by an independent
third party provider, Lipper Inc. ("Lipper").
The Board members reviewed the fees charged by GEAM for other mutual funds and
investment products other than mutual funds that employ a similar investment
strategy as the Fund.
Before approving the Fund's advisory agreement, the Board members reviewed the
proposed continuance of the agreement with management of GEAM and with
independent legal counsel. The Board members also reviewed a memorandum prepared
by independent legal counsel discussing the legal standards for the
consideration of the proposed continuance. The independent Board members
discussed the proposed continuance in detail during a private session with their
independent legal counsel at which no representatives of GEAM were present. The
independent Board members and their independent legal counsel requested, and
received and considered, additional information from GEAM following this
session.
In advance of the meetings, and in response to their request, the Board members
received from GEAM written responses to their inquiries, which included
substantial exhibits and other materials related to GEAM's business and the
services it provides to the Fund. The Board members took into account their
multi-year experience as Board members and particularly their consideration of
these agreements in recent years, noting that the information was presented in a
similar manner and format. To focus their review, the Board members asked GEAM
management, in its oral presentation, to highlight material differences from the
information presented in recent years. During the meetings, the Board members
had an opportunity to discuss this information with GEAM managers, including
senior executives, representatives from the legal, compliance and finance
departments, and investment personnel. The Board members posed questions to
these representatives and engaged in substantive discussions with them
concerning GEAM's investment process.
In reaching their determination relating to continuance of the agreement, the
Board members considered all factors they believed relevant, including the
factors discussed below. In their deliberations, the Board members did not
identify any particular information that was all-important or controlling, and
each Board member attributed different weights to the various factors. In
particular, the Board members focused on the following:
THE NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED.
The Board members reviewed the services provided by GEAM, and the Board members,
including the independent members, concurred that GEAM provides high quality
advisory and administrative services to the Fund.
In connection with their consideration of GEAM's services, the Board members
focused on the favorable attributes of GEAM, including (i) an investment
philosophy oriented toward long-term performance; (ii) effective processes used
for selecting investments, selecting brokers and with respect to Fund
administration, controllership and compliance activities; (iii) highly skilled
professionals, including analysts, research professionals and portfolio managers
with a depth of experience; (iv) access to significant technological resources
from which the Fund may benefit; and (v) a favorable history and reputation. The
Board members discussed with senior officers of GEAM the personnel changes made,
and proposed to be made, by GEAM. The Board members noted that the Fund
represents only a small portion of the assets managed by GEAM, but benefits from
a full array of services and resources provided by GEAM. In light of these
discussions, the Board members, including the independent members, concluded
that GEAM's services were of a high quality and had benefited the Fund.
18
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE FUND.
The Board members considered the investment performance of the Fund for various
periods. The Board members reviewed detailed comparisons of the performance of
the Fund with the relevant securities indexes and peer groupings of mutual funds
prepared by Lipper with respect to various periods. The Board members also
engaged in detailed discussions with GEAM management about the investment
process, focusing on the Fund's investment objective, the number and experience
of portfolio management and supporting research personnel, and the investment
style and approach employed. The Board members, including the independent
members, concluded that the Fund's performance was acceptable overall taking
into consideration the factors discussed above.
COST OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED FROM THE
RELATIONSHIP WITH THE FUND.
The Board members considered the cost of the services provided by GEAM. The
Board members reviewed the information they had requested from GEAM concerning
its profitability from the fees and services it provides to the Fund and the
financial condition of GEAM for various past periods. The Board members
considered the profit margin information for GEAM's investment company business
as a whole, as well as GEAM's profitability data for the Fund. The Board members
reviewed GEAM's assumptions and the methods of cost allocation used by GEAM in
preparing Fund-specific profitability data. The Board members also discussed
with GEAM the basis for its belief that the methods of allocation used were
reasonable and consistent across its business.
The Board members noted and discussed the additional services provided by GEAM
to the Fund compared to other investment products managed by GEAM. The Board
members determined that GEAM should be entitled to earn a reasonable level of
profits for the services it provides to the Fund. The Board members also
recognized that GEAM had made significant investments in its business and had
not fully recovered the sums invested. Based on their review, the Board members,
including the independent members, concluded that they were satisfied that the
level of profitability achieved by GEAM from its relationship with the Fund was
not unreasonable or excessive.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS AND
WHETHER FEE LEVELS WOULD REFLECT SUCH ECONOMIES OF SCALE.
The Board members considered the extent to which economies of scale would be
realized as the Fund grows, and whether fee levels reflect these economies of
scale for the benefit of Fund investors. The Board members considered the
substantial infrastructure investments that GEAM has made with respect to its
operations and its commitment to continue investing resources to enhance
services to Fund shareholders. The Board members recognized the benefits to the
Fund of GEAM's past investment in its operations through the expenditure of sums
to support its substantial infrastructure, and that, with respect to all GEAM
managed mutual funds, GEAM has not yet fully recouped that investment. The Board
members reviewed the applicable advisory fee breakpoints for the Fund and
concluded that no changes were needed. The Board members recognized the
economies of scale benefits derived by the Fund as a result of this fee
structure. The Board members also recognized the benefits to the Fund of being
able to leverage a favorable cost structure achieved with respect to the Fund's
other operating expenses as a result of GEAM's large overall base of assets
under management and its vendor management practices.
COMPARISON OF SERVICES TO BE RENDERED AND FEES TO BE PAID.
The Board members discussed the services provided to the Fund by GEAM, and the
fees charged for those services. The Board members reviewed information
concerning the fee and expense ratios for the Fund, and comparative information
with respect to similar products. They discussed that the Fund's figures were
within the applicable peer group range. In addition, the Board members
considered their discussion with representatives of GEAM about the fees being
charged to the Fund and, to the extent applicable, the effect, if any, of the
Securities and Exchange Commission staff's interpretive guidance concerning soft
dollars. In light of the foregoing, the Board members, including the independent
members, determined that the advisory fees were reasonable in relation to the
services provided to the Fund.
19
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
FALL-OUT BENEFITS.
The Board members considered other actual and potential financial benefits that
GEAM may derive from its relationship with the Fund, including, to the extent
applicable, soft dollar commission benefits generated through Fund portfolio
transactions. The Board members noted, however, that the Fund benefits from the
vast array of resources available through GEAM, and that the Fund represents
only a small portion of the assets managed by GEAM.
CONCLUSION.
No single factor was determinative to the Board members' decision. Based on
their discussion and such other matters as were deemed relevant, the Board
members, including the independent members, concluded that the proposed advisory
fee and projected total expense ratio are reasonable in relation to the services
provided to the Fund. In view of these facts, the Board members, including the
independent members, concluded that the renewal of the advisory agreement was in
the best interests of the Fund and its shareholders.
20
<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.
21
<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 Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
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
<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.
23
<page>
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL 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 OPERATING OFFICER (AS OF JANUARY 31, 2008)
24
<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 FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
GE Investments Funds, Inc.
Mid-Cap Equity Fund
Annual Report
DECEMBER 31, 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ............................................................. 18
TAX INFORMATION ..................................................................................................... 19
ADVISORY AND ADMINISTRATIVE AGREEMENT RENEWAL ....................................................................... 20
ADDITIONAL INFORMATION .............................................................................................. 23
INVESTMENT TEAM ..................................................................................................... 26
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance December 31, 2007
- --------------------------------------------------------------------------------
Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
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 Index) is an unmanaged index and
does not reflect the actual cost of investing in the instruments that comprise
the index.
Russell Mid-Cap Index is a market capitalization-weighted index of the smallest
800 companies included in the Russell 1000 Index that represent approximately
25% of the total market capitalization of the Russell 1000 Index. The Russell
1000 Index comprises the 1,000 largest U.S. domiciled companies. The results
shown for the foregoing index assume the reinvestment of net dividends or
interest.
The peer universe of the underlying annuity funds used in our peer 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.
- --------------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE
FUNDS.
* RUSSELL INVESTMENT GROUP OWNS THE RUSSELL INDEX DATA, INCLUDING ALL APPLICABLE
TRADEMARKS AND COPYRIGHTS, USED BY GE ASSET MANAGEMENT IN THESE MATERIALS. ANY
UNAUTHORIZED USE OR REDISTRIBUTION OF SUCH RUSSELL INDEX DATA IS STRICTLY
PROHIBITED. RUSSELL INVESTMENT GROUP IS NOT RESPONSIBLE FOR THE CONFIGURATION
OF THIS MATERIAL OR FOR ANY INACCURACY IN GE ASSET MANAGEMENT'S PRESENTATION
THEREOF.
1
<page>
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 TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the Mid-Cap Equity Fund
returned 12.60%. The Russell Mid-Cap Index, the Fund's benchmark, returned
5.61% and the Fund's Lipper peer group of 154 Mid-Cap Growth funds returned
an average of 16.46% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED
FUND PERFORMANCE?
A. During 2007, the growth style of investing outperformed value. The Fund's
growth bias and its overweight in the faster growing healthcare and
information technology sectors contributed to performance. Within the
healthcare sector, where the Fund had the largest exposure, medical device
holdings appreciated significantly. These companies delivered strong
financial performance during the year due to their leading technology and
market share positions. Stock selection within the technology sector, and in
particular among software and semiconductor stocks resulted in additional
outperformance for the Fund.
The Fund's underweight in the consumer discretionary sector, and in
particular homebuilders, added to performance. We continued to avoid most
consumer cyclical stocks due to the softening consumer spending environment.
Moreover, we maintained an underweight in financials as we became
increasingly concerned about deterioration in credit quality overall
(regional banks in particular), the expected buildup in reserves and a
lackluster loan growth.
The rise in commodity prices during 2007 contributed to our solid
performance within the energy sector. The price of oil hit an all time high
of $98 per barrel driven by the strong demand from the developing countries
such as China and India, as well as supply concerns stemming from increased
tensions in the Middle East. The energy sector regained its ranking as the
top performing sector among mid-cap stocks during the year, and the Fund's
solid weighting in this sector coupled with superior stock selection in both
exploration and production and services names bolstered performance.
Q. WHAT WERE THE PRIMARY DRIVERS OF
FUND PERFORMANCE?
A. The Fund outperformed during the twelve-month period, largely due to solid
stock selection within most sectors. Specifically within healthcare, Masimo
(+89%), a leading manufacturer of noninvasive monitoring devices, rose as
investors appreciated the company's strong competitive position and
continued market share gains. Lifecell (+79%), a regenerative biological
tissue graft company gained in anticipation of a new product launch and
increased market share. Within the materials sector, Monsanto (+114%)
benefited from strong sales and earnings growth and the boom in the
agricultural commodities market. The Fund was positively impacted by Harsco
(+71%), which benefited from the increasing spending on
[PHOTO OMITTED]
2
<page>
Q&A
- --------------------------------------------------------------------------------
global infrastructure projects. Activision (+72%) rose as sales and earnings
accelerated in part due to a new product cycle, and Juniper Networks (+75%)
performed well as demand continued to grow for high bandwidth applications
such as Video-on-Demand. Energy services company Weatherford International
(+64%) benefited from the strong demand for its service offerings to the oil
and gas industry.
Within the financials sector, real estate services firm CB Richard Ellis
(-35%) detracted from performance, as the commercial real estate sales and
leasing markets began to soften. Within technology, Macrovision (-35%) a
content protection software developer, detracted from performance. Their
recently announced acquisition of Gemstar-TV Guide has been met with
investor skepticism. Also, within the technology space BigBand Networks
(-64%) fell as concerns rose about the deployment of their video switching
technology. Finally, Fortress Investment Group (-48%), an alternative
investment management firm, corrected due to contracting credit markets
resulting in a tougher private equity and M&A environment.
Q. WERE THERE AND SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. During the past twelve months, we reduced the Fund's exposure to the
financial and consumer discretionary sectors in favor of more defensive
investments in the healthcare, technology, energy, materials, consumer
staples and telecommunications services sectors. We are focused on investing
in attractively valued companies with solid earnings prospects, strong
market share and what we believe to be 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
<page>
Mid-Cap Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended December
31, 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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,014.50 3.56
- ---------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,021.45 3.57
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.70% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2007 WAS: 1.45%.
4
Mid-Cap Equity Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
GEI Mid-Cap Equity Russell Midcap Index
12/97 $10000 $10000
12/98 10669 11005
12/99 12510 13008
12/00 13547 14082
12/01 13592 13287
12/02 11721 11138
12/03 15581 15604
12/04 18078 18751
12/05 20200 21123
12/06 21897 24353
12/07 24657 25720
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Mid-Cap Equity Fund 12.60% 16.04% 9.44%
- --------------------------------------------------------------------------------
Russell MidCap Index 5.61% 18.22% 9.91%
- --------------------------------------------------------------------------------
Lipper peer group average* 16.46% 17.01% 8.08%
- --------------------------------------------------------------------------------
Inception date 5/1/97
- --------------------------------------------------------------------------------
Mid-Cap Equity Fund (ending value $24,657)
Russell MidCap Index (ending value $25,720)
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 DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Harsco Corp. 2.40%
- --------------------------------------------------------------------------------
Thermo Electron Corp. 2.25%
- --------------------------------------------------------------------------------
Masimo Corp. 2.24%
- --------------------------------------------------------------------------------
ITC Holdings Corp. 2.18%
- --------------------------------------------------------------------------------
Hologic, Inc. 2.10%
- --------------------------------------------------------------------------------
Textron Inc. 2.06%
- --------------------------------------------------------------------------------
HCC Insurance Holdings, Inc. 1.95%
- --------------------------------------------------------------------------------
McCormick & Company, Inc. 1.93%
- --------------------------------------------------------------------------------
Weatherford International Ltd. 1.93%
- --------------------------------------------------------------------------------
Neustar, Inc. (Class A) 1.80%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
AS OF DECEMBER 31, 2007
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $191,815 (in thousands)
[PIE CHART OMITTED, PLOT POINTS FOLLOWS]
Information Technology 19.6%
Healthcare 19.4%
Industrials 11.1%
Financials 10.8%
Energy 9.9%
Consumer Discretionary 9.6%
Materials 5.6%
Consumer Staples 5.0%
Utilities 4.7%
Telecommunication Services 3.3%
Short-Term 1.0%
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE YEAR, FIVE-YEAR AND TEN-YEAR PERIODS INDICATED IN THE MID-CAP GROWTH
FUNDS PEER GROUP CONSISTING OF 154, 119 AND 30 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 December 31, 2007
- --------------------------------------------------------------------------------
MID-CAP EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 99.2%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 9.6%
Bed Bath & Beyond, Inc. 68,997 $ 2,027,822(a,d)
Coach, Inc. 47,766 1,460,684(a)
EchoStar Communications
Corp. (Class A) 9,781 368,939(a)
Liberty Global, Inc. (Series C) 83,937 3,071,255(a)
Life Time Fitness, Inc. 48,100 2,389,608(a)
O'Reilly Automotive, Inc. 92,073 2,985,927(a)
Penn National Gaming Inc. 15,962 950,537(a)
Regal Entertainment Group,
(Class A) 86,121 1,556,206
Starwood Hotels & Resorts
Worldwide, Inc. 24,204 1,065,702
The Cheesecake Factory 67,823 1,608,083(a)
Weight Watchers International Inc. 22,154 1,000,918
18,485,681
CONSUMER STAPLES -- 4.9%
Alberto-Culver Co. 123,960 3,041,978
General Mills, Inc. 48,092 2,741,244
McCormick & Company, Inc. 97,815 3,708,167
9,491,389
ENERGY -- 9.9%
Dresser-Rand Group, Inc. 64,443 2,516,499(a)
EOG Resources, Inc. 23,163 2,067,298
Hess Corp. 33,437 3,372,456
Peabody Energy Corp. 33,496 2,064,693
SandRidge Energy, Inc. 2,256 80,900(a)
Southwestern Energy Co. 49,723 2,770,565(a)
Sunoco, Inc. 13,857 1,003,801
Tesco Corp. 50,703 1,453,655(a)
Weatherford International Ltd. 54,006 3,704,812(a)
19,034,679
FINANCIALS -- 10.9%
Affiliated Managers Group, Inc. 16,602 1,950,071(a)
CB Richard Ellis Group, Inc.
(Class A) 114,658 2,470,880(a,d)
CVB Financial Corp. 121,784 1,259,246
Douglas Emmett, Inc. (REIT) 50,931 1,151,550
DuPont Fabros Technology,
Inc. (REIT) 84,113 1,648,615
Fortress Investment Group
LLC (Class A) 109,215 1,701,570
Greenhill & Company, Inc. 27,113 1,802,472
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
HCC Insurance Holdings, Inc. 130,321 $ 3,737,606
Legg Mason, Inc. 26,599 1,945,717
Prologis (REIT) 20,378 1,291,558
SL Green Realty Corp. (REIT) 8,966 837,962
Zions Bancorporation 21,356 997,112
20,794,359
HEALTHCARE -- 19.5%
Accuray Inc. 79,882 1,215,804(a)
Alcon, Inc. 13,368 1,912,159
Amylin Pharmaceuticals, Inc. 63,514 2,350,018(a)
Arthrocare Corp. 22,805 1,095,780(a)
Barr Pharmaceuticals, Inc. 45,187 2,399,430(a)
DENTSPLY International, Inc. 61,174 2,754,053
Gen-Probe Inc. 30,160 1,897,969(a)
Gilead Sciences, Inc. 40,418 1,859,632(a)
Hologic, Inc. 58,689 4,028,413(a)
Lifecell Corp. 55,428 2,389,501(a)
Masimo Corp. 108,720 4,289,004(a)
Psychiatric Solutions Inc. 98,165 3,190,363(a)
Smith & Nephew PLC ADR 30,664 1,760,727
Thermo Electron Corp. 74,979 4,324,789(a,d)
Vertex Pharmaceuticals, Inc. 76,758 1,783,088(a)
37,250,730
INDUSTRIALS -- 11.1%
Cooper Industries Ltd. 25,269 1,336,225
Corporate Executive Board Co. 25,855 1,553,886
Dover Corp. 41,804 1,926,746
Harsco Corp. 71,715 4,594,780
Hexcel Corp. 105,738 2,567,319(a)
ITT Corp. 12,227 807,471
Joy Global, Inc. 39,749 2,616,279
SAIC, Inc. 95,532 1,922,104(a)
Textron Inc. 55,428 3,952,016
21,276,826
INFORMATION TECHNOLOGY -- 19.7%
Activision, Inc. 105,541 3,134,568(a,d)
Affiliated Computer Services, Inc.
(Class A) 30,159 1,360,171(a)
Alibaba.com Ltd. 190,800 688,822(a,b)
Blackboard, Inc. 16,330 657,283(a)
Citrix Systems, Inc. 52,983 2,013,884(a)
Cogent, Inc. 113,151 1,261,634(a)
DST Systems, Inc. 27,749 2,290,680(a)
Fidelity National Information
Services, Inc. 56,244 2,339,188
Harris Corp. 19,245 1,206,277(d)
Hittite Microwave Corp. 60,319 2,880,835(a)
Juniper Networks, Inc. 102,679 3,408,943(a)
Macrovision Corp. 153,139 2,807,038(a)
Marvell Technology Group Ltd. 67,179 939,162(a)
Maxim Integrated Products, Inc. 40,756 1,079,219
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
<page>
MID-CAP EQUITY FUND
Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Mettler Toledo International Inc. 19,165 $ 2,180,977(a)
Microchip Technology Inc. 69,618 2,187,398
Neustar, Inc. (Class A) 120,405 3,453,215(a)
Salesforce.com, Inc. 35,050 2,197,285(a)
THQ, Inc. 55,428 1,562,515(a)
37,649,094
MATERIALS -- 5.6%
Allegheny Technologies
Incorporated 9,781 845,078
Cabot Corp. 39,174 1,306,061
Martin Marietta Materials, Inc. 16,954 2,248,100
Monsanto Co. 30,255 3,379,181(d)
Praxair, Inc. 32,491 2,882,277
10,660,697
TELECOMMUNICATION SERVICES -- 3.3%
American Tower Corp. (Class A) 46,639 1,986,821(a)
Clearwire Corp. (Class A) 34,235 469,362(a)
NII Holdings Inc. (Class B) 50,573 2,443,687(a)
Syniverse Holdings, Inc. 90,245 1,406,017(a)
6,305,887
UTILITIES -- 4.7%
DTE Energy Co. 32,223 1,416,523
ITC Holdings Corp. 74,181 4,185,292
PPL Corp. 33,901 1,765,903
SCANA Corp. 39,310 1,656,917
9,024,635
TOTAL INVESTMENTS IN SECURITIES
(COST $154,325,885) 189,973,977
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.0%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
4.96% 1,841,282 1,841,282(c,e)
(COST $1,841,282)
TOTAL INVESTMENTS
(COST $156,167,167) 191,815,259
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (0.2)% (475,804)
------------
NET ASSETS-- 100.0% $191,339,455
============
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
<page>
Notes to Schedule of Investments December 31, 2007
- --------------------------------------------------------------------------------
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 December 31, 2007 , these securities amounted to
$688,822 or 0.36% of net assets. These securities have been determined to be
liquid using procedures established by the Board of Trustees.
(c) Coupon amount represents effective yield.
(d) At December 31, 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) GE Asset Management (GEAM), the investment advisor of the Fund, also serves
as investment advisor of the GEI Short-Term Investment Fund.
+ Percentages are based on net assets as of December 31, 2007.
Abbreviations:
ADR American Depository Receipt
REIT Real Estate Investment Trust
8
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ---------------------------------------------------------------------------------------------------------------------------
MID-CAP EQUITY FUND
12/31/07 12/31/06 12/31/05 12/31/04 12/31/03
- ---------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- 5/1/97
Net asset value, beginning of period ................ $18.19 $19.22 $18.33 $17.48 $13.30
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................ 0.08 0.23 0.05 0.17 0.19
Net realized and unrealized
gains/(losses) on investments ................. 2.23 1.40 2.11 2.63 4.19
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ...... 2.31 1.63 2.16 2.80 4.38
LESS DISTRIBUTIONS FROM:
Net investment income ............................ 0.07 0.22 0.06 0.14 0.18
Net realized gains ............................... 3.13 2.44 1.21 1.81 0.02
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................. 3.20 2.66 1.27 1.95 0.20
NET ASSET VALUE, END OF PERIOD ...................... $17.30 $18.19 $19.22 $18.33 $17.48
===========================================================================================================================
TOTAL RETURN (A) .................................... 12.60%(B) 8.40% 11.74% 16.02% 32.94%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ......... $191,339 $199,311 $229,097 $239,831 $226,929
Ratios to average net assets:
Net investment income ......................... 0.35% 1.01% 0.24% 0.89% 1.36%
Expenses ...................................... 0.70% 0.69% 0.70% 0.70% 0.69%
Portfolio turnover rate .......................... 65% 29% 27% 78% 28%
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) The total return includes .66% related to the purchases and sales of initial
public offerings.
See Notes to Financial Statements.
9
<page>
Statement of Assets
and Liabilities DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
MID-CAP
EQUITY
FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $154,325,885) ........................................ $189,973,977
Short-term affiliated investments (at amortized cost) ........................................... 1,841,282
Income receivables .............................................................................. 198,752
Receivable for fund shares sold ................................................................. 1,922
Other assets .................................................................................... 76
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ................................................................................ 192,016,009
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Distribution payable to shareholders ............................................................ 63
Payable for fund shares redeemed ................................................................ 502,130
Payable to GEAM ................................................................................. 171,651
Variation margin payable ........................................................................ 2,710
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................................................... 676,554
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ......................................................................................... $191,339,455
===========================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ................................................................................. 154,464,265
Undistributed (distribution in excess of) net investment income ................................. 22,560
Accumulated net realized gain (loss) ............................................................ 1,204,499
Net unrealized appreciation/(depreciation) on:
Investments ................................................................................. 35,648,092
Futures ..................................................................................... 39
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ......................................................................................... $191,339,455
===========================================================================================================================
NET ASSETS ......................................................................................... 191,339,455
Shares outstanding ($0.01 par value; unlimited shares authorized) .................................. 11,058,070
Net asset value per share .......................................................................... $17.30
See Notes to Financial Statements.
10
<page>
Statement of Operations
FOR THE YEAR ENDED DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
MID-CAP
EQUITY
FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ........................................................................ $ 1,781,388
Interest* ....................................................................... 119,311
Interest from affliated investments ............................................. 138,685
Less: Foreign taxes withheld .................................................... (4,760)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ...................................................................... 2,034,624
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ................................................ 1,284,419
Transfer agent .................................................................. 61
Director's fees ................................................................. 4,954
Custody and accounting expenses ................................................. 44,153
Professional fees ............................................................... 23,383
Registration expenses ........................................................... 5,864
Other expenses .................................................................. 18,100
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .................................................................... 1,380,934
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ............................................................. 653,690
- ---------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments .................................................................. 27,389,808
Futures ...................................................................... (73,820)
Foreign currency transactions ................................................ 317
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments .................................................................. (4,033,165)
Futures ...................................................................... (25,565)
Foreign currency transactions ................................................ 15
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments ................................. 23,257,590
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................. $23,911,280
- ---------------------------------------------------------------------------------------------------------------------------
* Income attributable to security lending activity, net of rebate expenses
$99,557.
See Notes to Financial Statements.
11
<page>
Statements of
Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
MID-CAP
EQUITY
FUND
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income ............................................................ $ 653,690 $ 2,107,300
Net realized gain on investments, futures, written options,
foreign currency transactions and swaps ......................................... 27,316,305 24,149,867
Net (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, foreign currency translation .......... (4,058,715) (8,838,212)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase from operations ...................................................... 23,911,280 17,418,955
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................................. (620,613) (2,123,415)
Net realized gains ................................................................ (29,362,977) (23,338,915)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................. (29,983,590) (25,462,330)
- ---------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from operations .......................................... (6,072,310) (8,043,375)
- ---------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ...................................................... 11,021,978 1,813,307
Value of distributions reinvested ................................................. 29,983,527 25,462,330
Cost of shares redeemed ........................................................... (42,904,477) (49,018,282)
- ---------------------------------------------------------------------------------------------------------------------------
Net decrease from share transactions .............................................. (1,898,972) (21,742,645)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL (DECREASE) IN NET ASSETS ...................................................... (7,971,282) (29,786,020)
NET ASSETS
Beginning of period ................................................................. 199,310,737 229,096,757
- ---------------------------------------------------------------------------------------------------------------------------
End of period ....................................................................... $191,339,455 $199,310,737
===========================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ......... $ 22,560 $ 16,785
- ---------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold ....................................................................... 561,616 92,067
Issued for distributions reinvested ............................................... 1,725,174 1,391,385
Shares redeemed ................................................................... (2,184,057) (2,449,915)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ................................................. 102,733 (966,463)
===========================================================================================================================
See Notes to Financial Statements.
12
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized costs, which approximates market
value.
All assets and liabilities of the Fund's initially expressed in foreign currency
values will be converted into U.S. dollars at the WM exchange rate computed at
11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective consider
13
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
ations. Security values may differ depending on the methodology used to
determine their values, and may differ from the last quoted sale or closing
price. No assurance can be given that use of these fair value procedures will
always better represent the price at which the Fund could sell the affected
portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
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 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 on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to
14
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
decrease the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. The Fund will not enter
into a transaction involving options for speculative purposes. The Fund's risks
in using these contracts include changes in the value of the underlying
instruments, non-performance of the counterparties under the contracts' terms
and changes in the liquidity of the secondary market for the contracts. Options
are valued at the last sale price, or if no sales occurred on that day, at the
last quoted bid price.
When the Fund writes an option, the amount of the premium received is recorded
as a liability and is subsequently adjusted to the current fair value of the
option written. Premiums received from writing options that expire unexercised
are treated by the Fund on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase, as a realized loss. When an option is exercised, the proceeds
from the sale of the underlying security or the cost basis of the securities
purchased is adjusted by the original premium received or paid.
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 December 31, 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
- ---------------------------------------------------------------------------------------------------------------------------
$156,513,891 $44,896,003 $(9,594,635) $35,301,368
15
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
Net Tax Appreciation/ Undistributed Undistributed
(Depreciation) on Income/ Long-Term Gains/ Post
Derivatives, Currency (Accumulated (Accumulated October
and Other Net Assets Ordinary Loss) Capital Loss) Losses
- ---------------------------------------------------------------------------------------------------------------------------
$-- $25,089 $1,548,733 $--
As of December 31, 2007, 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, 2007.
The tax composition of distributions paid during the years ended December 31,
2007 and December 31, 2006 were as follows:
Long-Term
Ordinary Capital
Income Gains Total
- --------------------------------------------------------------------------------
2007 $3,939,151 $26,044,439 $29,983,590
2006 3,072,947 22,389,383 25,462,330
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, 2007 were as follows:
Undistributed
(Distribution
in Excess of)
Net Investment Accumulated
Income Net Realized Gain
- --------------------------------------------------------------------------------
$(27,302) $27,302
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES Expenses of the Company which are directly identifiable to the Fund are
allocated to the portfolio. Expenses which are not directly identifiable to the
Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expenses and relative size of the Fund. All
expenses of the Fund are paid by GEAM and reimbursed by the Fund.
16
<page>
Notes to Financial Statements December 31, 2007
- --------------------------------------------------------------------------------
3. LINE OF CREDIT
The Company 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. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street, which was established November 7, 2007. Generally, borrowings under the
credit facilities would accrue interest at the Federal Funds Rate plus 50 basis
points and would be borne by the borrowing Fund. The maximum amount allowed to
be borrowed by any one Fund is the lesser of (i) its prospectus limitation or
(ii) 20% of its net assets. The credit facilities were not utilized by the Fund
during the period ended December 31, 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 December 31, 2007, $2,993 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 December 31, 2007 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$127,075,775 $152,662,789
SECURITY LENDING At December 31, 2007, the Fund did not participate in
securities lending.
17
<page>
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
GE Investments Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Mid-Cap Equity Fund, a series of GE Investments Funds, Inc., including the
schedule of investments, as of December 31, 2007, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2007 by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Mid-Cap Equity Fund as of December 31, 2007, the results of its operations,
changes in its net assets and financial highlights for the years described
above, in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Boston, Massachusetts
February 25, 2008
18
<page>
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For the year ended December 31, 2007
SUMMARY
During the year ended December 31, 2007, the Fund paid to shareholders of record
on December 26, 2007, the following long-term capital gain dividends 2007:
FUND NAME PER SHARE AMOUNT
- --------------------------------------------------------------------------------
GE Investments Funds, Inc.-- Mid-Cap Value Equity Fund $2.77748
19
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
The Fund Board, including the independent Board members, considered and
unanimously approved the continuance of the Fund's investment advisory agreement
with GE Asset Management Incorporated ("GEAM") at meetings held on December 5
and December 12, 2007.
In considering whether to approve the Fund's investment advisory agreement, the
Board members, including the independent members, considered and discussed a
substantial amount of information and analysis provided, at the Board's request,
by GEAM. The Board members also considered detailed information regarding
performance and expenses of other investment companies, including those with
similar investment objectives and sizes, which was prepared by an independent
third party provider, Lipper Inc. ("Lipper"). The Board members reviewed the
fees charged by GEAM for other mutual funds and investment products other than
mutual funds that employ the same investment strategy as the Fund.
Before approving the Fund's advisory agreement, the Board members reviewed the
proposed continuance of the agreement with management of GEAM and with
independent legal counsel. The Board members also reviewed a memorandum prepared
by independent legal counsel discussing the legal standards for the
consideration of the proposed continuance. The independent Board members
discussed the proposed continuance in detail during a private session with their
independent legal counsel at which no representatives of GEAM were present. The
independent Board members and their independent legal counsel requested, and
received and considered, additional information from GEAM following this
session.
In advance of the meetings, and in response to their request, the Board members
received from GEAM written responses to their inquiries, which included
substantial exhibits and other materials related to GEAM's business and the
services it provides to the Fund. The Board members took into account their
multi-year experience as Board members and particularly their consideration of
these agreements in recent years, noting that the information was presented in a
similar manner and format. To focus their review, the Board members asked GEAM
management, in its oral presentation, to highlight material differences from the
information presented in recent years. During the meetings, the Board members
had an opportunity to discuss this information with GEAM managers, including
senior executives, representatives from the legal, compliance and legal
departments, and investment personnel. The Board members posed questions to
these representatives and engaged in substantive discussions with them
concerning GEAM's investment process.
In reaching their determination relating to continuance of the agreement, the
Board members considered all factors they believed relevant, including the
factors discussed below. In their deliberations, the Board members did not
identify any particular information that was all-important or controlling, and
each Board member attributed different weights to the various factors. In
particular, the Board members focused on the following:
THE NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED.
The Board members reviewed the services provided by GEAM, and the Board members,
including the independent members, concurred that GEAM provides high quality
advisory and administrative services to the Fund.
In connection with their consideration of GEAM's services, the Board members
focused on the favorable attributes of GEAM, including (i) an investment
philosophy oriented toward long-term performance; (ii) effective processes used
for selecting investments, selecting brokers and with respect to Fund
administration, controllership and compliance activities; (iii) highly skilled
professionals, including analysts, research professionals and portfolio managers
with a depth of experience; (iv) access to significant technological resources
from which the Fund may benefit; and (v) a favorable history and reputation. The
Board members discussed with senior officers of GEAM the personnel changes made,
and proposed to be made, by GEAM. The Board members noted that the Fund
represents only a small portion of the assets managed by GEAM, but benefits from
a full array of services and resources provided by GEAM. In light of these
discussions, the Board members, including the independent members, concluded
that GEAM's services were of a high quality and had benefited the Fund.
20
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE FUND.
The Board members considered the investment performance of the Fund for various
periods. The Board members reviewed detailed comparisons of the performance of
the Fund with the relevant securities indexes and peer groupings of mutual funds
prepared by Lipper with respect to various periods. The Board members also
engaged in detailed discussions with GEAM management about the investment
process, focusing on the Fund's investment objective, the number and experience
of portfolio management and supporting research personnel, the investment style
and approach employed, the likely market cycles for the investment style, and
the relative underperformance of the Fund in certain periods in light of GEAM's
commitment to long-term satisfactory performance with respect to the Fund's
investment objective and investment approach. The Board members, including the
independent members, concluded that the Fund's performance was acceptable
overall taking into consideration the factors discussed above.
COST OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED FROM THE
RELATIONSHIP WITH THE FUND.
The Board members considered the cost of the services provided by GEAM. The
Board members reviewed the information they had requested from GEAM concerning
its profitability from the fees and services it provides to the Fund and the
financial condition of GEAM for various past periods. The Board members
considered the profit margin information for GEAM's investment company business
as a whole, as well as GEAM's profitability data for the Fund. The Board members
reviewed GEAM's assumptions and the methods of cost allocation used by GEAM in
preparing Fund-specific profitability data. The Board members also discussed
with GEAM the basis for its belief that the methods of allocation used were
reasonable and consistent across its business.
The Board members noted and discussed the additional services provided by GEAM
to the Fund compared to other investment products managed by GEAM. The Board
members determined that GEAM should be entitled to earn a reasonable level of
profits for the services it provides to the Fund. The Board members also
recognized that GEAM had made significant investments in its business and had
not fully recovered the sums invested. Based on their review, the Board members,
including the independent members, concluded that they were satisfied that the
level of profitability achieved by GEAM from its relationship with the Fund was
not unreasonable or excessive.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS AND
WHETHER FEE LEVELS WOULD REFLECT SUCH ECONOMIES OF SCALE.
The Board members considered the extent to which economies of scale would be
realized as the Fund grows, and whether fee levels reflect these economies of
scale for the benefit of Fund investors. The Board members considered the
substantial infrastructure investments that GEAM has made with respect to its
operations and its commitment to continue investing resources to enhance
services to Fund shareholders. The Board members recognized the benefits to the
Fund of GEAM's past investment in its operations through the expenditure of sums
to support its substantial infrastructure, and that, with respect to all GEAM
managed mutual funds, GEAM has not yet fully recouped that investment. The Board
members also recognized the benefits to the Fund of being able to leverage a
favorable cost structure achieved with respect to the Fund's other operating
expenses as a result of GEAM's large overall base of assets under management and
its vendor management practices.
COMPARISON OF SERVICES TO BE RENDERED AND FEES TO BE PAID.
The Board members discussed the services provided to the Fund by GEAM, and the
fees charged for those services. The Board members reviewed information
concerning the fee and expense ratios for the Fund, and comparative information
with respect to similar products. They discussed that the Fund's figures were
within the applicable peer group range. In addition, the Board members
considered their discussion with representatives of GEAM about the fees being
charged to the Fund and, to the extent applicable, the effect, if any, of the
Securities and Exchange Commission staff's interpretive guidance concerning soft
dollars. In light of the foregoing, the Board members, including the independent
members, determined that the advisory fees were reasonable in relation to the
services provided to the Fund.
21
<page>
Advisory and Administrative Agreement Renewal (unaudited)
- --------------------------------------------------------------------------------
FALL-OUT BENEFITS.
The Board members considered other actual and potential financial benefits that
GEAM may derive from its relationship with the Fund, including, to the extent
applicable, soft dollar commission benefits generated through Fund portfolio
transactions. The Board members noted, however, that the Fund benefits from the
vast array of resources available through GEAM, and that the Fund represents
only a small portion of the assets managed by GEAM.
CONCLUSION.
No single factor was determinative to the Board members' decision. Based on
their discussion and such other matters as were deemed relevant, the Board
members, including the independent members, concluded that the proposed advisory
fee and projected total expense ratio are reasonable in relation to the services
provided to the Fund. In view of these facts, the Board members, including the
independent members, concluded that the renewal of the advisory agreement was in
the best interests of the Fund and its shareholders.
22
<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.
23
<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 Senior Vice President and Deputy
General Counsel at GE Asset Management since October 2007; Vice President and
Associate General Counsel - Marketing and Client Services (formerly Asset
Management Services) at GEAM from May 1997 to October 2007; Vice President and
Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds
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
24
<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.
25
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J.Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member FINRA and SIPC
COUNSEL
Sutherland, Asbill & Brennan, LLP
CUSTODIAN
State Street Bank & Trust Company
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
KPMG LLP
OFFICERS OF THE INVESTMENT ADVISER
James W. Ireland, CHIEF EXECUTIVE OFFICER
Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS
Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL 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 OPERATING OFFICER (AS OF JANUARY 31, 2008)
26
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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 FINRA AND SIPC
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and
procedures that the Fund uses to determine how to vote proxies (if any) relating
to portfolio securities is available without charge (i) upon request, by calling
1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii)
on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC
- - information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Information (if any) regarding how the Fund voted proxies relating to portfolio
securities during the most recently disclosed 12-month period ended June 30 is
available without charge (i) through the Fund's website at
http://www.gefunds.com; and (ii) on the Commission's website at
http://www.sec.gov.
[GE LOGO OMITTED]
ITEM 2. CODE OF ETHICS.
Please refer to the Code of Ethics included in the following link:
www.ge.com/files/usa/en/commitment/social/integrity/downloads/english.pdf
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that both John R.
Costantino and William J. Lucas are designated as audit committee financial
experts for the Funds; and further that it is the finding of the Boards that
Messrs. Costantino and Lucas, the audit committee financial experts, qualify
as being 'independent' pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES. The aggregate fees billed for each of the last two fiscal
years (the "Reporting Periods") for professional services rendered by the
Registrant's principal accountant (the "Auditor") for the audit of the
Registrant's annual financial statements, or services that are normally
provide by the Auditor in connection with the statutory and regulatory
filings or engagements for the Reporting Periods were $188,200 in 2006 and
$197,800 in 2007.
(b) AUDIT RELATED FEES. There were no fees billed by the Auditor for
assurance and related services that were related to the performance of the
audit for the Registrant during the Reporting Periods.
(c) TAX FEES. There were no fees billed for professional services
rendered by the Auditor for tax compliance, tax advice or tax planning for
the Registrant during the Reporting Periods.
(d) ALL OTHER FEES. There were no fees billed for products and services
provided by the Auditor, other than the services reported in paragraphs
(a) through (c) of this Item for the Registrant during the Reporting Periods.
(e) (1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES.
The Audit Committee of the GE Investments Funds (the "Funds") Board of
Trustees is responsible, among other things, for the appointment,
compensation and oversight of the work of the Fund's independent
accountants/auditors (the "Auditor"). As part of this responsibility and
to ensure that the Auditor's independence is not impaired, the Audit Committee
(1) pre-approves the audit and non-audit services provided to the Funds by
the Auditor, and (2) all non-audit services provided to the Funds' investment
adviser and covered affiliates (as defined in the Audit Committee Charter) that
provide ongoing services to the Funds if the services directly impact the
Funds' operations or financial reporting, in accordance with the Audit
Committee Charter. Following are excerpts from the Audit Committee Charter
that sets forth the pre-approval policies and procedures:
1. Selection and Pre-Approval of Auditor and Approval of Fees.
(i) The Audit Committee shall pre-approve the selection of the Auditor and
shall recommend for ratification the selection, retention or termination of the
Auditor by the full Board, including the independent Trustees/Directors, and,
in connection therewith, shall evaluate the independence of the Auditor,
including: (i) an evaluation of whether the Auditor provides any consulting
services to the Fund's investment adviser and the extent to which the Auditor
provides non-audit services to the Fund's investment adviser and certain other
affiliated service providers as defined in Section 2(f) below, which services
are not subject to the pre-approval requirements set forth in Section 4 below;
(ii) an evaluation of the extent to which the Auditor has any relationships
with the Fund or its affiliated persons that are brought to the attention of
the Audit Committee by the Auditor in accordance with applicable standards of
the Independence Standards Board ("ISB"), because, in the Auditor's
professional judgment, such relationships may reasonably be thought to bear
on the Auditor's independence with respect to the Fund; and (iii) monitoring
the Auditor's compliance with respect to the rotation requirements for the
lead and coordinating partners having primary responsibility for the Fund's
audits and any partner responsible for the reviewing the Fund's audits.
The Audit Committee shall review the Auditor's specific representations as
to its independence.
(b) The Audit Committee shall pre-approve and review the fees charged by
the Auditor for audit and non-audit services to be provided to the Fund and
certain affiliated service providers (as defined in Section 2(f) below) in
accordance with the pre-approval requirements set forth in Section 4 below.
The Fund shall provide for appropriate funding, as determined by the Audit
Committee, to compensate the Auditor for any authorized service provided to
the Fund.
2. Meetings with the Auditor. The Audit Committee shall meet with the
Auditor, including private meetings, prior to the commencement of substantial
work on the audit and following the conclusion of the audit, as well as such
other times as the Audit Committee shall deem necessary or appropriate. The
Auditor shall report directly to the Audit Committee. The Auditor shall
report at least annually, concerning the following and other pertinent matters:
(a) to review the arrangements for and scope of the annual audit and any
special audits;
(b) to provide the Auditor the opportunity to report to the Audit
Committee, on a timely basis, all critical accounting policies and practices
to be used;
(c) to discuss any matters of concern relating to the Fund's financial
statements, including: (i) any adjustments to such statements recommended by
the Auditor, or other results of said audit(s), and (ii) any alternative
treatments of financial information within GAAP that have been discussed with
Fund management, the ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the Auditor;
(d) to provide the Auditor the opportunity to report to the Audit
Committee, on a timely basis, any material written communication between the
Auditor and Fund management, such as any management letter or schedule of
unadjusted differences;
(e) to discuss the opinion the Auditor has rendered regarding the Fund's
financial statements;
(f) to report all non-audit services that do not require Audit Committee
pre-approval and are provided to certain affiliated persons of the Fund,
including: (1) the Fund's investment adviser or sub-advisers (but excluding
any investment sub-adviser whose role is primarily portfolio management and
is overseen by the investment adviser), (2) the Fund's principal underwriter,
and (3) any entity controlling, controlled by, or under common control with
the investment adviser or principal underwriter, that provides "ongoing"
services to the Funds in accordance with the pre-approval requirements of
paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X (each, a "Covered Affiliate"
and collectively, "Covered Affiliates");
(g) to review, in accordance with current standards of ISB, all
relationships between the Auditor and the Fund or its affiliated persons that,
in the Auditor's professional judgment, may reasonably be thought to bear
on its independence, and to confirm, in light of such information, whether
the Auditor believes, in its professional judgment, that it may properly serve
as independent accountants/auditors with respect to the Fund;
(h) to consider the Auditor's comments with respect to the Fund's financial
policies, procedures and internal accounting controls and responses thereto by
the Fund's officers and Fund management, as well as other personnel;
(i) to investigate any improprieties or suspected improprieties in the
operations of the Fund to the extent necessary or appropriate in light of any
internal investigations by the Fund's officers and/or by officers or employees
of the Fund management of such improprieties;
(j) to receive periodic reports concerning regulatory changes and new
accounting pronouncements that significantly affect the value of the Fund's
assets and their financial reporting;
(k) to report on the Fund's qualification under Subchapter M of the Internal
Revenue Code, amounts distributed and reported to shareholders for Federal tax
purposes and the Fund's tax returns; and
(l) to provide the Auditor the opportunity to report on any other matter
that the Auditor deems necessary or appropriate to discuss with the Audit
Committee.
If the Auditor's report on the above-listed (and other pertinent)
matters is not made in person to the Audit Committee within 60 days following
the end of the Fund's fiscal year, the Auditor shall deliver a written report
to the Audit Committee concerning these matters within such 60 day period.
3. Change in Accounting Principles. The Audit Committee shall consider
the effect upon the Fund of any changes in accounting principles or practices
proposed by the Auditor or the Fund's officers.
4. Pre-Approval of Audit Related Services and Permissible Non-Audit
Services. The Audit Committee shall pre-approve both audit (including audit,
review, and attest) services and permissible non-audit services provided to
the Fund and, if the nature of the engagement relates directly to the
operations and financial reporting of the Fund, permissible non-audit services
provided to any Covered Affiliate.
The Audit Committee may determine to delegate the authority to grant
pre-approvals to one or more Audit Committee members, each acting on behalf
of the Audit Committee. In this event, the member of the Audit Committee so
delegated shall report each delegated pre-approval to the Audit Committee at
its next regularly scheduled meeting. The Audit Committee may also adopt and
follow, in lieu of explicit pre-approval described above, written policies
and procedures detailed as to the particular service, designed to safeguard
the continued independence of the Auditor, consistent with the requirements
of the Act and SEC regulations thereunder.
Notwithstanding the foregoing, the pre-approval requirement concerning
permissible non-audit services provided to the Fund or any Covered Affiliate
is waived if: (1) the aggregate amount of all such non-audit services provided
constitutes no more than five percent (5%) of the total amount of revenues paid
to the Auditor by the Fund and the Covered Affiliates during the fiscal year in
which the services are provided that would have to be pre-approved by the Audit
Committee, (2) the non-audit services were not recognized as non-audit services
at the time of the engagement, and (3) such non-audit services are promptly
brought to the attention of the Audit Committee and approved by the Audit
Committee or one or more designated members of the Audit Committee prior to the
completion of the audit.
5. Prohibited Activities of the Auditor. The Audit Committee shall confirm
with the Auditor that it is not performing contemporaneously (during the audit
and professional engagement period) non-audit services for the Fund that the
Audit Committee believes may taint the independence of the Auditor.
The Auditor will be responsible for informing the Audit Committee of whether it
believes that a particular non-audit service is permissible or prohibited
pursuant to applicable regulations and standards.
(2) PERCENTAGE OF SERVICES IN PARAGRAGHS (b) THROUGH (d) APPROVED BY AUDIT
COMMITTEE. No fees were charged during 2003 or 2004 for audit related, tax or
other services as indicated in sections (b) through (d) of this Item.
(f) Not applicable.
(g) NON-AUDIT FEES. The aggregate non-audit fees billed by the Auditor
for services rendered to the Registrant, and rendered to Service Affiliates,
for the Reporting Periods were $0 in 2006 and $0 in 2007.
(h) AUDITOR INDEPENDENCE. There were no non-audit services rendered to
Service Affiliates that were not pre-approved.
ITEM 5. Audit Committee of Listed Registrants
The Registrant has a separately-designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Exchange Act.
The Registrant's audit committee members are: John R. Costantino,
William J. Lucas and Robert P. Quinn.
ITEM 6. Schedule of Investments.
Attached as part of ITEM 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Applicable only to Closed-End Management Investment Companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Applicable only to Closed-End Management Investment Companies.
ITEM 9. Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers.
Applicable only to Closed-End Management Investment Companies.
ITEM 10. Submission of Matters to a Vote of Security Holders.
No material changes.
ITEM 11. CONTROLS AND PROCEDURES.
The officers providing the certifications in this report in accordance
with Rule 30a-3 under the Investment Company Act of 1940 have concluded,
based on their evaluation of the registrant's disclosure controls and
procedures (as such term is defined in such rule), that such controls and
procedures are adequate and reasonably designed to achieve the purpose
described in paragraph (c) of such rule.
There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent
to the date of their last evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
ITEM 12. EXHIBITS.
(a) Not applicable.
(b) Attached hereto as Exhibit 1 and Exhibit 2 are the Certifications of
Michael J. Cosgrove and 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: March 07, 2008
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: March 07, 2008
By: /S/SCOTT RHODES
Scott Rhodes
TREASURER, GE INVESTMENTS FUNDS, INC.
Date: March 07, 2008
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.